Rethinking revenue: why health systems need a bigger pie, not just a better slice
Most revenue conversations today still focus on one thing: collecting what’s already owed, which is arguably harder than ever. But that’s only part of the equation. In a market defined by rising costs, contracting subsidies, and increasing complexity, health systems must advance their future strategic priorities. They need to reimagine revenue altogether.
Health systems don’t just need to just focus on collecting more revenue. They need to earn more revenue as well as collect what is owed.
The challenge isn’t getting better at slicing the revenue pie already on your plate. It’s finding ways to bake a bigger pie.
Why traditional managed care revenue strategies no longer work
The current financial environment for health systems is increasingly complex. Key drivers of these complexities include:
- Reduced benefits for patients and/or a much higher cost share transferred to the patient
- Payors offering lower rate increases for short term gains and more cost controls (prior authorizations, step programs, coverage limits, and increased cost share)
- Changes in health policy which impact access to coverage and services
- Targeted approaches to minimize employer or state/federal expenditures without linkage to the actual cost side (site-neutral payments, pharmacy coverage)
Over the last decade, health system strategies have leaned on consolidation and diversification to drive financial stability:
- Expanding access to lower cost locations like outpatient services, urgent care, ASC, and imaging center care settings
- Growing PCP access with 77.6% of all PCPs employed by health systems (55.1%) and corporate healthcare entities (22.5%)
- Adding physicians to capture more referrals and downstream volume
- Pursuing cost synergies through acquisition of former competitors
These moves were necessary, but they weren’t sufficient. And, unfortunately, in many cases, they haven’t delivered the desired financial results.
These strategies created more data and complexity and increased financial pressure without necessarily expanding system margin and the ability to invest in communities served. As the market evolves, health system revenue strategy must move from overall geographic and service expansion to applying their focus to intentional growth design.
These challenges are compounded by increased competition, shifting patient expectations, and the disruptive entry of nontraditional players with digital-first models. Thus, many health systems can no longer depend on scale alone.
Traditional managed care revenue strategies may have gotten us where we are today, but they won’t get us out. The winners will be the health systems who design for data-driven adaptability, margin integrity, and patient lifetime value, not just service line volume.
So, what does this type of managed care revenue strategy look like in action?
The new growth agenda: revenue strategy by design
1. Treat payor strategy as a growth engine
Newly available transparency data creates, for the first time, mutual understanding between the payor and health systems of the true market position. Integrating it into your analysis of your specific market across your revenue streams must become part of the standard process.
In addition, payor contracts shouldn’t be isolated deals. Each contract must be part of your revenue portfolio pie. A modern approach involves:
- Assessing all contracts with each payor to ensure that negotiated rates are aligned to desired services and patient segments
- Coordinating across various payor contracts to improve net revenue performance and payment consistency
- Aligning rate changes with system-wide service line strategies to maximize revenue growth plans
- Creating a platform in which managed care teams, finance, and clinical operations can communicate regularly and effectively
The goal isn’t just better rates. It’s smarter structure.
Effective managed care revenue strategy must integrate payor insights from the beginning. If your payor contracts incentivize high-volume, low-margin activity, you may inadvertently be fueling growth that erodes profitability. Health systems should be mapping contract expectations against actual utilization trends to determine where growth efforts will drive enterprise value, not just volume.
Health systems whose investments demonstrate integrated care delivery, improved patient experience, and strong outcomes will have improved leverage in negotiations. Revenue leaders should help drive enhanced metrics and performance indicators to drive proof points.
2. Align revenue to drive patient access to maximize the results of your diversification strategies
A diversified system doesn’t automatically equal diversified revenue and margin. Health system growth depends on turning that footprint into a strategic advantage. That means:
- Reducing leakage across the network for revenue and clinical consistency
- Matching access to opportunity
- Engaging potential patients early to promote loyalty
- Steering patients to the right sites of care, not just the nearest for the best outcomes
Nearly all health system CFOs (94% according one survey) say leakage is a strategic priority. Yet most systems still lack coordinated strategies to address it at scale.
The key isn’t just capturing referrals. It’s keeping patients within your ecosystem by creating a seamless experience, from awareness to engagement to access to care delivery. This consistent experience requires a true cross-functional partnership between marketing, operations, access, and finance. Leakage is often seen as a marketing problem or a provider preference issue. But in reality, it’s an organizational design problem. And it’s solvable.
3. Streamline the path from demand to delivery
Throughput is a revenue driver, not just a clinical metric. Every delay, whether due to authorizations, denials, or outdated workflows, adds friction that depresses both revenue and patient experience. To increase capacity, health systems must:
- Simplify pre-service processes
- Minimize unnecessary barriers to care
- Integrate access, scheduling, and financial clearance systems
- Obtain authorizations when and where possible
In a market where patients increasingly prioritize speed and simplicity, throughput becomes a competitive advantage. Your strategy for making improvements must focus on your internal processes. However, you must also work with your payors to ensure they are contributing to improving throughput. Everyone benefits.
Yet throughput isn’t just about clinical logistics. It’s about aligning marketing demand generation with operational capacity and financial goals. When systems successfully forecast and manage throughput, they don’t just prevent bottlenecks. They ensure every care touchpoint is tied to optimized financial performance, and they position themselves as the provider of choice in an increasingly competitive access market.
How health system leaders can redefine the next era of revenue strategy
Traditional revenue functions were designed to measure how much of what came in you were able to keep. The future of revenue leadership is about influencing what’s possible by expanding the definition.
It’s not just about better collection. It’s about building strategies that bring finance, marketing, access, payor relations, and operations to the same table, with shared goals, shared visibility, and shared accountability.
This requires different focus. Revenue strategy.
Today’s complex healthcare environment demands leaders who understand patient behavior, market dynamics, and digital tools just as well as they understand revenue cycle KPIs. The most effective teams will operate more like product design groups than billing departments. They blend insights, experimentation, and real-time optimization while driving improved patient outcomes.
The health systems that win will be the ones that define revenue leadership not by how well they audit the past, but by how skillfully they shape the future.
It’s not just time to optimize the slice. It’s time to bake a bigger pie.