Healthy Investments: Why Hospitals Need to Spend to Save

Simply making investments in upgrades and acquisitions does not ensure an acceptable return.
piggy bank wrapped in setethoscope

Hospitals, facing the need to provide quality care to more people at an affordable cost, are changing business strategies, striving to stay competitive – and solvent – as they encounter rapidly changing regulations. The Affordable Care Act is certainly one key factor driving the need for hospitals to invest in new technology and infrastructure while reducing costs.

As this article from Mergers & Acquisitions Magazine points out, the Affordable Care Act is increasing the number of patients hospitals are receiving, so health care institutions “need to pare down costs and improve efficiencies.” This means: purchasing, acquiring, merging, integrating, upgrading. In particular, the article points out, that “for hospitals and physician groups, as well as other health care organizations, upgrading and investing in new technology systems can help take costs out of running the business.” You have to spend money to save money in the long term.

We observed this first hand when working with an integrated health care system in New Jersey formed by the merger of three regional hospitals. By combining the resources of three institutions, the new entity aimed to provide patients with coordinated care across a broad network of specialties and specialized technology. Striving to build an entire integrated system from the ground up, the hospital group invested in new technology, created an impressive physician group by acquiring leading practices, launched an insurance subsidiary and created a network of centers of excellence.

Although the system was coming together, the challenge this group was facing was to translate their business strategy into a compelling value proposition for all key stakeholders – such as patients and even health care professionals – conveying precisely how these investments would affect the quality of health care. This is where brand comes in: simply making investments does not ensure an acceptable return. Investments – and the rationale behind them – must be communicated as part of an overall brand that conveys the most meaningful benefits to each of its constituent groups. How hospitals can use brand to truly capitalize on their investments is the focus of our most recent whitepaper.

Hospitals can see the evolution in the health care regulatory environment as either turbulent or exciting. From our point of view, it certainly offers a unique opportunity for hospitals to rethink and redefine their position in the marketplace. By aligning brand strategy with business strategy – by supplementing investments in technology, people and infrastructure with an investment in brand – a hospital can maximize the value of these investments and connect with all of the constituents most critical to its success.

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