skip to Main Content

Your Hospital’s Secret Revenue Source

I just returned from the Hospital Association of Southern California’s annual conference where one of the big topics was dealing with downward revenue pressure by diversifying revenue streams into non-traditional areas.

And interestingly, these hospital-based initiatives provide a surprisingly good template for other businesses to follow.

According to a recent study,, these new hospital revenue streams broke down into three categories:

  • Bringing innovative business models to market
    Hospital Example – Licensing intellectual property, like a patient-care management model, to an early-stage company which boosted the market value of the venture through proof of impact
  • Transforming cost centers into profit centers
    Hospital Example – Using internal departments to serve external customers, like clinical-trial management support services.
  • Increasing royalties from spinoff technologies
    Hospital Example – Royalties can come from drugs, devices, data and diagnostics. Hospital of Philadelphia’s spinoff of gene therapy company Spark Therapeutics, generating more than a $450 million return, is a great example.

The big takeaway is that alternative revenue streams do not have to result from a company’s core business.

In fact, as these examples from the hospital industry show, some of the best alternative revenue streams do not come from patient care but do come from alternative uses for existing assets and cost centers. University of Pittsburgh Medical Center developed a state-of-the-art proprietary supply chain management system for their own procurement purposes. They then spun it off into a completely new company with brand new customers who need supply chain management solutions.

Business owners can often be myopic as they look at their existing assets for only how those assets can drive existing revenues from existing customers. But it may be time to look at those existing assets and cost centers with a new lens and a new customer in mind. Deploying the same asset in an additional, non-traditional way augments existing revenue with far less investment that the initial asset took to create.

Over 90% of hospital executives in the study called the development of alternative revenue streams “an urgent priority.” That certainly makes sense as the continued downward pressure on hospital revenues is well known.

Without the same downward pressure on revenue, your business may not feel the same urgency.

But it should.

Back To Top