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Academic Medical Center Growth & Strategic Opportunities
By: John Meindl, CFA
Academic Medical Centers (AMCs) are facing unique challenges and opportunities in the current environment. With healthcare systems becoming more complex and dynamic, AMCs are adapting their strategies to preserve their inherent strengths and capitalize on evolving industry dynamics. One of the main challenges facing AMCs is the shortage of physicians, which is predicted to become more acute in the coming years. At the same time, revenue from higher margin care is eroding as new businesses are capturing market share. As AMCs play an outsized role in solving labor shortages, they have also been forced to adapt to the financial pressures. Here we examine some of the major financial and strategic opportunities available to AMCs.
1.) Academic Medical Center Partnerships
Many successful academic medical centers have adopted a hub-and-spoke model where the AMC serves as the hub and partners with community hospitals, medical complexes, for-profit hospitals, and pure-play service providers as the spokes. This model can improve care coordination to the appropriate site-of-care while expanding the population basis to support the growth or addition of specialty service lines.
AMCs entering new partnerships are doing so from a position of strength. Typical AMCs have a unique ability to effectively deliver highly complex care. Additionally, most AMCs have a strong and trusted brand in the communities they serve. However, access has long been a traditional weakness with patients struggling to access AMC facilities promptly. To address the access issue while capitalizing on strengths, AMCs are rethinking their approach to partnerships to provide easier channels for reaching their patients. Access to a more diverse population improves patient experiences, lowers cost structures, and provides revenue opportunities. Successful AMC partnerships may even end up being site-of-care agnostic, achieving the most optimum clinical outcomes while compensating all parties for their respective contributions.
However, partnering with non-academic medical centers poses some challenges. AMCs need to ensure that their partners provide the same quality of care and adhere to best practices, while also maintaining the AMC’s own high standards.
2.) Go at it Alone
Well capitalized AMCs can invest individually in ancillary services to access additional revenue streams and expand their patient base. The right mix of ancillary service lines allow an AMC to expand their footprint, improve clinical offerings, and generate incremental revenue. AMC’s investing in ancillary service lines should consider whether or not to allow the ancillary to use the AMC’s brand name. As outlined below, AMCs typically have a trusted and strong brand name built on a history of excellence. Allowing the ancillary to use the brand can either 1) enhance the volume of ancillary services, 2) dilute the AMC brand name, or 3) a mix of both. Common ancillary services may include ASCs, imaging centers, urgent care, and other retail facilities.
As mentioned above, AMCs often maintain a strong reputation and brand name. This intellectual property reflects valuable consumer trust built on history of clinical excellence. With the right strategic partner, AMCs can capitalize on their individual brand to become market makers through brand licensing, co-branding agreements, care network subscriptions, or external affiliations.
By building hub and spoke partnerships with community hospitals and medical complexes, academic medical centers can leverage their inherent strengths to maintain their industry reputation for excellence. AMCs that prefer an individualized approach may choose to invest directly in ancillary services or develop branding or affiliation agreements in order to generate additional revenue streams and expand patient access.
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