It’s been a banner year for healthcare, and not in a good way. As a healthcare provider, if your patients had trouble filling a prescription, if your organization struggled to submit claims to generate much-needed revenue, or if your organization had to ask a patient to reschedule a non-essential medical procedure, then you are likely a casualty of healthcare concentration risk.

Concentration is a type of systemic (external) risk that occurs when extreme dependencies within an organization’s business, operating, or commercial model create a single point of failure. When a systemic risk event for healthcare occurs, it sets off a chain of failures and disruptions with negative implications for healthcare organizations (HCOs) and dire consequences for patients. You don’t need to understand concentration risk for your organization to be impacted by it, but it won’t get better until you do. In our new report, Concentration Risk In Healthcare, we outline the necessary steps that HCOs must take to identify and mitigate healthcare concentration risk in five key areas.

Avoid These Five Sources Of Concentration Risk

We’ve previously written about how HCOs must take proactive action against concentration risk and how oligopolies in the pharmacy benefit manager market, for example, accelerate the spread of medical deserts. To be resilient in response to disruptions caused by natural events, market conditions, or other systemic risks, HCOs must identify and mitigate concentration risk in five common areas or suffer the consequences of lost revenue, reputational damage, and, at worst, putting lives at risk:

  • Labor. The existing labor supply and demand problem in healthcare will only intensify as the patient population grows and ages. The skills and knowledge gap, left behind by retiring clinicians and changes in training practices, further exacerbates this issue. Additionally, as reliance on technology increases, critical documentation skills are often missing during cybersecurity crises or routine downtimes. HCOs must prioritize flexible staffing solutions and knowledge transfer.
  • Technology. Overreliance on a single technology vendor can leave HCOs vulnerable to data breaches and service disruptions, especially when electronic medical records and telehealth services are indispensable. HCOs must diversify their technology partnerships, ensure interoperability between systems, and establish robust cybersecurity measures.
  • Artificial intelligence. Dependence on AI algorithms for critical decision-making processes, such as prior authorization, can lead to wrongful denial of care in favor of speed and cost-cutting. HCOs must balance AI innovation with proper precautions and guardrails.
  • Data. Relying on limited or biased datasets for decision-making, research, and AI training can introduce biases into patient care, thereby perpetuating existing inequities. Don’t limit the effectiveness of emerging healthcare technologies. HCOs must aim to collect and utilize diverse datasets and implement rigorous data governance practices.
  • Monopolies and oligopolies. When only a few big players dominate a market, customers can suffer if a disruption causes major shortages. Hurricane Helene’s damage of a single North Carolina plant that is responsible for 60% of the nation’s IV fluid production has hospitals nationwide experiencing a shortage, which is likely to be exacerbated by Hurricane Milton. This concentration of power in the hands of a few large entities can reduce competition, increase prices, and hinder innovation, leading to a complacent focus on incremental improvements rather than resilience. HCOs must identify single points of failure resulting from monopolies and oligopolies and develop mitigation strategies at the enterprise level.

Don’t Wait For Disaster: Act Now To Mitigate Concentration Risk

Read the full report to dive deeper into identification techniques and effective mitigation strategies. Forrester clients should schedule an inquiry or guidance session with Alla Valente and Arielle Trzcinski to discuss how you can protect your organization from the fallout of concentration risk.

Tiffany Do contributed to this blog post.