Issue link: https://beckershealthcare.uberflip.com/i/674245
36 Market Domination is Everything + 7 More Thoughts on Strategy By Scott Becker and Tamara Rosin T here are many different thoughts as to what is the right strat- egy for hospitals and health systems. Increasingly, a number of these thoughts are untested and put forth by professors and consultants. These strategies often resonate less and less well with what is successful practice. Currently, the strategy first and foremost that we see working is quite simple — build a dominant market presence, and keep getting better. Here, a system needs to be so dominant in its market that payers can't go around it. Further, it needs critical mass to pay and retain the best people and attract patients and payers. Dominance is becoming more and more about high-quality physician networks as it is about having the best buildings and locations. Further, the system must keep get- ting better in so many ways. It must improve customer experience, invest in precision medicine and better care delivery, invest in more effective cost management and a better IT, physician and core team. We believe, in short, as follows: 1. Market power is key 2. Focusing on the total consumer experience is critical 3. Constantly improving operations is critical 4. Owning practices (a dominant physician network) is critical 5. e jury is out on owning an insurance plan 6. Bundled payment efforts are growing 7. A constant focus on what drives cash flow is very important 8. Developing and recruiting great people is critical As we read articles like "e Strategy at Will Fix Healthcare," pub- lished in Harvard Business Review by Harvard Business School professor Michael Porter, PhD, and omas Lee, MD, CMO of Press Ganey Asso- ciates, one grapples with the mix of intelligent and abstract thought all put forth by the same brilliant people. Notwithstanding the brilliance of Dr. Porter, we are convinced that few of the theorists have the next great answer. More oen, if someone can understand who their customer is, where their revenues come from and start by really managing and developing those pieces of information — building upon the core of what works and building a dominant system — they are more likely to succeed. For example, there is no question that inpatient volumes will continue to decline. ere is no one great answer to this other than to keep costs in the system rational, keep becoming dominant in those things where the system is making money and con- tinually grow revenues in those areas. is article embraces a lot of existing concepts. Here, as the world evolves, we believe one also needs to return to the basics as a core starting point. We also believe healthcare systems and their leadership should define clearly their core overriding goals. Ideally, the system can move beyond the first goal and focus on Nos. 2 through 4. ese can oen be catego- rized as follows: 1. Financial survival 2. Greatness in certain specific areas 3. Dominant in a market 4. Great international brand, which oen starts with first meeting goals 1, 2 and 3 is article breaks down strategy and certain core observations as fol- lows: 1. Market power wins. 2. Know your business, double down on cash cows and test new areas. 3. No single strategy, no static solution. 4. ere will still be a lot of fee-for-service. Bundled payments are a type of fee-for-service. 5. Owning an insurance product requires a great deal of market posi- tion and risk tolerance. 6. Most systems must own practices. 7. Consumer-driven healthcare. 8. Talent management. e following eight sections expand on these points. 1. Market Power Wins A. Market power wins. e party with the greater market power tends to do better. In healthcare, this is abundantly true. Jack Welch, the cele- brated longtime CEO of GE, positioned GE such that it only focused on markets where it could be a market leader, i.e. No. 1 or 2 in its market. Being a market leader oen comes with pricing power, durability in chal- lenging times, branding and recruiting advantages, purchasing power and other advantages. In healthcare and in business, the top one or two market dominant leaders tend to end up with the lion's share of prof- its. Consumers do not think there are acceptable substitutes, and/or the health system receives better prices from suppliers. is concept seems to be as true as or truer than ever in healthcare. Further, it has become more important as the top five payers — UnitedHealthcare, Aetna, Hu- mana, Cigna and Anthem/Blue Cross — have become more dominant in most markets; in fact, it is usually one or two of the four that really dominate any specific market. e power of market dominance plays out in market aer market. It is clearly evidenced by Boston-based Partners HealthCare. Launched in 1994, the Partners HealthCare business model was "ahead of its time," according to e Boston Globe, combining the forces of two Harvard teaching hospitals — Brigham and Women's Hospital and Massa- chusetts General Hospital. Since then, Partners has expanded to be- come the largest nonprofit network of hospitals and physicians in the commonwealth. Its unequivocal market share gave it the ability to set prices and negotiate favorable reimbursement from private payers, to the disadvantage of its competitors. e Partners brand is also closely associated with cutting-edge medical research. Although the prices of Partners HealthCares' services have been repeatedly criticized by its competitors and some consumers, the massive health system's brand, combined with its dominating presence in Massachusetts, have enabled it to sustain its popularity among patients.