Who Will Survive Hospital Consolidation

Healthcare providers are under pressure on a variety of fronts.  Patients demand extensive care regardless of cost.  Payers both public and private are struggling to reduce costs, and the resulting billing struggles result in high administrative overhead.  Staffing is in short supply, resulting in high overtime and temporary staffing costs.  New technology and equipment require large capital expenditures that many facilities cannot afford.  Pharma and medical device manufacturers get a much bigger share of the healthcare profit pie.

The situation is even worse for hospitals in particular.  They’re overwhelmingly complex organizations, and as a result they’re difficult to manage.  They also have high fixed costs, and there is often over-capacity in specific geographical markets, leading to intense competition.  From a Porter’s Five Forces perspective, most of the puzzle pieces look pretty bad. Continue reading Who Will Survive Hospital Consolidation?

What Can HCA Tell Us About the Healthcare Sector?

When HCA Inc. was acquired in 2006 by a private equity consortium including Bain Capital, KKR, and Merrill Lynch (now of course Bank of America), it was the biggest leveraged buyout in history.  For that reason, the announcement a couple of weeks ago that HCA was pricing its IPO at around $3.7 billion piqued my interest.  The company is the largest private healthcare provider in the US, providing 4-5% of all hospital services with 156 hospitals, not to mention 97 freestanding surgical centers.  Just because of HCA’s sheer size and influence on management practices, it is an interesting company to analyze a bit more closely to understand trends in the US healthcare sector. Continue reading What Can HCA Tell Us About the Healthcare Sector?

Can Better Analysis Improve Healthcare?

For decades, our understanding of the relationship between healthcare spending, pricing, and health outcomes has been limited to the crude level of epidemiological studies.  Most of those results suggested that offering better healthcare didn’t improve outcomes, a depressing conclusion.  However, everyone seems to be talking about how we’re now in the era of “big data.”  Interest in deeper analysis of healthcare data, and more sophisticated responses to the results of that analysis, seems to be spiking.  Here are a few examples of budding healthcare innovation that have received attention in just in the last few weeks:

  • U.S. tries open-source model for health data systems
    • The government and a variety of big companies are working to quickly develop a standard for sharing healthcare information among different providers.  The early version basically appears to be encrypted email.  It sounds ridiculously simple, but maybe getting a basic standard in place and seeing what healthcare users need to help them do their jobs is a better approach than spending years in standard-setting only to realize the specification doesn’t really meet people’s needs.

Continue reading Can Better Analysis Improve Healthcare?

Disruptive Innovation in Healthcare

Many of you have probably heard of Clayton Christensen, author of The Innovator’s Dilemma and a number of other outstanding books on technology innovation  and disruptive business models.  It’s one of the best business books I’ve read because it insightfully explores a business theory rather than throwing out a bunch of personal stories that are supposed to coalesce into a whole.

Christensen also wrote a book called The Innovator’s Prescription, applying the framework of disruptive innovation to the healthcare system.  MIT World has an good presentation video where Christensen walks through many of the ideas in the book.  It’s definitely worth watching for anyone involved in the healthcare system. Continue reading Disruptive Innovation in Healthcare

Thinking About the Healthcare Sector

I’m always fascinated to think that over 17% of US GDP goes to healthcare.  All of this spending stimulates a lot of policy debates, but I’m more interested in the business challenges and opportunities presented by the size and complexity of the healthcare industry.  Many aspects of healthcare have traditionally been slow to evolve, but these days changes in regulation, new information technology, and novel business processes models (like the rise of outpatient procedures) are speeding up the pace of change.

While I’ve done consulting work in various parts of the industry (with providers, pharmaceuticals, and medical devices), I still don’t feel that I have a true ground-up understanding of how everything works.  So in addition to more general posts, I’m planning a series of blog posts exploring the industry from a business strategy perspective. Continue reading Thinking About the Healthcare Sector