Over the past two years, the world has experienced unimaginable challenges due to the COVID-19 pandemic, with health care organizations continually on the front lines of battle. Organizations that survived did so at both clinical and financial costs.
This survival came with many lessons learned, such as the lack of resiliency exhibited by fee-for-service (FFS) business models. As procedural volumes fell amidst the pandemic, these models saw their financial margins disappear. Yet, as the world continues to emerge from the effects of the pandemic, health care entities continue to battle challenges associated with falling reimbursement, rising costs, and the threat—or promise—of a shift to value-based care looming just over the horizon.
With the added responsibility to address drivers of health (DOH), also known as social determinants of health, pressure is mounting to create health, not just treat sickness. The FFS business models of the past impede progress toward a healthier future for patients and a more financially sustainable one for health care organizations. To thrive in the future, health care organizations need a transition plan to remain financially viable and continue to serve their communities. This paper provides a compass to guide the transition.
When we analyzed the health care landscape, we found that the vast majority of today’s organizations can’t successfully and sustainably address DOH to improve people’s lives. This isn’t because leaders are incapable or unwilling. Most organizations simply don’t have the business models required to make the desired impact. Traditional business models are set up to succeed in the FFS, “sick care” business, not the value-based business of improving health by addressing the root causes of disease.
As a result, health care organizations need a fresh start. They need new business models to address drivers of health and create better lives for individuals and communities. In this paper, we provide a data-driven and theory-driven analysis for why this is the case, and guidance leaders can follow to design or redesign their business models. By transforming value propositions, resources, processes, and profit formulas, health care organizations can embark on a path to thrive in the future.