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14 September, 2009 Posted by John G. Self Posted in Current Affairs, Healthcare
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Is The Healthcare Industry Heading For A Massive Restructuring?

Posted September 14th, 2009 | Author: John G. Self

As the economic recovery moves forward, albeit slowly, the idea that we are entering a new business climate is coming into a sharper focus.

With increasing clarity, business leaders are realizing that just as the Internet produced a tectonic shift in business models and processes in the dot.com economic bubble of the mid and late 1990s, the Great Recession, which began in 2007, will drive an equally jolting change for other industries including healthcare.

Let’s look at the newspaper industry. Who would have thought five years ago that major daily newspapers like the Chicago Tribune, the Los Angeles Times, The Boston Globe, the New York Post, and The New York Times would all be fighting for survival? While their old business model presses roll slowly to possible oblivion, they all can be faulted for ignoring important social and market trends.

The new media – a proliferation of legitimate and questionable news and information sites largely on the Internet – has shaken to the core the newspaper businesses. Major dailies are scrambling to create a new product model that will allow them to survive as profitable and scalable enterprise. The economic downturn, which produced sharply lower advertising revenues, is only exacerbating this crisis for publishers across the nation. I know there are more than a few of the chattering class of CNBC, FOX News and others who claim they have seen this shakeup coming for years, even as they attempt to jump on the “newspapers are dead” train as it pulls out of the station.

Now, here is the real uncomfortable part of this economic crisis. There are analysts who argue that healthcare is ripe for a similar wakeup call. They cite bloated expenses, sharply rising prices, inadequate management information infrastructure, and problems with quality of care and patient safety as significant negatives that will create unparalleled momentum for a restructuring, regardless of what Congress and the President do.
It is inevitable, they argue.

As the founding partner of a boutique business – an international search firm that specializes in the healthcare sector – the economy, some of the provisions in the healthcare reform bill(s), the realization that major change in the way healthcare organizations do business – is very unsettling, to say the least.

On Sunday afternoon, as many watched the NFL games, I plowed through my notes, looking for inspiration for my blogs that will post in the upcoming week. Here are three ideas concerning healthcare business models that I think are worth sharing.

1. Controlling costs will be critical. There will not be a substantive or sustained increase in Medicare or Medicaid funding. Medicare and Medicaid payments on an adjusted per-patient basis are at levels that we are unlikely to see again. Ever. As businesses push for lower health benefit premiums, the major insurance companies will follow Medicare in reducing payments to providers. Health systems, hospitals, medical schools and other healthcare providers must control their costs, and vendors must be more creative in delivering enhanced value that will support their professional fees.

2. Client focused solutions – not off-the-shelf templates that so many larger consulting firms currently use — will gain traction with clients if firms really focus on how to help their clients reduce costs, the quality of care or enhancements in patient safety. Moreover, the consultants should be willing to be accountable for the quality of their advice and the results it produces. In these turbulent times, it seems more than just a little inappropriate to use terms “template consulting” and “client value” in the same sentence. In this new environment, each client meeting should begin with the question, “How can I help you reduce costs and improve your business,” not, “Here are my products, what can I sell you.”

3. The innovators who get to the market first with new ideas will be the biggest winners. This current economic crisis significantly levels the playing field. Small firms will have a real chance to lead meaningful change. In fact, it will be the nimble smaller firms who actually can afford to drive innovation.

If the major healthcare manufacturers, suppliers, and consulting firms act like the lions of the old media, they may face consequences similar to many of our major daily newspapers.

Being irrelevant is not a great business strategy.

© 2020 John Gregory Self

2 comments

  1. Jay D'Aprile says:

    John,
    Indeed, we are in a period of unprecedented change (doesn’t every generation feel that way?) I agree, insurance companies are going to follow the Medicare trend of reducing payments to the provider community. I think that as that trend takes place providers will begin to have to adopt Medical Home as a model for the future of health care delivery. I am sure that you are aware of The Geisinger System which is an integrated health plan that, in basic terms, is a system where the doctors and hospitals own the insurance company. Because of this structure the providers and payers are able to work together to improve outcomes for patients while reducing costs. Keep your eyes on Geisinger to get a glimpse on how health care is going to be delivered in the future.
    Jay
    http://www.linkedin.com/in/daprile1

  2. Jay D'Aprile says:

    John,
    Indeed, we are in a period of unprecedented change (doesn’t every generation feel that way?) I agree, insurance companies are going to follow the Medicare trend of reducing payments to the provider community. I think that as that trend takes place providers will begin to have to adopt Medical Home as a model for the future of health care delivery. I am sure that you are aware of The Geisinger System which is an integrated health plan that, in basic terms, is a system where the doctors and hospitals own the insurance company. Because of this structure the providers and payers are able to work together to improve outcomes for patients while reducing costs. Keep your eyes on Geisinger to get a glimpse on how health care is going to be delivered in the future.
    Jay
    http://www.linkedin.com/in/daprile1

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