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Health Providers Uncover New Revenue Streams to Advance Innovation For Patient Care

The first benchmarking study of health system efforts to generate new revenue streams evaluates a range of effective strategies to sustain overall operations, fuel innovation, and advance patient care missions. The report by Partners HealthCare and Fitzroy Health finds that successful health systems have increased operating margin as much as five points through diversification strategies.

“The study shows an industry undertaking a vast number of bold experiments to diversify revenue by improving the quality, efficiency, and satisfaction of patient care delivery,” says James Stanford, co-author of study and managing director, Fitzroy Health.

The study examined the scope, depth, and potential risks and returns of non-traditional revenue strategies. Key findings revealed that health systems can create a risk-adjusted portfolio of initiatives that leverages their ecosystem and competitive advantages. In sum, health systems possess the unique ability to create market value through innovations that have transformed their own operating and clinical models.

Three primary levers for value creation emerged from the findings:

Lever 1: Bring care model innovations to market, like University of Colorado Hospital’s co-development with RxRevu.

Lever 2: Transform cost centers into profit centers, like Navicent Health’s Flex Health, a workforce management company spin-out.

Lever 3: Generate royalties from drugs, devices, and diagnostics – like Children’s Hospital of Philadelphia’s $35 million investment in Spark Therapeutics.

“Diversifying revenue streams helps ensure future investment for life-saving technologies and ongoing discovery in medicine,” said Christopher M. Coburn, co-author of the study and chief innovation officer, Partners HealthCare System. “It’s encouraging to see the many ways health systems are driving investment in collaborative innovation to create new solutions to today’s healthcare’s challenges.”

Researchers conducted comprehensive interviews with C-suite executives, board members, venture executives, and others at 74 U.S. health systems and academic medical centers. All the participants acknowledged the need to diversify revenue, and 90 percent indicated novel revenue streams were an urgent priority.

Method: The researchers evaluated more than 1,400 initiatives that health systems have pursued to generate new revenue and categorized those initiatives into 10 different options. The model demonstrated where opportunities exist inside health ecosystems that could represents billions of dollars of latent value. The study yielded more than 40 case studies, many of which are featured in the white paper along with their value proposition and key success factors.

 

About Fitzroy Health

Fitzroy Health partners with distinctive healthcare organizations to create commercial ventures that generate new sources of revenue and enterprise value. Through its unique model of risk sharing, Fitzroy Health supports all areas of commercial innovation, from sourcing and capacity building to commercialization and operation. www.fitzroyhealth.com