VHA assesses the hospital environment - VHA Inc - Industry Overview

Health Industry Today, July, 2001 by Donald E. L. Johnson

Hospitals face a number of changes in their business environment that may change the ways they evaluate medical devices and capital spending decisions.

Many medical device companies already are feeling the effects of these changes and adjusting their product and marketing strategies accordingly.

To a certain extent, the song is the same sad melody we've been hearing in recent years, but the words are slightly different. And, as a result of subtle changes in the thinking of leading hospital industry strategists, marketers to hospitals and health systems need to rework their sales strategies, Web sites, brochures, trade show exhibits and sales pitches.

VHA Inc., Irving, Texas, and the accounting and consulting firm, Deloitte & Touche, Detroit, say there are six categories of issues that hospitals must face.

In Health Care 2001, a strategic assessment of the health care environment in the United States, they say the six issues are:

* The financial crunch. The current delivery model is ineffective because of eroding earnings streams, limited access to capital and strategic flexibility and the rush to increase market share and financial margins. What's needed are "improved decisions plus reduced expense structure." For suppliers, the question is, how do your products reduce costs, improve margins and attract financing?

* The rise of consumerism. Today's system creates confusing and inconvenient patient experiences. Consumers are empowered by Internet access to health care information. And consumers will demand personalized service and convenient patient interfaces or they will choose other providers. What's needed are "quality, convenience, personalization, efficiency and service as centerpieces of customer experience." How are medical device manufacturers building answers to these consumer demands into their products?

* Labor and talent shortages. Hospitals are coping with a "skill set shortage [that is] exacerbated by growing job dissatisfaction." They are having "difficulty managing careers, job rotation and improving compensation. And they are finding that "undifferentiated benefits and compensation limit recruiting success." What's needed: "job enrichment, focus on clinicians (core), [and turn to] professional employer organizations (non-core)." Does this represent increased empowerment opportunities for your key users? How will you help them use their new empowerment to buy your products?

* Scientific advancement. Hospitals have limited capital to buy and promote new technology. They experience a lot of excitement ahead of doability. There is slow acceptance of cell and gene therapies. But telemedicine allows expanded choice and access to care. VHA and Deloitte&Touche recommend "pharmaceutical and biotech ventures as part of the enterprise." What about medical devices? Where's the buzz for advanced diagnostic and treatment devices?

* Physician unrest. The traditional hospital view is that "physicians must be viewed as an external customer versus an internal user." Today, it is believed that "increased entrophy and fragmentation will spur further adversarial relations." What's needed: "Greater empowerment and personalized attention to physicians as customers." One way hospitals will empower physicians is to give them more buying power, if the money is available. How do you take advantage of this opportunity?

* Assessing and applying information. Hospitals and consumers have "sporadic connectivity to needed, useful data." Ideally, "all connected customers [should] have access to their patient histories and health planning tools." HealthSouth and Oracle are working with more than a dozen medical device companies to get more information to the hospital, physicians, nurses and, ultimately, consumers. Are you an early adapter and believer or are you hanging back?

VHA and Deloitte & Touche say the "Salient realities of the new economy are:

* "The business world has become too complex for one organization to do everything on its own.

* "To succeed, value must be created in an organization's core competencies.

* "Excellence in non-core activities can be achieved more easily through value networks and partnerships--rather than owning all processes.

* "Selection of business partners is important--organizations will be viewed by the company they keep."

VHA is urging its hospitals to concentrate on their core competencies. Core competencies of hospitals include what VHA calls "clinical processes and people," physician relations and patient/customer-centric services.

Hospitals and integrated health care delivery systems can create value by empowering physicians, according to VHA and Deloitte & Touche. To do this, hospitals must:

* "View physicians as an external strategic partner;

* "Reduce the time needed to complete non-patient care activities;

* "Improve access to and accuracy of patient medical histories and clinical data;

* "Understand physician needs by asking for input;

* "Encourage loyalty and productivity through compelling partnerships;