Finance
e-Newsletter
Intelligence Unit Special Reports Special Events Subscribe Sponsored Departments Follow Us

Twitter Facebook LinkedIn RSS

Live from HFMA-ANI: Consumerism and the Changing Business Model

Philip Betbeze, for HealthLeaders Media, June 26, 2008

Call 2008 the year of the consumer.

My sense is that many of the attendees here are skeptical of that claim viscerally, but their minds—and their heavy attendance at consumer-oriented sessions here at HFMA-ANI—betray them.

Maybe it's just curiosity, but I don't think so. I think they want to know whether this coming horde of consumers is just a bunch of hype or not.

Well, by the time that's clear, it will probably be too late to do much about it. Steve Case, the head of Revolution Health, gave the keynote speech yesterday and despite his admitted lack of knowledge about the inner workings of healthcare, he knows how to market to consumers and to give consumers what they want.

It's important to note history to skeptics about consumerism in healthcare. Consumers have only outsourced their healthcare for the past couple of generations. Prior to Medicare's advent in 1965, if you didn't have employer-based healthcare, you paid for it out of pocket. Healthcare is complicated, but perhaps not so complicated that the forces of the free market can't have a big impact. Healthcare, Case says, will be one of the last industries to shift to a business model by which the consumer will shape winners and losers in the future.

For now, consumers are nibbling around the edges, but it won't always be so. Another conference presenter, Paul Keckley, executive director of the Deloitte Center for Health Solutions, has done reams of research into what consumers want in healthcare and he's convinced that healthcare is a consumer market now. Maybe not for procedures, but in terms of wellness and other "integrated" medicine, it's already there. Are you managing to yesterday's model, he asks? More is spent on so-called "alternative medicine" than on primary care. That's striking, and it's a big missed opportunity if you're not trying to figure out how you're going to tap into that market.

It's a hard transition to make. Yesterday's model says your hospital should be managing to a system that ensures you're going to be paid for the procedures you currently do. For instance, Keckley says, no hospital gets paid to tell an orthopedist not to do a hip replacement. Hospitals get paid to help an orthopedist do a hip well that maybe should not have been done.

But that model isn't the only way to do it anymore. Capital allocation is perhaps the most fraught with danger. Should a hospital or system spend $100 million on a new patient tower or should it spend that huge capital allocation on research and development in consumer-oriented care systems? To many of you, the answer is obvious. You're going to get paid tomorrow under today's model for that investment in stuff like the new patient tower. But will that be true in 10 years? Or 20 or 30? That's how long it takes to pay off that new patient tower. It might be the right answer today but it may not be the right answer forever. Allina, in Minnesota, for instance, is spending on consumer R&D. That means that money isn't available to be spent on some project that boasts a lot of cranes and bricks and mortar.

I don't pretend to know what the right answer is for you and your hospital. But your consumers do. You should get to know them. They're getting to know you, whether you like it or not.


Philip Betbeze is finance editor with HealthLeaders magazine. He can be reached at pbetbeze@healthleadersmedia.com.

Comments are moderated. Please be patient.