Healthcare Industry: Fear the Outsider

Posted on April 30, 2012


In Fast Company’s “Generation Flux” article, much ground was covered as to how the capitalist landscape is unsettled, or more poignantly stated, constantly changing. Change equals risk in many businessmen’s heads, and continual change…well, deep down no one wants that; it is just too hard to plan for. Yet, this is where we find ourselves.

Up until now, the focus in the shifting healthcare landscape has been about how hospitals will change to survive. Given its uncertain future and highly regulated environment, healthcare is not too much unlike the airline industry about ten years ago. The question is:  where will it go from here—stabilization, promising new future, or government bailout?

One difference a decade ago with airlines was that there were indie airlines gaining momentum to upend the establishment. Today, so much focus on healthcare is inward. Why not outward? If there is an entrepreneur crazy enough to start a car company from scratch, why not a healthcare system with similar ambitions:  domination by way of a business model?

Suggestions to new approaches in healthcare are not without recent precedent. Regardless, healthcare is a ripe opportunity for the right maverick because of:

  1. Lethargy. Industry change is not happening fast enough; hospitals change only when forced to. Disruption at the pace of outside innovation would force the establishment to change or perish. 
  2. ‘Healthcare Hubris’. I have heard the sentiment voiced more than once that ‘no one can do healthcare better than those who are doing it now’.  Beware:  entrepreneurs appreciate motivation, but love a good underdog story. Somewhere an entrepreneur is drooling like a mad dog.
  3. Politics. Bureaucracy bogs down even the small and humble hospital. Healthcare is composed of layers of administration and multi-step approvals with oversight and governance to burn. An outsider with state or national clout could beat existing healthcare at its own game, and really get things done.
  4. Little Appetite for Risk. Administrators are generally risk averse, shun messy structural changes to care delivery, and are against outside counsel on business issues—the perfect candidate to be broadsided.

Not long ago I wrote about Walmart’s interest in retail healthcare.   The Flux article mentions the concept of Nike-branded hospitals!

Are you thinking what I’m thinking?  If staffed by physicians and nurses, yes I would seek care there. At this point, my existing care providers have done nothing to cement brand loyalty with me.

The elephant in the room is Wall Street and the healthy fear (pun intended) hospitals should have for it.  The truth is someone from outside the current healthcare industry can easily disrupt the establishment if they have:

  1. A solid business plan
  2. Smart, motivated leadership
  3. Capital
  4. Can negotiate with physicians and insurers

Who’s to say that can’t be a publicly traded company? They have stockholders (access to cash), business smarts, and can acquire the best human talent in the industry.  Arguably HCA, Tenet and HealthSouth, among others, are halfway there.

The healthcare market is too large and potentially lucrative to be ignored for much longer. There is plenty of innovation going on now with app design for smart phones to help deliver care better, but that is the market equivalent to rearranging deck chairs on the Titanic. Despite the unpleasant taste of regulation and other market peculiarities like the CON, no industry—telecom, utilities, airlines—is immune to entrepreneurial attack.  Eventually someone will find healthcare appealing enough to enter as an outsider. My feeling is that if existing healthcare systems and hospitals find that unpalatable, they should focus a more honest and critical eye on their own existing operations and get to work before someone goes to work on them.