The Growth Imperative and Why Marketing Must Lead

April 4, 2022

// By Daniel Fell //

Growth is far from one-dimensional and shouldn’t be thought of in terms of new patients and new revenue only.

Growth is important for every organization. Whether it’s for-profits or not-for-profits, start-ups or established market leaders, every business depends on some level of growth to succeed in the near term. Growth is also essential to long-term sustainability, especially when navigating dynamic markets and overcoming unforeseen market disruptions.

Given how dynamic the health care industry has been over the past decade, and likely will be for the next, health systems are particularly reliant on growth to maintain existing services, provide the latest clinical care, invest in technological advances, and attract and retain talent.

The recent pandemic has likewise been a seismic disruption to growth for many health systems — creating high demand in some parts of the system while delaying procedures and creating consumer and patient hesitancies to seek care in others. Kaiser Family Foundation estimates that more than half of adult consumers have put off some type of health care services during the past 12 months. While some health care organizations have fared better than others, many have suffered significant financial losses. Almost all face new challenges related to the public health crisis.

A recent ACHE survey of issues confronting hospitals identified staffing shortages and financial challenges as the top-two concerns among hospital CEOs. It’s the first time since 2004 that finances were not the number-one concern. Overcoming and addressing both issues depends on the ability of health systems to manage and accelerate growth going forward.

Two recent trends underpin the importance and evolution of growth thinking in today’s health care environment.

One is that hospitals and health systems can’t simply cut their way to financial sustainability. Growth is essential. The Advisory Board concluded in its 2018 report, The New Cost Mandate, that balancing cost reductions with targeted growth strategies will be essential for health systems to thrive.

The other trend that underscores the importance of growth in health care is related to where it will occur. Industry experts agree that the future growth of health systems will not come from traditional inpatient business, but from other opportunities and settings requiring completely new and more innovative strategies and approaches.

For example, think of the shift to outpatient services, physician-office-based care, remote and at-home care models, and chronic disease management services. Health systems not only need to look to new areas to achieve future growth, but also retool and evolve structurally and operationally to capitalize on that growth.

Defining Growth More Broadly

For most organizations, growth primarily comes from three sources:

1. Expanding one’s current market share and share of existing services (selling more of what you’ve always sold to more people)
2. Growing share of wallet or “share of care” (selling more things to the same customers and patients)
3. Entering into new markets and services beyond current core business offerings

From a marketing perspective, all three are important to understand. A variety of different strategies and tactics may be used in achieving growth within each approach. Below is a starter list of examples that marketers might use to achieve growth within each imperative:

Growing Existing Market Share

• Optimizing the mix of payers and reimbursement plans
• Expanding the referral network and optimizing relationships with physicians
• Developing more-competitive pricing plans
• Creating new partnerships and pursuing merger and acquisition (M&A) strategies
• Improving brand awareness and preference
• Improving patient access and ease of use/convenience
• Improving market competitive positioning

Growing Share of Care

• Promotional offerings around pricing, bundled services, and special offers
• Increasing brand loyalty among existing patients and referral sources
• Consolidating care and services to create more “one-stop shopping” opportunities
• Improving patient engagement strategies
• Cross-selling opportunities and loyalty programs

Growing New Revenue Streams

• Geographic expansion from existing primary and secondary markets into new regions
• New data-driven, precision consumer and patient acquisition strategies
• Physician acquisition and retention (by geography, specialty, or capabilities and expertise)
• Service-line rationalization and expansion of existing or new clinical services
• New partnerships and M&A
• Commercializing existing services and products (business services, food services, technology, etc.)
• New-product development, incubators and venture capital (VC) investing
• Vertical integration

Marketing’s Role in Growth

Many of the strategies can easily apply to one or more overall growth imperatives, and it’s easy to see that growth is far from one-dimensional and shouldn’t be thought of in terms of new patients and new revenue only. Growth can be approached in different ways. Health care marketers need to think creatively about all the ways the organization may need to grow, what resources will be required to enable that growth, and all the ways marketing can support specific growth initiatives.

Local health care systems have also traditionally competed by focusing on the first two imperatives — growing existing market share and growing share of care. Increasingly, health care executives need to embrace expansion and new revenue streams as an important third element of a diversified growth strategy.

This has also led to a variety of new organizational structures and entities ranging from new payer/provider models to venture capital investment vehicles to strategic partnerships covering a variety of new business channels and audiences for health care services. As a result, the health care system of the future looks very different from the traditional hospital-centric health system of the past.

This means marketers need to think differently as well and not only consider all three imperatives for growth, but also become more flexible in adapting marketing strategies and tactics to fit the right investments in branding, customer acquisition and retention, and service delivery.

For instance, a 2020 Accenture report found that health systems prioritizing consumer experience and delivering on new expectations are more successful in maintaining their own patient base and growing market share. Clearly, marketing can have significant impact here, but it’s also an area where health care marketers have traditionally had less involvement and influence.

Competing on Growth

As hospitals reach beyond the traditional inpatient and outpatient delivery settings, they will face new and different competition as well. Many of these competitors will be new health care providers built from the ground up to focus on a unique setting or clinical specialty. Others will emerge from more traditional retail and consumer-driven industries that will give them an edge in many operational, customer service, and technological areas.

Whatever the specific scenario, health care systems are no longer competing among themselves for growth, but against a vastly different — and inherently more dynamic — marketplace that is increasingly more consumer-driven. Hence the desire of health care leaders to better understand consumer behavior, launch consumer insight functions, and adopt new, more retail-driven approaches such as “digital front door” strategies.

Marketers should embrace the enthusiasm, but also help lead these initiatives with sound planning, rigorous execution, and realistic expectations. Health systems don’t necessarily need to become the “Apple of health care” — they simply need to exceed current consumer and patient expectations, and sometimes that bar can be surprisingly low in health care. Elevating the patient experience can fuel growth, as noted in the Accenture report.

Finally, mergers and acquisitions get a lot of attention when it comes to growth for good reason. Between 2012 and 2018, the market share (based on patient revenue) of the 10 largest health systems grew to be nearly a quarter of the market. This is due to growth in both revenue and consolidation. According to Deloitte, revenue grew for the 10 largest health systems nearly twice as much during this period compared with the rest of the health systems and independent hospitals in the market (82 percent vs. 45 percent).

But mergers and acquisitions have their own unique challenges and require big investments of time and resources to pull off successfully. While size and scale can certainly enable growth, being “big” doesn’t in and of itself define success. Savvy marketers know that being the market leader comes with its own marketing challenges. Mainly, leaders become the focus of every other competitor’s challenge, and it’s impossible to be all things to all people (or patients, in this case).

Reimagining Marketing for Growth

From a more practical standpoint, strategists and marketers should also be looking across their organizations to build the ideal marketing infrastructure to support growth wherever the focus. For example, rather than aligning the marketing organization to a specific business line or set of traditional inpatient and outpatient service lines, marketers may want to take a more enterprise approach to thinking about marketing staffing and expertise.

Having the right marketing data and analytics takes on greater importance. Traditional siloed marketing systems may no longer meet the needs of a changing, multifaceted health care delivery system. Even the approach to measuring marketing’s impact and calculating MROI (marketing return-on-investment) may need to adapt to new situations or measures of success.

Optum found that organizations striving to remain nimble and primed for growth need three essential elements:

1. An enterprise point of view that defines their true north
2. A strategic roadmap that highlights areas of differentiation
3. Supporting data to help make critical adjustments along the way

Vision, data, and planning are all areas that marketing is uniquely positioned to help support and lead in ways other departments and functions may not be as well suited.

In short, health care is going through a radical transformation. Health systems are not only highly dependent on short-term growth to overcome the impact of a pandemic, but also on completely new ways of doing business to adapt and compete in an ever-shifting market. Marketers must fully understand both traditional levers for growth as well as emerging ones, and proactively lead around the changing needs of their organizations to ensure they succeed and thrive in whatever future health care landscape comes at them.

Daniel Fell is a senior strategist with Optum and a member of the eHealthcare Strategy & Trends Editorial Advisory Board.

References

Americans’ Challenges with Health Care Costs, Kaiser Family Foundation, 2021, https://www.kff.org/health-costs/issue-brief/americans-challenges-with-health-care-costs/

Top Issues Confronting Hospitals Survey, ACHE, 2021, https://www.ache.org/learning-center/research/about-the-field/top-issues-confronting-hospitals

Elevating the Patient Experience to Fuel Growth, Accenture, 2020, https://www.accenture.com/_acnmedia/PDF-140/Accenture-Health-Elevate-Patient-Experience-Fuel-Growth_SEO.pdf

The New Cost Mandate, Advisory Board, 2018, https://www.advisory.com/en/topics/margin-management/2018/01/the-new-cost-mandate

The Potential for Rapid Consolidation of Health Systems, Deloitte, 2020, https://www2.deloitte.com/us/en/insights/industry/health-care/hospital-mergers-acquisition-trends.html

Accelerating Growth in the Health Economy, Optum, 2020, https://www.optum.com/content/dam/optum3/optum/en/resources/ebooks/optum-accelerating-growth-in-the-health-economy-ebook.pdf