Hospital Business Strategy–One size fits none

One size fits none, or is it one.  The patient rarely buys what the hospital is selling.  The hospital sells a hip replacement—the patient is buying the ability to play golf for ten more years.

Clayton Christensen conducted a study which showed that seventy percent of today’s patients would have been in the ICU thirty years ago, and seventy percent of the patients in today’s ICUs would have died thirty years ago.  The question the study seemed to leave unaddressed is who is now caring for those patients who were not in the ICU and who didn’t die.  Wanna’ bet most have been outsourced to non-hospital care givers?

There was a successful business model in that group of patients when they were treated at the hospital thirty years ago.  There is an even larger business model today for that same set of patients; only it is no longer owned by the hospital.  Neither are the associated revenues.

Hospitals have more high-end capability—and cost—than the average patient will utilize—sort of an 80/20 rule on steroids.  Each successive clinical breakthrough enables the hospital to solve a problem for a mere handful of patients; one that will have no application to 99% of patients in their service area.

What if instead of continuing to expand the reach for the stars model ad nauseam, the hospital flipped the model on its side and catered to the ninety-nine percent?  What if the business model centered on serving mainstream customers?  But then who or what would handle the other one percent of the cases?  An autonomous business unit could be established to serve those cases, or they could be outsourced to a group which did.

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