In our work with hospitals and health systems, we often help our clients ask and answer the big strategic questions that will shape a health system’s future direction—a decision-making exercise we’ve previously explored in this blog. We also advise health system leaders to build out a corporate strategy function to support the choices they make.
After those important directional decisions and strategic capabilities are in place, making strategies practical and actionable is the logical next step. In our experience, the “how” for nearly any strategy includes some combination of the below three activities, listed with illustrative, but not exhaustive, potential examples:
- Growth (Bigger): Expanding inorganically or organically—and within existing and new geographies, which might include:
- Building new specialty service lines
- Entering new markets
- Improvement (Better): Taking steps to drive continuous improvement around existing processes to manage costs, which might include:
- Identifying cost efficiencies, improving productivity, and reallocating resources
- Improving contract negotiation
- Optimizing supply chains
- Transformation (Different): Improving how care is delivered to patients and communities, which might include:
- Evolving the operating model to enable success
- Shifting care to ambulatory settings
- Recalibrating physician employment models
- Centralizing and/or optimizing shared services
- Developing payer-provider partnerships or other new partnership structures
We often use this Growth/Improvement/Transformation model to help health system leaders determine where to focus their efforts and align their teams, which is critically important today given the choppy waters they are currently facing.
Financial conditions are softening: Kaufman Hall’s Hospital Operating Margin Index adjusted for corporate allocations stood at 1.7% for 2025 through July, according to the National Hospital Flash Report. And the projected long-term declines in federal healthcare spending from the One Big Beautiful Bill (OBBB) are looming around the corner.
In the current moment, healthcare leaders need to be asking:
What do we need to be doing to grow, improve, and transform?
Given that every organization has unique attributes, including payer mix, market standing, and revenue, there are no one-size-fits-all answers to this question. The deliberate pursuit of growth, improvement, and transformation requires information, direction, planning, and an effective operating model. This process includes:
- Codifying a point of view, using both analytics and engagement of relevant stakeholders (including the board, employees, patients, community members and others)
- Declaring a direction and related imperative needs—and the value proposition to support that direction
- Developing a plan that presents the total economic impact of those choices
- Effecting changes to the operating model and processes that enables the full realization of the plan
Successful strategies will employ a mix of growth, improvement and transformation activities—which should be prioritized to meet their specific short and long-term needs without casting aside any of these three imperatives at the expense of another.
For example, a small or mid-sized organization in a market with flat population growth might lean more in the short term on improvement activities, even as they identify growth and transformation activities that will be critical to long-term sustainability. On the flip side, a larger system with strong financial resources might be able to immediately take more steps around transformation and growth at a regional or even national level.
From there, organizations should determine whether they have the internal capabilities and resources to pursue each imperative, and consider whether to develop, partner, or acquire capabilities to fill any gaps.
Putting strategy into action
An effective strategy must be actionable, practical and in service of an organization’s priorities, market position, and unique attributes.
Identifying the right mix of growth, improvement, and transformation activities to support the strategic plan—and putting those efforts into action—is a critical step after the plan and supporting corporate capabilities are in place.
By effectively putting strategy into action, organizations can thrive amid today’s financial and operational challenges and position themselves to confront the looming threats that are just around the corner.
