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Unlocking Revenue Potential in Hospitals (Part-1)

The proliferation of private healthcare players in Tier-1, and Tier-2 cities due to rising healthcare demand, the last decade has seen significant inflow of capital into the sector and significant investments in Infrastructure expansion to cater to the rapidly growing healthcare needs of the population. In this increasingly competitive environment, performance management becomes all so critical and calls for a thorough approach to optimizing financial performance.

With a record number of PE investments in the sector in the last 3 years, the next 5 years will see increasing pressure on operators for enhanced financial performance as investors seek attractive returns from exits.

In the first of the 2-part series that covers enhanced hospital performance, we tackle key strategies that focus on how Hospital Operators can Enhance Revenue Performance.

While the newer players face the challenge of optimally utilizing installed bed capacity by ensuring adequate footfall, established incumbents face high patient footfalls, must think of ways to improve the average realization per patient and optimal utilization of capacity.

A — Increasing Patient Footfall

1. Identifying Key Target Segments & alignment of Service Mix

Micro market mapping to understand the key target segment with a focus on neighborhood activation. Clearly mapping demand and identifying gaps in offerings will help refine the service mix and positioning of the hospitalMicro Markets Need to be Identified

2. Optimizing Demand Channels

A clear engagement plan for referral physician engagement that includes frequency of visits, timely revision of incentive structures among others will be critical to drive demand through a key channel. Regular benchmarking to assess the competitive landscape in terms of incentive structures can help players stay ahead of the curve and ensure steady demand inflowInstitutional channels can contribute significant patient volume to hospitals — however they come with caveats — Governmental channels typically have a lower per procedure payout rate and have longer payment terms thus impacting working capital. Third Party Administrators (TPA) channels also have lower average pricing but if managed well. Key measures that can help manage the channel better are increased insurance empanelment, increased corporate engagement initiatives among othersDeveloping and engaging usually ignored channels like Nursing homes to tap into demand from peripheral networks can also aid in improving patient footfall

3. Marketing as a tool is Underrated in Hospital Branding

Deploying both Above the line and Below the Line Strategies effectively can make a significant impact in cementing a hospital’s brand in the market and thus creating a steady patient footfall beyond the conventional B2B channels. Effective brand communications would play a critical role in recall along with optimal deployment of ATL / BTL channels. Digital marketing and a strong online presence also have a key role to play in improving brand recall, and driving up inbound enquiriesSalesforce effectiveness — Rifle vs shotgun strategy — often, the rifle approach works better and concerted sales strategy with clear focus and target segment mapping as opposed to the spray and pray approachShotgun vs Rifle Strategy

B — Enhancing Average Revenue Per Patient

Arresting Revenue Leakages & Managing ConversionAlong the patient journeys through a hospital from the first consultation till discharge, across various touchpoints, revenue leakages lead to a signification drop in overall revenue that could be generated from a patientLack of focus on tracking patient journeys can lead to avoidable revenue leakages — ex — ensuring a properly stocked pharmacy which has enough counters to ensure a seamless purchase experience can arrest significant revenue leakages as many patients who would otherwise purchase at the hospital’s pharmacy end up buying elsewhere due to long wait times and lack of medicine availabilityKey conversion indicators like OP/IP, ER / IP among others should be tracked to understand performance by department which can help in undertaking targeted performance improvement to help lower revenue leakagesStreamlining doctor / clinician incentives is critical to arresting leakages — for instance, doctors could be referring patients to specific service providers (diagnostics, pharmacies, etc.) due to misaligned incentive structures and engagement modelsTypical Patient Journey

2. Cross Selling of Services

A thorough mapping of patient journeys and identification of potential clinical and non-clinical services that can be sold to the patients is a key revenue enhancement lever. For example, patients who will undergo major orthopedic surgeries will need rehabilitation and care — the hospital can partner with service providers and generate additional revenues through referrals