Service line management will continue to be a key focus for health systems

By Kaci Plattenburg

Because service lines are the foundation of most care delivery services, rock-solid service line management is crucial for health systems.

This year, many organizations have reported similar challenges with their service line management, including removing silos from care and trying to strike the balance between standardizing processes across a system and customizing them based on facilities and markets. At the same time, many organizations have shared priorities, like increasing patient access and optimizing operational efficiency.

In 2025, my team will focus on helping health system leaders solve some of their biggest service line management challenges. We're going to explore the root causes that hinder successful and efficient service line management, and how systems are organizing and leveraging their service lines to drive growth and profitability.

These growth strategies may not always look how you'd expect. For example, they may no longer rest on the laurels of the highest-revenue surgeries or even target the usual top service lines.

Continued margin compression and the changing mix of patient complexity will push future health system growth to focus on sustainability. Because of this, organizations will need to prepare for a future where outpatient growth is king and systemness as table stakes is nonnegotiable.

In addition to service lines, we'll look at how health systems are approaching capital spending. We surveyed over 100 health system financial leaders about how they're planning to deploy capital in 2025 and what's driving that decision-making, furthering our research on overall health system growth.

Go from a VBC dabbler to a VBC powerhouse

By Clare Wirth

Last year, our research focused on the question, "What does 'good' look like in value-based care (VBC)?" Using decades of Advisory Board research, we developed a tool called the VBC self-assessment to paint the VBC landscape. The tool helps provider executives diagnose their progress in VBC and start developing a strategy to get to their goal destination.

When it came down to defining that destination, however, a lack of consistently successful examples of VBC in action left a lot of leaders hesitant. Even if a health system wanted to do more with VBC, they didn't know how.  

Fortunately, there are several health systems deep into their VBC journeys with approaches worth emulating. These organizations have achieved the governance and vision, financial transformation, and clinical transformation necessary to generate meaningful cost savings and quality improvement.

In 2025, we will share in-depth, insight-rich case studies on these successful health systems' VBC implementation journeys. These organizations gave Advisory Board access to their full leadership bench, allowing us to gain insights into how they:

• Won buy-in from their executives and frontline care teams
• Integrated VBC into system-level decision-making
• Negotiated risk-based contracts
• Developed productive partnerships with health plans
•  Made VBC visible on their financial statements
• Translated data analytics into actionable insights for care teams
• Established their population health care model
• Managed their network, including engaging specialists

This research can help take you from a VBC dabbler to a VBC powerhouse. Even the most advanced VBC organizations will be able to learn from this research.

An up-to-date analysis on CVR opportunities and approaches

By Paul Trigonoplos

Although hospital finances and margins are recovering, the waterline for costs is higher than ever. Over the past two years, many organizations' cost improvement focus was on workforce and agency spend. But care variation reduction (CVR) remains a necessary area of focus as we move into 2025.  

There have been several changes to the operating environment that necessitate a new, up-to-date look at how providers are measuring, prioritizing, and rooting out performance variation.

First, the ongoing shift of care away from the hospital and toward alternative sites of care point to meaningful CVR opportunities in the outpatient and ambulatory space, particularly when it comes to procedural or drug-oriented care episodes. This is a shift compared to the pre-COVID era, when many organizations focused CVR efforts squarely on the inpatient space.

Second, AI is now more mature and is increasingly applicable to CVR efforts — AI can find granular cost and quality variation for things like LOS, discharge date/time, or supply use and can point to clear wins for hospital leaders.  

And lastly, the unit of focus for CVR has begun to evolve from DRGs and toward disease "clusters" across service lines. Measuring and implementing standards is more complex — but potentially meaningful – in such a model.

While evergreen best practices on topics such as governance committees or change management remain relevant, we're interested in new approaches, especially those that aim to meet these 2025 realities and a 2025 physician workforce. The good news is that these evolutions to the CVR playbook point to additional and attainable improvement opportunity for many.

AI's impact on clinical decision-making

By Ty Aderhold

In the past few years, AI has become a main topic of conversation for many healthcare leaders, particularly regarding the efficiency gains that could be offered by generative AI. But that is not the only place AI is poised to have an impact. In 2025, we're focusing on how the technology could better inform clinical decision-making and care decisions, with an eye toward how it could improve outcomes while making these processes more efficient.

I want to emphasize the word "could," since these benefits are not guaranteed. In fact, I don't think these benefits will emerge if payers, providers, and life sciences organizations continue to invest in AI in silos. Instead, clinicians may be limited to administrative AI support at the point of care, while data silos could prevent organizations from better identifying patient care needs and providing timely interventions.  

Because we're still in the relatively early stages of understanding how AI can transform clinical care, it's important to research the best ways to transform and improve these processes for all payers, providers, life sciences organizations, and patients. However, the industry will need to work together to find a better method than just throwing AI-powered automation at our current processes.

To figure out the potential impact of AI technology on clinical decisions, we're going to talk to a wide range of stakeholders about their current investments in the space, their future plans, how they're working with partners, and the barriers they face. We'll also pressure test future potential scenarios for the technology, trying to understand different potential use cases and what decisions or actions could lead to them.

How specialty pharmacies can achieve strategic business goals

By Chloe Bakst

Drug costs are a hot topic in healthcare, and that's not likely to change anytime soon. With every year of record drug spending, we're moving closer to a healthcare system defined by high drug costs rather than high procedure costs.

That structural shift in healthcare dynamics means that organizations would be remiss to overlook the ways in which their pharmacy assets can help them achieve their strategic goals. We've long discussed how specialty pharmacies are often the unsung lifeblood of hospital finances — as well as revenue engines for pharmacy benefit managers.

Currently, several factors, including heightened competition, a growing pipeline of rare and orphan drugs and their limited distribution networks, challenges to 340B, and more, are changing the specialty pharmacy landscape. These headwinds will persist in the coming years and force healthcare leaders to think strategically about how they approach specialty pharmacy.

It won't be enough to simply defend against challenges to specialty pharmacy prescription capture — leaders will need learn how to go on the offense and look for opportunities to leverage their pharmacy assets. For example, our conversations with provider and plan leaders have shown us that they are starting to recognize the potential of integrated pharmacies to support success in a risk-based healthcare environment.

In 2025, we plan to dig deeper into trends around specialty pharmacies, particularly the ways providers and health plans are deploying their integrated pharmacy assets to achieve strategic goals. This research will go beyond naming what makes specialty pharmacy strategy hard and instead call out the ways that integrated pharmacy assets can be transformative for the future of your health system.