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It Is Time To Re-examine Our Premises

Posted Nov 14 2012 5:11pm

Stanley Feld M.D.,FACP,MACE

About once a week I have an in-depth conversation with my son Brad. In my view his perception of the world is more accurate than most. In his younger days I did most of the teaching and he did most of the listening.

Today, I do most of the listening and he does most of the teaching. This morning he said something profound. We were talking about large corporations business models. He said most corporations do not know what business they are in.

He is right. As technologies change business model must change. If the business model does not change the corporation cannot survive.

The healthcare industry and the medical care industry (physicians and hospital systems) must re-examine their premises and change their business model.

President Obama is trying to change the business model with Obamacare. In reality he is not changing the old business model at all. He is expanding the old business model that has failed.

He is also making the business model more complicated. He is building an elaborate and expensive structure whose goal is to decrease costs. It will cause the system to fail faster.

Obamacare is adding a more punitive and restrictive element to healthcare delivery rather that a more innovative and rewarding element to both the patients and physicians.

It is not designed to promote health; it is designed to cut costs by limiting access to care, rationing care and decreasing freedom of choice.

Obamacare pays lip service to preventive care. Preventive care will be largely ineffective because of the reimbursement metrics and lack of incentives provided to consumers.  Consumers must be incentive driven.

There are many examples of long time successful corporations that could not change their business model fast enough. These companies were muscle bound either because of a lack of vision, a lack of leadership, multiple committee meetings and too much decentralization of an ever-expanding bureaucracy.

Eastman Kodak is a perfect example. It was the premier film, film processing and photography paper manufacturer in the world.

 Kodak did not recognize that it was  in the imaging business. The technology of digital photography put Kodak out of business because Kodak could not change its business model fast enough.

Royal Typewriter Company viewed itself as a typewriter manufacturer. As soon as IBM developed the innovative Selectric typewriter Royal should have figured it out.

Royal should have developed a faster and more innovative typewriter. Royal also should have jumped on the development of a typewriter that would store the typed data.  Instead it was more of the same old.

It did not take long for consumers to drive the typewriter companies out of business.  Word processing on computers made typing documents  easier and more useful.

The railroad business did not have the vision to understand it was in the transportation business. Airplanes, eighteen-wheelers and Greyhound buses almost drove the railroads out of business. Railroads did not realize that consumers wanted a better product. A product that is faster and cheaper.

Railroads have only partially recovered.  

Consumers drive innovation. If a new great product is introduced to consumers, the new product can take off at the expense of the legacy product.

Just think about ITunes and the music industry, the IPHONE and the legacy landline telephone industry and the IPAD and the desktop computer industry.

Amazon has dis-intermediated the Book Publishing industry with its Kindle and wireless downloading of books.

The opportunity in healthcare is similar. However Obamacare is driving the country in the opposite direction away from a consumer driven industry into a government controlled, bureaucratically dictated decision making industry.

The business model of 2020 should look like this.

Slide14
Instead it is going to look like the slide below under Obamacare. The healthcare industry is going to collapse under its own structure.

  Slide11

The effective future business model will put consumers in charge of their healthcare dollars and provide consumers with financial incentives to stay healthy.

It will decrease the healthcare industry’s control of the healthcare system. Consumers will have control of their own first dollar coverage.

Consumers will drive the healthcare system to produce the best medical product. They will seek high quality care at the lowest price.

Physicians and hospital systems will want to produce the best product at the lowest prices so they can attract patients.

Only a consumer driven healthcare system will drive the technologies of efficiency into the healthcare system.

Remember, without patients or physicians there would not be a healthcare system.

  The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone

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