Humatica Corner: Scaling healthcare – multiplying the multiple
Healthcare has become an attractive investment sector for private equity, driven by market size and efficiency improvement potential. Despite regulatory complexities, the industry’s fragmentation offers great opportunities to scale through organic growth, and buy and build. However, building a healthcare platform is tricky. People are the key resource. And, aligning sponsor and caregiver interests has proven particularly challenging in the sector.
Typical private equity financial incentives can backfire in healthcare organisations... healthcare is a minefield, with many potential investment risks
Healthcare presents other unique human capital management challenges, including high employee turnover, chronic labour shortages and significant wage differentials. And senior medical professionals often lack the required management skills. Finally, typical private equity financial incentives can backfire in healthcare organisations. Healthcare is a minefield, with many potential investment risks.
Humatica’s work has shown three levers to drive organisational effectiveness and investment success:
1. Agreeing a fit-for-purpose operating model is the starting point. The org setup needs to address fundamental questions around both care and support activities. For example: should patient scheduling or staff rostering be centralised and/or automated? What roles are required and how can they be defined consistently across the organisation? Or, what new roles are needed to allow medical staff to focus more on patient care? Clarity on the operating model is needed to achieve an efficient and effective organisation that can scale.
2. Breaking down silos and enabling collaboration between specialist teams is also critical for achieving great patient and investor outcomes. For this, clearly defined roles and responsibilities are essential. Establishing well-understood management and governance processes that define decision-making also underpins collaboration between professionals and clinics. Management processes are the 'software' routines that enable good clinical governance and decision-making. Creating cohesive teams and fostering a collaborative culture enables mutual understanding, efficiency and effectiveness.
3. Leveraging the inspiring sense of purpose from patient care is the fuel to attract the best talent and motivate staff. But creating a cultural awareness of cost, efficiency and profit among healthcare professionals at the same time is a leadership and communication challenge. In this context, KPIs that measure both patient outcomes and business effectiveness provide necessary feedback loops. Reporting balanced KPIs helps to ensure best patient outcomes, while creating a commercial mindset.
Healthcare leadership teams and their private equity sponsors are navigating a complex business environment – between the emotions of life quality and financial returns. Mastering a few basic practices enables PE-backed healthcare organisations to deliver both better patient outcomes and profit.
Categories: Insights Expert Commentaries Sectors Healthcare & Education
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