Demand for healthcare services in Asia-Pacific continues to grow amid an aging population and an increase in chronic disease. But there are several headwinds on the horizon that are putting pressure on healthcare providers. Vikram Kapur, a partner with Bain's Healthcare practice, discusses four areas that providers can focus on to improve their operational excellence.
Read the Bain Brief: Operational Excellence in Healthcare Delivery in India
Read the transcript below.
VIKRAM KAPUR: The healthcare sector in Asia-Pacific continues to see very strong demand outlook, with an aging population and growing chronic disease. Now, this demand is actually accompanied with several headwinds. We're seeing increasing competition, growing pricing pressure, and rising costs, which is starting to put pressure on margins for providers in the region.
Having historically focused on growth, most providers in the region are woefully underprepared for this new normal. And we really need to shift their focus to operational excellence. Now, what do we mean by operational excellence? We see four critical levers that providers can deploy as they move on this journey. Firstly, it's just top-line, service mix optimization. So taking a sharp look at what specialties they're focused on. Taking a look at pricing, value-based pricing, contracting.
The second thing is front-end manpower. Thinking about their doctor model, thinking about how do you really deploy that frontline. Material costs—buying better, spending better. And then finally, just taking a sharper look at overhead costs.
Not realizing operation improvements is hard. Our research shows that 60% of executives, who set a bold ambition on operational excellence, have to settle for a dilution in their ambition. And what separates the successful programs from the less successful programs is really three things. Firstly, designing the program with the patient at the center. Secondly, taking a zero-based approach to redesigning for the future. And then finally, investing in change management and capability building right from the beginning.
If done right, the size of the prize can be really large. We've seen successful programs realize anywhere between 15% and 20% improvement in EBITDA.
A critical imperative during a painful transition.