Consulting firms advise major players across the healthcare industry—from providers, payers, and government clients to pharmaceutical and medical device companies. But with constantly changing financial, clinical, and quality regulations to adhere to, hospitals represent one of the largest markets for healthcare consulting firms.
Definitive Healthcare tracks over 7,200 active hospitals across the United States. Of those, more than 5,600—or nearly 78 percent—are affiliated with an integrated delivery network. IDNs, or health systems, are responsible for managing daily operations, financial risks, clinical outcomes, credentialing, new technology implementations, and quality performance for as many as two hundred facilities in their networks.
Widespread industry consolidation has further complicated the structure and influence of these IDNs, resulting in a smaller number of large health systems with hefty negotiating power. According to Definitive Healthcare data, a total of 130 IDNs have closed or been absorbed into larger health networks in the past several years.
As of April 2020, there are 906 active IDNs across the United States. Fifty-six of these active health systems have 20 or more affiliated hospitals—with a handful of top IDNs reporting more than 100 member hospitals.
Top 5 IDNs with the most member hospitals
Net Patient Revenue
# of Member Hospitals
Universal Health Services
Department of Veterans Affairs
Encompass Health Corporation
Fig 1 Information about IDNs available in Definitive Healthcare’s Hospitals & IDNs database. Net patient revenue data is an aggregate of member hospital financial information sourced from the January 2020 Medicare Cost Report, the most recent data available. Accessed April 2020.
Targeting an IDN is a much more efficient, cost-effective way to implement changes throughout an entire network of hospitals. A consulting firm working with HCA Healthcare, for instance, could propose a quality improvement initiative that would be implemented across all 215 HCA Healthcare hospitals in addition to other network facilities. This is a much more strategic approach than if the firm were to only consult with one or two unaffiliated hospitals reporting low quality scores.
Key metrics to focus on when partnering with IDNs
With access to the right intelligence solution, there are a multitude of metrics that healthcare consultants can utilize when forming their IDN partnership strategy. This depends, in large part, on the consultant’s area of specialty.
Here, we’ve broken down some of the most relevant data points to focus on by consultant specialization:
Because strategy consultants are engaged with healthcare compliance, regulatory requirements, and strategic direction at the highest level of hospital and health system administration, they’ll want to focus their attention on more global metrics within their client facility and the industry at-large.
Staying up-to-date on CMS value-based care initiatives and Medicare reform is one critical way to incorporate industry insights into high-level strategic consulting. Quality measures like HCAHPS survey results, 30-day readmission rates, hospital-acquired condition rates, and Medicare value-based payment adjustments are key benchmarks to assess when evaluating compliance with regulatory requirements.
Financial metrics like total revenue, operating expenses, and net profit margin are good indicators of an IDN’s financial health. These data points will be most useful in consulting with a health network on the feasibility of a strategic decision like a merger, acquisition, or network restructuring.
Financial management and operations
Healthcare financial consultants might be more concerned with the granular details of each hospital or care facility within an IDN. Hospital metrics that a financial consultant might find most useful in preparing to partner with an IDN include:
Total operating expenses
Supply chain costs
Bad debt ratio
Building context around each member facility will also help consultants gain a better understanding of each hospital’s finances. Critical-access and safety-net hospitals, for instance, serve greater numbers of uninsured or under-insured patients. The care that these facilities provide is essential, but it often means that critical-access and safety-net hospitals are likely to report greater bad debt ratios than other care facilities.
In another vein, cancer centers and research facilities are likely to report much higher pharmaceutical supply chain costs than other hospital types. This is due to the nature of the drugs and treatment regimens that cancer centers administer, and the high cost of purchasing such specialized pharmaceuticals from suppliers.
Recognizing the role that each care facility plays—both within its community and within the health network—is an important step in assessing its financial performance and determining which measures a consultant can take to improve that performance.
Clinical consultants will not only want to ensure that patient outcomes and care quality are of the highest possible standard, but also that each facility within a health network is efficient and fully optimized in its daily operations.
When assessing an IDN’s clinical performance, consultants should consider some of the following metrics, including:
30-day readmission rate
AHRQ serious complication measures
Patient mortality rate
Abnormally high 30-day readmission rates could indicate that a hospital might need to improve communication and post-discharge care instructions for their patients. Identifying these potential lapses in clinical performance can present an opportunity for consultants to implement an improvement strategy across all member hospitals within an IDN.
Lean consultants focused on optimizing hospital efficiency might instead concentrate on clinical metrics like total number of staffed beds, bed utilization rate, total number of inpatient surgeries, number of operating rooms, and total facility square footage.
With access to this information, a lean consultant could potentially identify inefficiencies in a given hospital’s surgical capacity as a result of the distance that hospital staff must travel with (or without) their patient to and from the operating room. When approaching an IDN with a strategy for implementing these lean practices, a consultant could recommend new, streamlined ways of organizing hospital departments and services as the health system continues to grow.
Guest presenters John Pritchard and John Strong dive deep into the ways in which you can execute relational strategies when working with and selling to IDNs.
No time to watch the webinar? You can also read our guide to approaching IDNs for pharmaceutical and biotech companies. Read the blog to learn more about how your peers across the industry are forming partnerships with health networks.