Change of Address

Shifting Accountability for Growth Outcomes, and Where the Total Cost of Care Performance Lives

Health systems across the country are entering a strategic inflection point.

For decades, the core organizing principle of most health systems has been the hospital and its surrounding primary service area. Service lines were designed to attract specialty physicians, grow advanced clinical capabilities, and support the capital-intensive infrastructure of hospital-based care.

This model successfully fueled the expansion of modern health systems. But the economic environment surrounding healthcare delivery is beginning to change.

An increasing share of revenue now flows through arrangements that hold organizations accountable not only for delivering care, but for managing longitudinal patient outcomes and total cost of care across populations.

These models include the Medicare Shared Savings Program (MSSP) and Medicare Advantage; employer-sponsored value arrangements, bundled payment models, and risk-bearing provider networks.

In these arrangements, financial performance depends not simply on how much care an organization delivers, but on how effectively it manages care across the full continuum.

This shift introduces a new strategic tension. Health systems must now simultaneously manage two objectives:

• Sustaining growth in clinically appropriate services
• Managing utilization, outcomes, and total cost of care for defined populations

In some cases, these goals reinforce each other. In others, they may conflict. For example:

• Preventing avoidable admissions may improve value-based performance but reduce hospital revenue
• Optimizing site of service may shift procedures away from higher-cost facilities
• Coordinating care transitions may reduce post-acute utilization

These dynamics raise a fundamental structural question for healthcare organizations: How should the enterprise organize itself to manage both growth and risk simultaneously?

Aligning form (structure) to function (strategy)

For most of the modern health system era, the hospital has been the organizing center of the enterprise. Care delivery was structured around hospital primary service areas—the geographic zones from which each facility drew its patients, physicians, and influence. 

Within those boundaries, the hospital became more than a site of care; it became the gravitational center of the local healthcare economy.

Everything radiated outward from it. Local operations were built to support its clinical activity. Physicians aligned themselves with the institution that controlled access to patients, operating rooms, and advanced technology. Capital investment flowed toward the facilities and specialties that strengthened its position. Service lines grew as extensions of the hospital’s clinical capabilities, competing to attract referrals and expand procedural expertise. 

Financial accountability, too, was largely defined by the hospital's performance.

This model was not accidental. It was a rational response to the realities of healthcare economics. Hospitals represented the most complex, capital-intensive assets in the system, and organizing around them created clarity in leadership, operations, and strategy. For managing advanced clinical care and sustaining the infrastructure of modern medicine, the hospital-centered model worked—and in many ways, it still does.

Value-based care changes the question a health system must answer.

Under the traditional model, success was largely determined by how well the hospital performed: volumes, service lines, margins, and clinical reputation. Performance accountability was concentrated in a single place.

Value-based care disperses that accountability.

In a risk-bearing environment, performance is no longer determined solely by what happens within hospital walls. It is determined by how well the system manages patients across the full continuum of care, including before they arrive at the hospital, after they leave, and often without the hospital being involved at all.

Managing population health means orchestrating care across a far broader landscape: primary care practices that anchor longitudinal relationships, specialty services that guide complex treatment decisions, ambulatory clinics that increasingly handle procedures once confined to hospitals, and post-acute providers responsible for recovery and rehabilitation. 

The orchestration imperative extends into the patient’s home through remote monitoring and home-based care, and increasingly into digital pathways that allow patients to seek care outside traditional clinical settings.

None of these components operates neatly within a single hospital’s geographic footprint. Patients move across facilities, providers, and care settings in ways that rarely respect organizational boundaries. The responsibility for outcomes and the total cost of care now falls on the patient rather than the building.

And that simple shift raises a profound organizational question: if accountability now spans the entire continuum of care, can it still live primarily within the hospital?

As a result, many organizations are asking whether the traditional hospital-based structure remains sufficient for the next phase of healthcare delivery. The real strategic question is determining the appropriate unit of accountability for an integrated health system.

Three structural paths

In practice, health systems tend to evolve toward one of three structural approaches:

1. Hospital-centered model

In this model, hospitals remain the primary organizing unit for operations, physician alignment, and service line strategy. This approach provides:

• Clear operational accountability
• Alignment between facilities and leadership
• Strong focus on hospital asset performance

However, it can make it difficult to manage utilization patterns and cost performance across the continuum of care. Population health efforts may operate largely downstream from service line strategy rather than shaping it.

2. Market-based population model

In a market-based model, the organizing unit shifts from hospital geography to consumer-defined markets or attributed patient populations. Leadership structures, strategy, and performance accountability are organized around populations rather than facilities.

This model aligns more directly with value-based payment structures and supports management of the total cost of care.

However, it introduces its own challenges:

• Defining markets consistently
• Managing matrix leadership structures
• Maintaining accountability for hospital assets
• Ensuring operational clarity across facilities.

3. Hybrid model: population accountability with asset-based operations

Many organizations ultimately pursue a hybrid approach. In this model:

• Hospitals remain responsible for asset management and operations
• Service lines maintain clinical leadership for specialty programs
• Markets or attributed populations define accountability for outcomes and cost performance

This approach attempts to integrate three distinct dimensions of strategy: population accountability, clinical expertise, and asset management. But hybrid models also require disciplined governance to prevent ambiguity around decision authority and accountability.

The decision before the board

The strategic question before the board is not simply about geography or reporting lines. It is about how the organization intends to manage the intersection of growth and risk. Specifically:

At what level should the enterprise assign accountability for growth, outcomes, and total cost of care?

Possible units of accountability include:

• The hospital
• The service line
• The market
• Or, some combination

This decision will shape how strategy is developed, how incentives are aligned, and how leaders are evaluated. Regardless of the organizational model selected, one implication is increasingly clear:

If health systems expect to succeed in value-based environments, primary care and population health capabilities cannot remain downstream operational programs.

They must be incorporated into the service line strategy and its governance. Otherwise, service lines may continue to optimize local growth; population health teams will be left managing downstream utilization; and enterprise risk performance will remain difficult to achieve.

The board’s role is to determine the structural mechanisms that ensure clinical growth strategies and population health accountability reinforce rather than undermine one another. This pre-read is intended to frame and inform that decision.