International Strategy in Healthcare

                                                      Cleveland Clinic in Abu Dhabi

Many healthcare systems work across multiple countries. Many firms can also leverage their resources and capabilities by engaging in activities in different countries. It is mostly common in technology and manufacturing industry. Companies like Apple, Cisco, IBM operates in dozens of countries so does beverage companies like Coca-Cola, Pepsi and hotel industries like Hilton, Marriot and Best Western. Automobile industry is extremely global. In the healthcare industry it is an emerging market. Healthcare tourism is popular where people travel to different countries to take care of healthcare issues at a cheaper cost. Many hospitals in Asia and Caribbean are working are popular with healthcare tourism. Each year thousands of patients come to Cleveland Clinic and St. Jude’s from around the world for specialized medical care.   Many hospitals have started operating in other countries.  Cleveland Clinic also operates in Abu Dhabi, Riyadh, Guatemala, Honduras, Panama and multiple other countries. Methodist healthcare has ties in Bangladesh and China. Operating in international countries can be challenging as the protocols, regulations, taxes, insurances, payment system and competition are varied and challenging.

 Disclaimer: Opinions expressed are solely personal and do not express the views or opinions of any other person or entity.

Sources: Gaining and Sustaining Competitive Advantage by J. Barney

Merger and Acquisitions in Healthcare

Merger and Acquisitions are the buying; selling, dividing and combining of different companies that can assist an organization grow without using a joint venture. Merger is association of two companies into one, whereas an acquisition happens when one company takes over another and becomes the new owner (a large hospital system buying a home health company or a smaller regional hospital).

In the healthcare industry this is primarily driven by competitiveness and profitability. The final goal is to increase one’s ability for success. As the company wants expands its core business of healthcare service, often they also participate in different new areas of services that they are not proficient; aligning with a company who can help with that part is one option and the other could be by merger and acquisition.   

 Disclaimer: Opinions expressed are solely personal and do not express the views or opinions of any other person or entity.

Sources: Gaining and Sustaining Competitive Advantage by J. Barney

                      http://www.methodisthealth.org/

Strategic Alliance in Healthcare

Strategic alliance is usually an official relationship between two or more organizations to pursue a set of joint goals or to meet a critical business need while continuing to remain independent organizations. Strategic alliances can be very useful in healthcare as a business when common goals are set based on the resources of the organizations. The final goal is to increase your ability for success. As the company expands its core business of healthcare service, often they also participate in different new areas of services that they are not proficient; aligning with a company who can help with that part is often the key. In the Greater Memphis area, Methodist healthcare in Memphis has aligned with several organizations to provide services to its customers. One of their key alignments is with Health-South rehabilitation, a national leader in inpatient rehabilitation.  As the patients are discharged from the Methodist hospitals often they are in need of inpatient rehabilitation. A similar alliance has been with the signature health, another national provider in Skilled Nursing and long term care.  In both the scenarios, the expertise required to successfully manage the business is complicated and needs plenty of resources. Aligning with the organizations who are experts in this area helps both the organizations. Alliances are common throughout the healthcare industry be it in Rehabilitation, Lab, pharmacy or food and nutrition, the goal remains the same, providing care while maintaining the competitiveness.

 Disclaimer: Opinions expressed are solely personal and do not express the views or opinions of any other person or entity.

Sources: Gaining and Sustaining Competitive Advantage by J. Barney

                http://www.methodisthealth.org/
                http://www.caycon.com/blog/2014/05/how-is-that-strategic-alliance-working-out/

OUTSIDERS ON THE BOARD

In the recent times much attention is given to recruit board members from outside the board. The issue of how the power should be shared between the board members – inside or outside– is often debatable but both have merits.  The argument is that the outsiders can be more objective as they have less self-interest.

Similarly in the health care industry, members from the community, independent physicians, and family partners are often encouraged to serve on different boards. It definitely adds value as they can add their perspective without focusing on the internal issues of the system. But at times, too much control can cause shift from the operational focus. Having the right balance where they can complement each other is the key success.

Disclaimer: Opinions expressed are solely personal and do not express the views or opinions of any other person or entity.

Vertical Integration In Healthcare

Vertical integration is a strategy in microeconomics which describes about a company to compete with it’s competitors by gaining control over its supplies or distributions and thereby increasing the firm’s power in the marketplace. The more they are integrated the more they are vertically integrated. For a hospital system, when they invest on the physicians who can admit patients directly  to their hospitals helps the hospitals with their admissions and census and after they discharge the patients, patients will need multitude of services like medications and pharmaceutical, lab and other test requirements, services like home health , inpatient rehab, outpatient services etc. The more a hospital can provide services the more they can control the market. 

               Methodist healthcare system and their major competitor in Memphis area, Baptist healthcare, both have invested  heavily on their physicians. They both have dozens of outpatient services, surgery centers. They both own home health services. Baptist partners with Nashville-based Centerre Healthcare to service inpatient rehabilitation and Methodist provides this service via Healthsouth a national chain in this area. Providing the services before a patient is admitted to the hospital (backward integration) and the services they require after they are discharged from the hospital like various home-health and outpatient needs (forward integration) is vital for their business.

Cardiocom, explains their vertical integration (http://www.cardiocom.com).

Disclaimer: Opinions expressed are solely personal and do not express the views or opinions of any other person or entity.

Tacit Collusion in Healthcare

Tacit collusion exists when two or more firms coordinate their production and pricing strategies indirectly by agreeing a production and pricing decisions of other firms.  Usually this can lead to under production and prices above the competitive levels. This are more common in the oligopoly markets where there are mainly two major competitive organizations.

The healthcare market in Greater Memphis area has about six major players but the two large companies, Baptist Healthcare and Methodist healthcare controls most of the market share. In a real sense, this should create an Oligopoly market where they both can dictate the price. But in USA, healthcare market rates are partially dictated by CMS (Center for Medicare and Medicaid services), private insurances and organizations like AMA (American Medical Association) and others. In rural areas, where there are monopoly, healthcare can negotiate special rates with the insurance companies but in urban areas, where the market is more open and competitive, tacit collusion is minimal.

Disclaimer: Opinions expressed are solely personal and do not express the views or opinions of any other person or entity.

Flexibility in healthcare

Flexibility in the healthcare industry is the  ability for the organization to change directions quickly and at low cost, given unanticipated changes in the competitive situation. 

Though there are several types of flexibility, but the top ones are: The options to defer; The option to grow; The option to contract; The option to shut down; The option to abandon; The option to expand.

Methodist healthcare in the greater Memphis area remains flexible and competitive. The examples of some of their actions are tabulated underneath.

Types of Flexibility and Examples of Actions That Can Create

Types of Flexibility	Examples
The option to defer	Option to defer purchasing transportation van, instead contracting service through a 3rd party.
The option to grow	Methodist Healthcare, decides to open up a new hospital in Olive Branch, MS.
The option to contract	Contracts temporary staff to cover week nights and weekends
The option to shut down and restart	Recently shut down the hospital at Fayete County in TN.
The option to abandon	Recently abandoned the SNF program and outsourced the whole program to the Signature health care.
The option to expand	Recently added the new service by aligning with West cancer center and opening of the hospice house.

Disclaimer: Opinions expressed are solely personal and do not express the views or opinions of any other person or entity.