Flirting with Market Irrelevance?

I visited recently with a senior business development leader for large Midwestern health system. As we talked, he candidly shared a concern that his system might not survive in the market. He noted that repeated growth strategies to reverse a steady decline in market share had been tried, but to no avail. The system was on its third iteration in five years of cost-cutting, eliminating positions, programs and shuttering some underperforming sites.

“We can’t cut our way to market relevance,” he said, “but nothing else seems to have worked.”

The irony of his situation is that the system’s decline has come during a period of steady growth in overall demand and technological innovation that has improved the product. Much like the venerable auto brands Oldsmobile, Plymouth and (soon) Pontiac that have disappeared from the market because they were no longer meaningfully different to customers, the decline of my friend’s employer begs the question whether there is a coming shake-out of health system brands.

Whether health system reform passes or not, we know that demand will continue to grow and that reimbursement to providers will likely be cut. To balance this dynamic will require payers to allocate resources to those providers who can deliver better outcomes and radically different service at a lower total cost. Some systems will have the leadership, market and performance transformation strategies to make that leap. Many others will not.

So I pose this question: will incremental peformance improvement position your system to survive in a market that will likely demand transformational change? If not, do you have in place the leadership and strategies to become meaningfully different? Those questions ought to be at the forefront of health system thinking. Failing to ask and answer the questions just might relegate a system to the same fate that has beset much of the domestic auto industry.

Mike Eaton is a vice president for consulting with Navvis & Company in St. Louis, Missouri.

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