Dr. Rupal Malani on the way forward for clinical-care organizations
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What are the current challenges facing clinical-care organizations?
I think we can all agree that the degree of uncertainty and the pace of change at this moment is truly unprecedented. Moreover, the cross-functional nature of addressing those fronts also feels meaningfully different.
Welcome. You're listening to the McKinsey on Healthcare podcast. If you're looking for insights into the issues that matter most to healthcare right now, you're in the right place. Explore wide-ranging conversations with leaders, changemakers, innovators, and professionals who are at the heart of healthcare today. I'm Corita Anderson, Senior Editor for Healthcare at McKinsey, based in New York. Let's get started. Today I'm here with Rupal Malani, a senior partner in McKinsey's Cleveland office. Rupal leads McKinsey's work with health systems in the healthcare practice in North America. She serves national, regional, and academic medical providers across a broad range of strategic, operational, and organizational topics.
Rupal has extensive experience supporting health systems in achieving improvements in workforce productivity, external spending and clinical operations. Hi, Rupa. Great to have you on the podcast today. Hi, Karida. So good to see you and talk to you as always. So, Rupa, let's talk about some specifics for the year ahead and the next few years. What has been top of mind for you and your clients as you start out 2025? It's a great question.
You know, perennially, when I talk to my clients, I would say quality and access are absolutely top of mind. And that's been the case for, you know, 15 plus years that I've been doing this role in the firm and the nearly 20 that I've been in health care. This year, I think there are a few topics where the emerging thinking is coalescing around the near-term impacts. And those are around site neutrality, tariffs and their impact on the supply chain, acceleration in value-based care, and drug pricing. Agnostic of that, though, I think if I just kind of reflect on the last 18 months of conversations, providers, CEOs, really what's been their main focus has been growth and expanding access. The key, though, there is to do it in a margin accretive way so that they can enable investment in patient care and for academic medical centers also in training and research.
As you know, Corita, but maybe for some listeners of the podcast that may not be as aware, health system economics are marked by cross-subsidization, meaning the business relies on segments that generate higher margins to ensure they can continue providing care for the segments that don't. However, as the population ages, number one, and number two, as competition intensifies, that cross-subsidization model is not as sustainable. And so health systems are rightly focused on access and on growth that's margin accretive so that they can continue to invest in high-quality patient outcomes. At the same time, they're equally focused on operating efficiency. If you just look at the past 10 years, EBITDA margins have been steadily declining.
Around 2015, the median EBITDA margin for health systems was at roughly 11.5%. HFMA reported that for the first half of 2024, that same stat was roughly 6%. And so operating efficiency has been a huge focus. frankly, for the majority of the last decade for health systems. Providers are continuing to find ways to fight input cost inflation, whether that's in driving down supply costs, rethinking care models, or improving retention of their clinical and nonclinical staff. And I think what I've noticed over the past, call it 12 to 24 months, is health systems are really moving away from pulling the same set of levers that they've relied upon for the past, you know, 4, 5, 10 years. Not just pulling those levers harder, but actually finding new levers to pull.
And that's where technology comes in. The capabilities that are being offered by technology are accelerating at a pace that I think we've not seen before in this industry. And providers are really taking advantage of this to drive consistency, accuracy, and speed.
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