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
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
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
Just think about ITunes and the music industry, the
IPHONE and the legacy landline telephone industry and the IPAD and the desktop
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.
Instead it is going to look like the slide below under Obamacare. The
healthcare industry is going to collapse under its own structure.
effective future business model will put consumers in charge of their
healthcare dollars and provide consumers with financial incentives to stay
will decrease the healthcare industry’s control of the healthcare system.
Consumers will have control of their own first dollar coverage.
will drive the healthcare system to produce the best medical product. They will
seek high quality care at the lowest price.
and hospital systems will want to produce the best product at the lowest prices
so they can attract patients.
a consumer driven healthcare system will drive the technologies of efficiency
into the healthcare system.
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