In this series, e123 President Brendan McLoughlin will explain what Strategic Revenue Management (SRM) is with a detailed 6-step guide on how you can implement this framework within your organization.
Healthcare Is Local. Your Strategy Should Be Too.
Healthcare is a local business. The carriers, distributors, and agents that best meet the needs of local customers will win in those local markets. Despite this, many carriers spread their resources equally across all markets, hoping a broader presence will translate to growth. It usually doesn’t. If you want profitable growth, the first step in Strategic Revenue Management (SRM) is understanding where you can actually win and focusing your resources accordingly.
That starts with a clear assessment of your competitive position using a metric known as Local Relative Market Share (LRMS).
LRMS is simply your share in a given market divided by your largest competitor in that market. But the implications are anything but simple.
LRMS is different and more relevant than your regional or national market share. This metric tells you where you can assume a leadership position and where it’s a battle not worth fighting. At the same time, LRMS helps you determine where to increase investment and where to dial back, helping focus your capital and management priorities into the markets where you can successfully grow profitably.
Let’s take a look at an example. In a market where your share is 40% and your competitor’s is 45%, your LRMS is 89%. Compare this to a market where your share is 10% and your competitor has 80%, resulting in a LRMS of 12.5%. There’s a world of difference between being second with 40% when the leader has 45%, and being second with 10% when the leader owns 80% of the market.
At 12.5% LRMS , trying to gain brand recognition, pricing power, or favorable provider contracts is an expensive fight. At 89% LRMS, you have more of an advantage and opportunity. With the right investments, you can dominate quickly.
Your potential members want convenient, local healthcare. They don’t care about how carriers define a market. They care about getting care close to home. That means winning around a single hospital or a handful of zip codes, not a sprawling, undefined region.
Bigger Risk Pools, More Predictable Outcomes
Having 1,000 members in one concentrated market is far more powerful than scattering 100 members each across ten. You get larger risk pools and more predictable Medical Loss Ratios (MLRs). This results in more accurate pricing, better forecasting, and fewer surprises—exactly what you need for stable margins and confident operations.
In a business where just one extreme claim outlier can devastate profitability, predictability is power.
Market leadership makes you relevant. When you represent a significant share of a provider’s patient base, your importance rises and so does your negotiating power.
That translates into better rates, stronger network retention, and a real path to value-based care arrangements. Providers become partners in improving member experience. And as your value to the system grows, so does your lifetime value per member.
This is why investing in markets where you already lead pays off. Don’t throw dollars at trying to move from 10% to 12% in ten markets. Focus on going from 80% to 100% in two. That’s where you get real momentum.
This creates a virtuous feedback loop. More insights lead to better decisions, which attracts more members with better products, which leads to even better insights. That’s how local dominance compounds.
If you’re stuck chasing growth in too many places and not gaining traction, it’s time to reassess. Stop spending resources in low potential markets and start investing where you have a chance to win big. Focusing on Local Relative Market Share might be the key to unlocking predictable, profitable growth for your organization.
To learn more, download our Strategic Revenue Management whitepaper, watch our President’s presentation on SRM, or stay tuned for the next post in this SRM series. Can’t wait for the next blog? Schedule a consultation with e123 and let’s see how SRM can help your organization win in local markets.