VHA assesses the hospital environment - VHA Inc - Industry Overview

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

* "Provide information for the practice of evidence-based medicine."

Hospitals are urged to outsource

The better a marketer and salesperson understands that these are top priorities for hospitals, the better job they will do in positioning their products and services as the solutions that their hospital customers are seeking.

At the same time, top managers need to anticipate changes in their markets, including the possibility that the professionals and institutions who have been their customers might delegate important responsibilities to others. Over the years, for example, hospitals have increasingly outsourced certain laboratory procedures that used to be considered core competencies.

Thus, the VHA and Deloitte report also identifies hospitals' non-core functions and strategies for managing them. VHA is saying in this report that non-core activities should be structured so that they can be outsourced. This means that hospitals and health care systems must be organized to manage outsource vendors.

Hospitals need to define what they value in various non-core activities and "encourage innovation in relationships and contracts." And, according to VHA and Deloitte & Touche, hospitals need to create information technology structures that will support outsourcing relationships. Thus, a hospital's IT structure must be able to communicate with outsourcing vendors' information systems easily and transparently to both hospital managers and vendors.

Non-core functions identified

It follows, then, that medical device companies need to be thinking about whether their buyers will be "outsourced" and to whom. Some services, indeed, are being taken from hospitals by new competitors, such as heart hospitals and various types of diagnostic clinics rather than being outsourced. This, again, changes market dynamics for suppliers.

In the management literature, core competencies are defined as those that an organization is in business to develop and maintain, while non-core competencies are those that can be outsourced and performed better by other organizations. The report identifies non-core functions in hospitals as:

* Facility management;

* Revenue cycle;

* Supply chain;

* Information systems;

* Human resources;

* Food service;

* Other.

Enablers of success outlined by VHA

The report promotes what VHA calls "Enablers of success in the personalized health enterprise."

"The 10 enablers of success encompass the entire personalized health enterprise model and effectively address emerging business issues," the report says.

"Marketing initiatives create connections with the community. Outsourcing non-core functions refocuses management's attention on customer service;

"New business models maximize the three key core competencies;

"Information technology is used as a competitive differentiator through the extraction of integrated clinical and operational data;

"Alliances provide access to new technologies and revenue-generating ventures;

"Effective leadership rebuilds and maintains financial acumen;