Advisory Board Study: How #Hospitals #HealthSystems Can Earn Growth with Customer-Centric Strategies

Advisory Board Study: How #Hospitals #HealthSystems Can Earn Growth with Customer-Centric Strategies

According to a new report released by Advisory Board, health systems can no longer take as a given their growth as community health providers. So how can these organizations ensure that they can continue to serve their mission amid consolidation and heightened competition from traditional and nontraditional players?

Driving Consumer-Centric Growth

Facing a more consumer-driven market, health systems can build on three principles, said Brian Fuller, National Partner, Consulting at Advisory Board. “Best practices center on knowing your customers, designing around the patient journey, and marketing to inflect key decisions,” he said. “Health system marketing should create consumer value by focusing on driving specific activity within key segments of the patient journey. This outreach is strengthened by specific calls to action and continuous testing and refinement.”

Knowing their customers means health systems need to identify the behaviors and decision-drivers that influence the decisions customers make, said Kyle Rose, Executive Director, Technology at Advisory Board. In particular, he emphasized the power of advanced longitudinal patient data to transform growth, enabling new strategic views into care journeys, care pathways, and lifetime value of health care customers. “Health system growth now depends on understanding consumers better than competitors do, and not just for planning and targeting services and facilities,” Rose said.

According to Srinivas Sridhara, PhD, Managing Director, Data Science and Analytics at Advisory Board, “Being chosen by patients requires studying key inflection points and journeys of consumer segments. Health systems should understand how patients make care decisions and what that says about the strength of physician and consumer relationships, what kind of physician network is needed, network integrity strategy, and health systems’ ability to reach out to consumers about services. This requires a new generation of data and analytics that provides a 360-degree view of how patient journeys and care pathways interact with different parts of our health system.”

“The numbers do not lie: We are seeing growth calcification in markets across the country,” said Tom Cassels, National Partner, Consulting at Advisory Board. “And while consolidation is yielding bigger balance sheets, size is simply not translating to organic growth. Health systems that want to grow faster than the market must focus on getting chosen by their most important customers—patients, physicians, and employers.”

In many geographic areas, there is scarcely any difference between the growth rate for the fastest and slowest health systems, often restricted between 1.5% and 2.5% annually.1 ”

To break through the widespread limits on growth, health system strategies should account for the increasing migration to outpatient care, fragmentation of the healthcare provider market, rising payer scrutiny on value, and a policy push toward individual choice,” said Zachary Hafner, National Partner, Consulting at Advisory Board. “Growth is essential to creating sustainable margin to reinvest in health systems’ mission of providing the highest quality of service and patient outcomes.”

Trends Call for New Growth Strategies

Data show the complex challenges that hospitals and health systems face. Key findings:

  • Utilization shrinks: Inpatient days per 1,000 people in a patient population have fallen by 8% since 2009.2
  • Prices recede: From January 2013 to January 2015, hospital price growth dropped from 2.9% to -0.1%.3
  • Patients do not value loyalty: Hospitals and health systems are seeking to build durable patient loyalty and yet almost four out of five Medicare patients use more than one system for care across five years, according to Advisory Board analysis of a subset of claims, and the majority of Medicare patients use two to five health systems.
  • M&A is no silver bullet: Two years after acquisition, 59% of acquired hospitals fail to achieve increases in market share or grow as fast as market peers.4
  • Physicians continue to refer outside the system: For an average hospital, employed physicians refer $52 million in business outside the health system.5 While almost 3,200 individual hospitals are now part of health systems, a 20% increase since 2004, physicians have not been wowed by the benefits of increased consolidation.6 Today, 38% of physicians are employed by hospitals but one third of employed primary care physicians refer out-of-network for specialty care.7,8
  • Consumer-directed market grows: Amid this combination of trends, an estimated market of $700 billion has emerged for shoppable procedures across inpatient and outpatient care.9



Understanding customer journeys includes nonemergency visits to retail health or walk-in sick clinics or telehealth that can include online visits or videoconferencing with a doctor or nurse. In a small study, one health system working with Advisory Board found that for every 100 consumers considering the health system’s services, only 40 received care and said they were likely to return for future care. Along the journey, 24 dropped off due to lack of online information, such as consumer reviews, services offered, and locations. Four more consumers ended their journey because they could not schedule an online visit or access telehealth. Finally, 32 consumers who received care were unlikely to return because they did not find the right level of staff friendliness or care specialization.

“These and other data on consumer journeys can lead health systems to a new level of service and organic growth beyond merger-driven expansion,” said Leslie Schreiber, Managing Director, Consulting at Advisory Board. “Instead of following a competitor-centric strategy, health systems can raise growth by adopting consumer-centric strategies and redefining success to delivering the maximum consumer value and developing lifetime loyalty.”

Adopt Innovator’s Mindset

Health system strategy requires no less of a transformation. Typically, health systems design for broad market appeal to maximize their chances for return on investment, for example building a retail clinic near a corporate complex or a hospital-branded outpatient surgery center, said Shay Pratt, Executive Director, Research at Advisory Board.

“Competition now requires health systems to think more like innovators. They should make deliberate choices to actively attract and compete for specific customer segments and then differentiate services to compete for choice,” Mr. Pratt added.

 Mini Case Study: Marietta Memorial Enacts Market-Driven Planning

As an example of a progressive institution making strategic decisions based on consumer insights, Marietta (Ohio) Memorial Hospital engaged Advisory Board on developing a new strategic service line. A market analysis determined that market demand would not support investing $2 million in new equipment for the advanced surgery within the service line. The hospital did not invest in the large technology and scoped their new program to the market need.


Source: The Advisory Board,

Notes on sources:

1 Estimate from Advisory Board based on interviews and analysis.

2 Altarum Institute, Health Sector Trend Report, March 2015, accessed April 2015; American Hospital Association Annual Survey Data; US Census Bureau: National and State Population Estimates, available at:

3 MedPac 2014, Chapter 3 Hospital Inpatient and Outpatient Services; Analysis of American Hospital Association Annual Survey data, 2014, for community hospitals.

4 Strategy&, Succeeding in Hospital & Health Systems M&A, accessed November 2017, available at

5 Analysis of hospital cohort using referral management technology from Advisory Board.

6 American Hospital Association, AHA Hospital Statistics, 2017 Edition, accessed November 2017, available at

7 HealthLeaders Media, “Number of Hospital-Employed Physicians Up 50% since 2012,” September 8, 2016.

8 Analysis of hospital cohort using referral management technology from Advisory Board.

9 Estimate from Advisory Board based on interviews and analysis of total hospital revenue, inpatient, outpatient, excluding ED and all ED admissions related revenue.

 About Advisory Board
. Advisory Board is a best practices firm that uses a combination of research, technology, and consulting to improve the performance of 4,600+ health care organizations. As the health care business of The Advisory Board Company (NASDAQ: ABCO), Advisory Board forges and finds the best new ideas and proven practices from its network of thousands of leaders, then customizes and hardwires them into every level of member organizations, creating enduring value. For more information, visit

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