health Systems Explore New Revenue Streams by Selling Internal Capabilities
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As financial pressures mount, large health systems are increasingly looking to monetize their expertise and infrastructure by offering back-office services to smaller hospitals, a trend that could reshape the healthcare landscape. While still in it’s early stages, this strategy presents a potential lifeline for systems grappling with insufficient reimbursement rates and rising labor costs.
The Rise of “Healthcare-as-a-Service”
A growing number of health systems are experimenting with selling internal capabilities – such as IT support,revenue cycle management,and call centre operations – to smaller hospitals as a new revenue stream. This approach, often described as “healthcare-as-a-service,” allows larger organizations to leverage existing investments and expertise while generating additional income.
“Health systems are under significant financial strain,” noted Tyler Giesting, director of healthcare M&A at West Monroe. “Ongoing headwinds, such as insufficient reimbursement and the rising cost of labor, are pushing them to find new sources of revenue.”
The concept is simple: rather than solely focusing on direct patient care, systems can package their non-clinical services and offer them to hospitals that may lack the resources or scale to develop these capabilities in-house. This can include everything from managing billing and coding to providing help desk support and maintaining electronic health records.
Did you know? – healthcare-as-a-service allows larger systems to monetize existing infrastructure. This includes IT support, revenue cycle management, and call centers. Smaller hospitals benefit from access to specialized expertise without large upfront costs.
Why Now? The Financial Imperative
The shift towards selling internal capabilities is largely driven by the challenging financial realities facing the healthcare industry. Declining reimbursement rates from both government and private payers, coupled with increasing labor costs, are squeezing margins and forcing organizations to seek option revenue sources.
Selling these services allows health systems to diversify their income streams and reduce their reliance on traditional patient care revenue. It also presents an opportunity to improve efficiency and reduce costs by leveraging economies of scale.
Pro tip: – Health systems can improve efficiency and reduce costs by leveraging economies of scale. This strategy helps diversify income streams and reduce reliance on traditional patient care revenue. It’s a win-win for both large and small organizations.
Potential Benefits and Challenges
The potential benefits of this model are significant. for larger health systems, it offers a new revenue stream and a way to optimize existing resources. For smaller hospitals, it provides access to specialized expertise and technology without the need for significant upfront investment.
However, challenges remain.Successfully implementing this strategy requires careful planning and execution. Systems must ensure that their services are competitive in terms of price and quality, and they must be able to effectively manage the complexities of serving multiple clients.
Furthermore,concerns about data security and interoperability must be addressed to ensure the seamless exchange of facts between systems.
Reader question: – What are the biggest hurdles for health systems selling internal capabilities? What specific strategies can they use to overcome these challenges and ensure success in this new buisness model?
Looking Ahead
While the practice of health systems selling internal capabilities is still relatively rare, it is indeed expected to gain traction as financial pressures continue to intensify. This trend could lead to a more consolidated and efficient healthcare ecosystem, with larger systems playing a more prominent role in providing essential support services to smaller organizations. The long-term impact of this shift remains to be seen, but it represents a significant evolution in how healthcare organizations approach revenue generation and service delivery.
