Conceptualizing the Healthcare Business Model and Management

Book Extract from Chapter 3, page 37

THE INCREASING FOCUS ON THE COSTS OF CARE IS FORCING HEALTH CARE organizations to critically look at their basic set of processes and activities, to determine what type of value they can deliver. The basic healthcare business model is a doctor treating a patient. A more detailed business model, on the other hand, describes the resources, processes, and cost assumptions that an organization makes that will lead to the delivery of a unique value proposition to a customer. As health care organizations are beginning to transform their structure in preparation for a value-based delivery system,
understanding business model theory can help in the redesign process.
Hospitals and health systems will face a crossroads if they want to succeed in a consumer-driven healthcare economy.

The traditional business model, which puts hospitals at the center of healthcare, will not create value and attract customers. Singh and his colleagues at PwC’s Health Research Institute (HRI) found out that hospitals will likely adopt one of the four hospital business models to stay open and succeed in the shifting landscape. The models are the Product Leader, Experience Leader, Integrator, and Health Manager.

A. The Product Leader
Hospitals and health systems in this business model deliver the highest quality, most advanced care that generates predictable outcomes for one or more clinical outcomes, the organizations provide ‚best-in-class‛ care to their
geographic region, as well as to patients who travel to receive care at the organization.

B. The Experience Leader
Hospitals and health systems selecting the Experience Leader business model will place customer satisfaction at the top of their priority lists. The Experience Leader captures and retains patients by positioning itself as providing the premier customer experience when compared with the competition. Experience Leaders must understand consumer preferences and identify methods for delivering consistent experiences across all providers in the system, and even those in the virtual space. Investing in concierge-like services will be vital to supporting a high-quality consumer experience.

C. The Integrator
The Integrator is a hospital or health system with a multiregional or national reach. Through its large footprint, the organization achieves value through a broad network of providers, especially those who are low-cost. With such a
wide reach, all patient populations are a target consumer market for the Integrator hospital. Lower costs are a top priority for the Integrator business
model. As the popularity of high-deducible health plans continues, patients are putting more focus on the cost of care when selecting a provider. The Integrator is a position to show patients different care options along the cost spectrum.

D. The Health Manager
Hospitals using the Health Manager Business model are all about enhancing the health of an entire population over time. A Health Manager improves the health of entire populations over time as it focuses on finding ways to serve
complex populations and address the social determinants affecting health. This model likely will contract directly with the public sector and employers; however, an understanding of the underlying consumer markets, especially its target segments, will still be integral to a Health Manager’s strategy.

A Health Manager hospital will not resemble the traditional care delivery setting. Instead, the hospital may operate as a community organization or integrated care provider to deliver services beyond the scope of traditional healthcare.

Watch out for Series 2: Hospital Profitability Transformation Framework-ICE

Published by Aquinius Mung'atia

Aquinius Mung’atia is the Head of Projects at Aga Khan Hospital, Mombasa, and was previously the General Manager of Muthaiga Golf Club and Sigona Golf Clubs, respectively. He is an expert in Strategic Management with over 20 years of experience in both hospitality and healthcare Industry. My Career path boast of extensive training and consultancy experience in Hospitality Industry, Hospital Support Services and Operations, Healthcare Projects and Facility Management, among others. The author is currently a PhD student in Business Administration and holder of MBA in strategic Management (University of Nairobi) and a 1st class honors degree in Hotel and Institution Management (Maseno University) Aquinius is also a healthcare insight and a data analytic enthusiast. Follow him on or Facebook Page

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