I wrote this as a comment to Barbara Duck’s fine post in her blog, http://ow.ly/3tFPx

Part of the problem, at least in my mind is that many of the large and small provider business models are trapped in what any MBA student would label an 0.2 model. The two biggest adversaries to provider’s success and limiting their ability to change, the two industries constraining the providers’ ability to run a profitable business, pharmaceuticals and the payors, exercise power that comes from their scale.

Add to that complexities brought to bear by other large external influencers—the rule-makers, makes it almost impossible to know what business model to build and under which to operate because providers must build strategies designed to hit unknown and moving targets; reform, regulation, and Medicaid, Medicare. Whatever strategy they design will be ineffective by the time it is implemented.

It is important to note that healthcare providers represent the only industry which does not know the cost of ninety percent of the services they deliver. They do not know what something costs, but they do know what they charge. Even the identical procedure at the same hospital will produce a different bill. How does one run a business suing those pricing models?

You may or may not know that Shakespeare spelled his own name five different ways. While that worked out okay for him, using that as a pricing model—I know this analogy is a stretch—makes no sense.

Compare hospital pricing to McDonald’s who knows how profits will be impacted if they so much as add another pickle to a hamburger.
Nobody can tell you what a tonsillectomy costs, or the profit earned from the procedure. Even for hospital IDNs, the same service will be priced differently, will be charged differently, and will be reimbursed differently.

Through acquisition and mismanagement many hospitals have multiple occurrences of large business processes; to name a few—admissions, IT, HR, payroll, pharmacy.

The time has come to separate the hospital business model into two components; the business of healthcare—how it is run, and the healthcare business—the care component. Care is delivered using a best-process model, whereas some will argue the business of healthcare is often managed no better than a lemonade stand.

There are no measures used by hospitals that allow them to calculate the ROI of a patient or a physician over five or ten years. There is no Patient Equity Management process to reduce patient or physician churn.

Large hospitals have spent more than $100,000,000 to implement failed EHRs—sixty percent of them fail. Hospitals are rushing through their implementations to try to secure minimal ARRA payments. Many hospitals are on EHR 2.0 thinking that by changing their EHR vendor they will have a better chance of succeeding. To that model they hope to incorporate ACOs.

Maybe before they boldly go where no man has gone before, they should pause and come up with a real plan of attack.