Looking at “Antares”: The Advisory Board Company Models the Future of Hospital Margins

Earlier this week, Healthcare Innovation Editor-in-Chief Mark Hagland interviewed Rob Lazerow, managing director, research and insights, at The Advisory Board Company, Washington, D.C., about a range of subjects, including around the future of hospital and health system revenue margins.

In the second interview, Lazerow referenced that “We created a model, average, $1 billion health system, which we called ‘Antares’—named after the fifteenth brightest star, which is burning through its hydrogen and will eventually collapse. We found that by 2021, Antares had a negative operating margin. That was the metaphor.  And we projected a negative 4.2 percent margin in 2025 for Antares, absent intervention.”

In that regard, Advisory Board Company leaders have come up with an infographic, which we are sharing here, exclusively, around the “Antares” concept. And they have written the following, about the origin of the development of “Antares”:

“Hospitals’ financial performance has reached an all-time low, and margin pressures are only intensifying over time. The structural nature of today’s revenue threats—manifesting in the form of direct pricing cuts, new payment models, site-of-care shifts, and more—combined with rising operating costs means that few leaders will be able to achieve sustainable margins through expense reduction or revenue growth alone. Instead, hospital and health system leaders will need to meaningfully improve both their cost and revenue performance to execute a comprehensive margin management playbook. In 2017, the Health Care Advisory Board investigated how organizations can best develop the cost discipline necessary to support long-term sustainability.

“In 2018, to complement this previous research, we focused on strategies to substantially grow revenue to achieve and maintain healthy margins. Sustaining this level of revenue growth will require providers to focus across three primary areas: reducing avoidable revenue erosion to ensure appropriate payment for each patient encounter, increasing patient volumes to win market share in both the inpatient and outpatient settings, and exploring opportunities to diversify into new revenue streams. Our research uncovered 10 strategies to guide hospital and health system leaders on the road to effective long-term revenue growth. This research report, the second in a three-part series, focuses on strategies five through eight, which will help organizations win an increased share of lucrative patient volumes. In the first and third research reports, we explain how to avoid revenue erosion and diversify into new revenue streams, respectively.”