Build Systemness or Fall Behind: How to Optimize the Network and Grow Health System Margins

In the face of relentless margin pressures, declining traditional revenue streams and a growing demand for patient-centered care, health systems must fundamentally rethink operations. True margin management is no longer possible through isolated cost savings or departmental efficiency gains. It requires a total effort — one that spans the entire enterprise, bridging the gap between clinical excellence and financial engagement.

This is the essence of systemness: designing a network that delivers the right care, in the right place, at the right cost. When organizations achieve it, patients gain clarity and trust while providers improve margins, collections and speed to revenue.

Premier's strategic guide to margin management explores how health systems can build this foundation for long-term performance. The following network optimization strategies can help organizations concentrate resources where they create the most enterprise value.

Prioritize and Invest in Your Best Service Lines to Maximize Quality and Conserve Resources

As the saying goes, a jack of all trades is a master of none. Many health systems fall into the trap of pursuing too many service lines in an effort to capture every possible patient. But the most financially resilient organizations focus their time, talent and capital where they already excel. They concentrate investment in service lines with demonstrated quality outcomes, strong market presence and meaningful growth potential.

Building a focused growth strategy starts with understanding where to invest, how to improve performance and how to scale success across the enterprise. Three priorities consistently rise to the top.

1. Use Data to Identify Your “Anchor” Service Lines

Start by grounding decisions in data. Use performance dashboards and external benchmarking to pinpoint which service lines:

• Deliver the highest margins and contributions to overall income.
• Maintain superior quality and patient safety scores.
• Command strong referral patterns and market share.
• Have strategic alignment with the organization’s long-term mission.

Premier’s data analytics can help leaders visualize performance across hospital service lines and care sites and pinpoint the best areas for investment.

2. Double Down on Operational Excellence 

Next, Premier’s experts can help design targeted investments that improve throughput, patient experience and efficiency. Examples include:

• Deploying artificial intelligence (AI)-powered scheduling, patient flow and capacity tools to maximize volume without adding cost.
• Employing Premier’s Performance Insights Value Optimization Tool (PIVOT) to help ensure physician alignment through performance-based compensation models tied to productivity and outcomes.
• Optimizing supply chain contracts and ensuring every site purchases on-contract to eliminate leakage.

3. Turn Proven Pillars into a Growth Engine 

Savvy systems use high-performing service lines as launchpads for enterprise growth, expanding access, strengthening referral networks and investing in brand differentiation. A focused growth strategy ensures that every minute and dollar spent reinforces the organization’s most profitable, high-potential and sustainable lines of business. 

Govern Investments to Strengthen Margins

Growth alone does not strengthen margins. Many organizations pursue new technology investments, acquire additional sites of care or expand capacity with the goal of increasing patient volume. Yet without strong governance, those investments can produce unintended consequences.

Decision makers must ensure that every purchase, every capital project and every technology deployment — whether clinical or operational — is governed through an enterprise-wide lens. They must not only ask, “Will this increase volume?” but also “Will this help us deliver better care?” and “Will it improve our total margin?” 

The organizations that achieve systemness govern capital, technology and operational investments with the same discipline they apply to clinical performance.

Treat the Supply Chain as the Foundation of Financial Discipline

Few functions touch more of the enterprise than the supply chain. From clinical operations to capital planning, supply chain performance plays a foundational role in margin management. It is also one of the areas where fragmented processes most commonly erode profitability. When sites of care purchase independently, organizations lose leverage, visibility and consistency. Variation in pricing, utilization and contract compliance weakens negotiating power and drains margin potential.

That’s largely why leading systems are moving toward unified procurement strategies that align purchasing activity with enterprise financial goals.

Premier’s supply chain optimization solutions help foster and activate that discipline. Using advanced analytics, benchmarking and contract intelligence, Premier identifies areas of variation and drives standardization across facilities. Technology tools such as Premier SmartPO®, a cost-saving digital purchasing platform for continuum of care providers, help ensure that all purchasing activity serves the greater financial good while fulfilling patient care needs.

Employ Technology to Connect Data, Decisions and Performance

Systemness cannot succeed without technology that connects the enterprise. Fragmented data silos cloud the full picture of operational performance and impede system financial health. On the other hand, purposeful technology solutions extend well beyond hospital walls. They provide the infrastructure to unify data across care settings, giving leaders the visibility and control necessary to manage and grow margins at scale.

Performance assessments across acute, ambulatory and post-acute environments can help:

• Identify patient flow inefficiencies.
• Pinpoint leakage across the network.
• Align care delivery with system capacity.
• Guide patients to the most appropriate setting of care.

Technology also strengthens governance. Performance dashboards and predictive analytics give leaders the ability to model scenarios, track compliance, uncover revenue opportunities and manage costs proactively rather than reactively.

Align People, Incentives and Strategy

Technology alone cannot create lasting change. Many health systems have invested heavily in physician networks without realizing the expected return. Misalignment, rather than access or scale, is frequently the challenge.

Misaligned incentives and fragmented performance oversight can make it difficult for employed physicians to fully support enterprise objectives. That is why leading organizations are reengineering physician enterprises around access strategy, compensation design and performance management.

Premier's Physician Enterprise Advisory Practice helps organizations evaluate opportunities for improvement through data-driven performance management, embedded advisory support and peer benchmarking. Solutions such as PIVOT help organizations identify opportunity gaps, prioritize actions and align physician performance with enterprise goals.

Get Started: Eliminate Waste and Build Toward Meaningful Growth

Systemness is not a buzzword. It is a financial strategy. As reimbursement tightens and patient expectations evolve, the challenge facing health systems will not be solved through disconnected initiatives. Margin, mission and market position all depend on an integrated approach that connects supply chain, finance, clinical care, physician strategy and growth. Organizations that achieve true systemness are better positioned to improve care quality, strengthen financial performance and build lasting margin resilience.

Where does fragmentation still exist across your network, and what opportunities could be unlocked by treating the enterprise as a connected system? Download Premier's strategic guide to margin management to explore the complete strategy.