Does Darwinism apply to hospitals?
In her weekly e-newsletter, HealthLeaders Media editor Gienna Shaw cites a blog post titled “2009: The Year of Brand Darwinism.” The article, by brand consultant Laura Ries (daughter of famed branding guru Al Ries and president of the firm Ries & Ries), posits that in down economic times, many brands disappear, but this natural “pruning” of businesses is a good thing.
“It’s brand darwinism at its best. Currently, we simply have too many of everything. Too many clothing stores, too many gas stations, too many malls, too many sandwich shops, too many coffee shops, too many furniture stores, too many car dealers, too many condos, too many real estate agents,” says Ries. “Thinning the herd means more food and a greater chance of survival for the stronger animals and their young.”
In her e-newsletter, Gienna follows this citation with the question, “Should we add hospitals to the list?” Well, if hospitals and health systems are truly part of a market-based system, where competition drives better value, then yes, maybe we should.
Of course, there are specific areas of healthcare where access to providers is a huge issue (rural hospitals, inner-city EDs). But consider a market like the Twin Cities: do we really need all of the hospitals found here? Do we need a dozen heart centers, joint replacement centers, birthing centers? Everyone is facing a lower census, dropping volumes. “Thinning the herd” would help with this problem (as it’s supposed to in any market-driven industry). It also might help with the shortage of nurses and other medical professionals.
Nothing is ever that easy in healthcare, though, is it? We can’t close a hospital in the innner-city, but keep keep just the ED open. In some cases, closing a hospital would cause issues of proximity for critical services like cardiac care. And in typical market-driven industries, too many companies typically mean prices are driven downward, while consolidation drives prices higher. That’s not the effect we want (or can afford) in healthcare.
But it’s an intriguing concept to consider. Let the strong organizations thrive, the weak pass on. And when considering all the growth and expansion Twin Cities healthcare organizations have experienced over the past decade, it’s interesting to consider another point from Ries:
“Unchecked growth in all directions weakens a plant which needs constant pruning to remain healthy. The same holds true for companies.”
What do you think? Time for a healthcare pruning?
“…And in typical market-driven industries, too many companies typically mean prices are driven downward, while consolidation drives prices higher. That’s not the effect we want (or can afford) in healthcare….”
Chris, don’t you think the Dartmouth folks have established that healthcare is freakishly NOT market driven? That the greater the supply, the greater the overall demand?
A good argument has been made by Shannon Brownlee and others that if anything it is time for lopping, not pruning, but because one of the villains in the soaring cost of healthcare is oversupply.
Nice redesigned page, btw. –Avery
Hi Avery – great to hear from you! And yes, while not familiar with your specific references, I totally agree that “freakish” is an appropriate way to describe the market dynamics for provider healthcare. The more radiologists in a market, the more MRIs. Don’t seem to recall that graph in economics. I would agree it’s a huge reason for the overall cost of healthcare to society. Perhaps the economy combined with consumer-driven plans will force healthcare into a more typical supply/demand curve. As more patients opt to delay or avoid care, demand might force a tighter supply, or as you’ve termed it, “lopping.” More interesting, will we see a reduction of price in care as part of the oversupply? Haven’t seen it yet, but will be curious to watch and see how providers react when transparency highlights why a test at Hospital A costs twice the amount for the test at Clinic B.
“…More interesting, will we see a reduction of price in care as part of the oversupply?…”
Excuse me while I keel over in hysterical laughter. If it happens, I think it will mostly be for nonreimbursable elective care like cosmetic plastic surgery, laser eye treatment, and so on. What other parts of the direct-care part of healthcare are sensitive to price?
Then there’s the so-called transparency movement. In addition to the topsy-turvy economics of healthcare re supply/demand, “transparency” as currently manifested is nothing of the kind. Most of the dollar amounts revealed to the public reflect not prices but charges, which you and I know bear as much resemblance to provider reimbursements or to what patients pay out of pocket as a Steeler lineman does to a high school punter. Who knows, other than third-party payers, what “price” even means?
My goodness – covering healthcare all these years has left you bitter and unbelieving.
: )
But remember I operate out of Minneapolis, where healthcare “price” transparency has been a hot topic for a couple of years, seemingly putting it head of many other U.S. markets. Last year and before, we saw an advertising war between two payers promoting their own hospital-price comparison web sites. And we’ve seen the birth of Carol.com, the online care marketplace. In September, they announced a new program, in partnership with two large local systems, to provide care “packages” to the employees of large companies. These packages, for conditions such as coronary artery disease, asthma or diabetes, would offer a set of care offerings – doc visits, tests, education, etc. – for a set price (yes, price) per year. According to an article in the Minneapolis Star Tribune, 3M, General Mills and Medtronic had all signed up for the program. Alas, since then, Carol.com has shuttered its online shopping site, as not enough patients purchased care through it (perhaps proving your point). I’m not sure where their healthcare package concept sits as a result.
That’s pretty radical, no? I’ve also had two physicians – an opthamologist and a podiatrist – lament their low volumes of late, in the same breath noting the “high prices” their system charges in comparison to independent providers. An interesting series in the Star Tribune has noted that, at least locally, providers have been monitoring and in some case resetting their “prices” in response to additional transparency and inquiries from patients.
In the end, seeing healthcare act like a “normal” market-driven industry is a long ways off (if at all). So your skepticism is well placed, as is your accurate depiction that “price” is usually referring to charges. But even in Minnesota, the ice can thaw once in awhile.