The Consumer Hourglass Theory and the Need for "Better, Cheaper, Faster" Healthcare
Posted Sep 16 2011 12:00am
Multiple recent stories suggest that the U.S. middle class is getting hollowed-out. As a result, consumer attitudes and behaviors are undergoing significant change (see: The decline and fall of the American middle class ). This macro trend has significant ramifications for healthcare in general and hospitals in particular. Below is an excerpt from an article on this topic:
The Consumer Hourglass Theory has been coined by Citibank to describe the new corporate strategy of marketing to high- and low-income earners but ignoring the squeezed middle....But missing from [our debates] ...is the single biggest issue facing the country: the destruction of the American middle class. For stories on how America is bifurcating into haves and have-nots, with precious little in between, you have to dive behind the headlines of the latest Washington political bun-fight and find the devil in the details....Take a story that appeared in the Wall Street Journal [ recently ]. The tale is nominally one about marketing strategy and it looks at how giant firm Procter & Gamble sells its household goods to its customers. But the picture that emerges is terrifying. P&G, it transpires, is cutting back on marketing to the disappearing middle classes, instead selling more and more to either high-income or low-income customers and abandoning the middle. Other big firms, like Heinz, are following suit. The piece reveals there is even a word for this strategy, helpfully coined by Citibank: the Consumer Hourglass Theory – because it denotes a society that bulges at the top and bottom and is squeezed in the middle....Or look at a story in the New York Times [ recently ]. It starkly shows how the plight of the American working person has worsened.
As the middle class in the U.S. atrophies, so will the health insurance benefits that this group have been previously accustomed to. Many will end up with no health insurance at all. The remainder will have health insurance policies with reduced benefits and higher co-payments. Meanwhile, the highly-skilled, highly-educated, high-income individuals in the population are thriving in this new, information-based economy. They will continue to have health insurance that provides broad, gold-plated benefits. As never before, there will be two patient queues into hospitals: (1) the vanilla queue for the majority of Americans and (2) the lush, gold-plated queue for the minority. What are the implications of this scenario for hospitals?
For the patients waiting in the gold-plated queue, not much will change for them or for the hospitals serving them. The problem for hospitals will be focused on the vanilla queue. In order to stay in business, healthcare delivery will need to pursue a "better, cheaper, faster" strategy. This will require more attention to automation, workflow management, and the elimination of unnecessary services. This is a significant departure from the previous approach with the equivalent of cost-plus reimbursement and a premium paid for the delivery of medical procedures (see: Performing Procedures Can Be Lucrative for Physicians ; Beyond Fee for Service: Reimbursement for Episodes-of-Care ).
I think that most hospital executives, and the increasing number of salaried physicians working in hospitals, will need help in pursuing such an agenda (see: multiple notes on hospitalists ). In my experience and in the past, the common approach to cost reductions by most CEOs and CFOs has been to reduce all hospital departmental budgets by X% and then watch what happens. Most executive officers have also attended primarily to their spread sheets, mergers/acquisitions, and new medical program development. Most do not have a deep understanding of automation, clinical workflow and the elimination of redundant/unnecessary services. These later skills will be critical for providing "better, cheaper, faster" services.
Multiple recent stories suggest that the U.S. middle class is getting hollowed-out. As a result, consumer attitudes and behaviors are undergoing significant change (see: The decline and fall of the American middle class ). This macro trend has significant ramifications for healthcare in general and hospitals in particular. Below is an excerpt from an article on this topic:
The Consumer Hourglass Theory has been coined by Citibank to describe the new corporate strategy of marketing to high- and low-income earners but ignoring the squeezed middle....But missing from [our debates] ...is the single biggest issue facing the country: the destruction of the American middle class. For stories on how America is bifurcating into haves and have-nots, with precious little in between, you have to dive behind the headlines of the latest Washington political bun-fight and find the devil in the details....Take a story that appeared in the Wall Street Journal [ recently ]. The tale is nominally one about marketing strategy and it looks at how giant firm Procter & Gamble sells its household goods to its customers. But the picture that emerges is terrifying. P&G, it transpires, is cutting back on marketing to the disappearing middle classes, instead selling more and more to either high-income or low-income customers and abandoning the middle. Other big firms, like Heinz, are following suit. The piece reveals there is even a word for this strategy, helpfully coined by Citibank: the Consumer Hourglass Theory – because it denotes a society that bulges at the top and bottom and is squeezed in the middle....Or look at a story in the New York Times [ recently ]. It starkly shows how the plight of the American working person has worsened.As the middle class in the U.S. atrophies, so will the health insurance benefits that this group have been previously accustomed to. Many will end up with no health insurance at all. The remainder will have health insurance policies with reduced benefits and higher co-payments. Meanwhile, the highly-skilled, highly-educated, high-income individuals in the population are thriving in this new, information-based economy. They will continue to have health insurance that provides broad, gold-plated benefits. As never before, there will be two patient queues into hospitals: (1) the vanilla queue for the majority of Americans and (2) the lush, gold-plated queue for the minority. What are the implications of this scenario for hospitals?
For the patients waiting in the gold-plated queue, not much will change for them or for the hospitals serving them. The problem for hospitals will be focused on the vanilla queue. In order to stay in business, healthcare delivery will need to pursue a "better, cheaper, faster" strategy. This will require more attention to automation, workflow management, and the elimination of unnecessary services. This is a significant departure from the previous approach with the equivalent of cost-plus reimbursement and a premium paid for the delivery of medical procedures (see: Performing Procedures Can Be Lucrative for Physicians ; Beyond Fee for Service: Reimbursement for Episodes-of-Care ).
I think that most hospital executives, and the increasing number of salaried physicians working in hospitals, will need help in pursuing such an agenda (see: multiple notes on hospitalists ). In my experience and in the past, the common approach to cost reductions by most CEOs and CFOs has been to reduce all hospital departmental budgets by X% and then watch what happens. Most executive officers have also attended primarily to their spread sheets, mergers/acquisitions, and new medical program development. Most do not have a deep understanding of automation, clinical workflow and the elimination of redundant/unnecessary services. These later skills will be critical for providing "better, cheaper, faster" services.