From time to time, the basis of competition in an industry shifts so dramatically that shifting with it requires a new long-term vision that calls for the organization to do things it never would have done in the past. The hardest part is connecting long-term goals to near-term actions — especially when those new actions directly threaten the way you make money right now.
Consider the case of MedStar Health, the largest nongovernment health care provider in the Baltimore-Washington, D.C., region, as it navigates a dramatic shift from competing by offering integrated, comprehensive medical services to offering lower cost preventive care. Back before the passage of the Affordable Care Act, MedStar’s leaders decided they needed a strategic plan to reimagine the company in 2020. MedStar operated nine hospitals, but realized that its long-held objective of increasing revenue and profits at those venues was unsustainable, given the outcries over runaway medical costs.
Instead, it mapped out a future in which more and more care was delivered outside its hospitals at a fraction of the cost. Doing that required developing a new business model in which MedStar would get paid to keep patients well. “We needed an enduring strategy independent of any legislation,” recalls MedStar executive vice president Eric R. Wagner.
As in any large organization, the biggest challenge was how to keep this kind of long-range plan on track for a decade or more. After all, diverting investments away from core hospital budgets might be unpopular across an organization that is the largest private employer in the region. The new-growth areas MedStar mapped out included entering the general-population health insurance business as well as creating a major presence in ambulatory care – that is, outpatient locations aimed at preempting visits to the places where nearly all of its 30,000 employees currently worked.
These new ventures would operate separately from the core hospital assets and would compete in new ways in the health care marketplace. CEO Kenneth Samet, along with Wagner and the six other executives on the leadership team, set a long-term goal of building a major growth business from these new areas.
Mark W. Johnson is cofounder and senior partner at Innosight.