Three Ways to Survive Cutthroat Competition in Healthcare

HealthLeaders Media Staff, September 18, 2009

Though building and maintaining a successful and thriving hospital in today's healthcare environment isn't easy, and challenges are numerous, cutthroat competition among providers isn't really one of them. But that's likely to change.

Sure, hospitals compete vigorously for high-margin patients and doctors who perform those high-margin services. But that's nothing compared to what appears to be coming with or without a legislative answer to healthcare reform.

Heart care and orthopedics are two examples that have historically been well-reimbursed, of course. But competition among hospitals as reimbursements decline for even these high-dollar service lines is destined to grow ever more fierce—not only because of the greater influence quality and outcomes data are exhibiting on where commercial and government payers steer their patients, but because over the medium- to long-term future, operating margins will be similarly squeezed. That means hospitals need to carve out niches on service lines that can effectively compete against sometimes-better financed and bigger rivals.

With these and other factors leading to greater competitive forces on the hospital landscape, senior leaders will have to make bold and often dramatic shifts in strategy. Here are three ways your hospital can survive and thrive in a market that seems destined to become more and more competitive over time.

1. If evidence doesn't support a service line, get rid of it.
Specific demonstration projects exist whose purpose is to cut down on the number of hospitals offering certain high-acuity services, based on the notion that fewer facilities and doctors performing greater quantity of those services improves patient outcomes. One of CMS' ambitious acute care episode demonstration projects includes Denver's Exempla St. Joseph Healthcare, which is one of four hospitals participating in the cardiovascular portion of the project.

It aims to demonstrate not only that hospitals that share risk and rewards with their physicians can reduce cost and waste, but that hospitals that do fewer of the procedures will wilt under the competitive pressure, and choose to close competing heart and orthopedic programs that perform fewer such procedures, and do them less well. Evidence suggests that hospitals and doctors who do many of this type of complicated procedures involved in heart care usually demonstrate better outcomes. If the program proves successful, and its attributes are rolled out nationwide, look for payers to gravitate to systems and hospitals that do more of the procedure in question—and do it better.

2. Treat your employees, from the broom-pusher to the cardiac surgeon, as partners who can help the business run better.
Even small hospitals deal with more complicated processes than a manufacturing plant that produces even the most complex products. Yet manufacturers have spent years and lots of research on finding ways to take the inefficiency and error out of these processes, while many hospitals haven't. There's waste in your processes, and the longer it goes on, the more inefficient—and less competitive—your hospital becomes. But it doesn't have to cost millions to take out that waste.

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