In 2012, a hospital's competitors may not be other hospitals, traditional healthcare providers, and/or even based in the same state. With whom is a hospital competing now? In short: anyone who interacts with its patients, staff, providers, and/or payors in ways that promise enhanced quality, value or experience. New competitors are appearing in unexpected markets for a variety of reasons. For some, forces within their market, such as changes in legislation, create the right mix of need and opportunity. In other cases, providers are partnering with others to expand, and as a result, new group purchasing organizations, resurgence of independent practice associations, and other structures that reduce cost and share risk across multiple parties are emerging. Lastly, ACOs and patient-centered medical homes have created markets for providers of goods and services that expand and enhance the care continuum.
Here are ten non-traditional competitors that have emerged, and "real world" events that were unthinkable even five years ago.
1. Service providers not subject to Certificate of Need rules
In New Hampshire, the big threat for many years was outmigration to Boston. Earlier this year, however, the state legislature voted to allow specialty providers to enter the market without being subject to the rigorous CON laws in the state. As a result, the entry of external, for-profit companies such as Cancer Treatment Centers of America will significantly change the competitive landscape in already competitive southern New Hampshire.
2. Niche providers operating in non-traditional settings
When retail medicine came into vogue, numerous hospitals signed contracts with retailers like Walmart to offer in-store clinics. Now, however, many of the retailers are forming their own networks of providers to compete with the local urgent care centers. Consider CVS' MinuteClinic, which operates 600 locations in 25 states. Their physician assistants and nurse practitioners provide care that is designed to be "high quality, accessible, convenient and coordinated." For any existing provider with access or information flow issues, these retail clinics are significant competitors.
3. Affiliates of organizations that are not current competitors...but could be
Competition is also increasing because of consolidation. Consider Dignity Health's acquisition of U.S. HealthWorks, the largest independent operator of occupational health and urgent care centers in the country. As a result of the acquisition, the parent company, which runs 40 hospitals in California, Arizona and Nevada, and is close to entering southern Oregon, will transform into a national healthcare system with 172 centers in 16 states. Dignity Health plans to expand U.S. HealthWorks operations nationally and strengthen surgical and imaging services through partnerships with United Surgical Partners International and SimonMed Imaging.
4. Payors acquiring providers
Independent medical groups also face pressure from those who are not providers. There has been a trend of payers acquiring medical groups to enhance their vertical integration and strength in the marketplace. Examples of this include United’s subsidiary, Optum, purchasing Monarch Healthcare in Irvine, California; Highmark’s agreement with West Penn Allegheny Health System in Pittsburgh, Pennsylvania, and the acquisition of CareMore, which includes both a health plan and medical group, by Wellpoint.
5. Catholic hospitals/health systems
Hospitals have trouble competing if they are deferring maintenance or working with inefficient facilities. In many markets, Catholic hospitals are getting a new infusion of capital and administrative support through Ascension Health Network. Recently formed through a partnership with capital investors, Ascension is acquiring distressed Catholic hospitals, investing in their development, and even starting new Catholic systems from previously independent Catholic facilities (e.g., in New Jersey).
6. Private equity firms
Private equity firms have been investing in hospitals and health systems, expecting that increases in healthcare services from the impact of healthcare reform and the aging population will result in returns on their investment. For hospitals and health systems, these private equity firms, which typically have multiple cash flow resources, can help meet their capital needs. Examples include Cerberus Capital, which purchased Caritas Christi Healthcare (subsequently converted to for-profit Steward Health Care System). Another high profile private equity firm, Blackstone Group, holds the majority equity in Vanguard Health Systems.
7. Out-of-state growth
New competitors to consider include health systems seeking to grow outside of their local markets by acquiring medical groups and/or other facilities. Examples include Iowa Health System, which has entered into the Illinois market. In 2011, it finalized its partnership with Illinois-based Methodist Health and recently finalized an agreement to affiliate and add Quincy Medical Group, located in Quincy, Illinois, into its ACO.
8. Online health consultations
Technology firms such Revolution Health Networks, which merged with Waterfront Media to compete against WebMD, have become competitors as well. New tech firms set virtual visits that can bypass local providers and offer "shopping" sites that create a retail marketplace.
9. ACOs for employees/retiree population
Employers have started creating their own ACOs with networks of providers for their employees/retiree population. An example of this is the California Public Employees’ Retirement System, the health benefits purchaser for all of California’s state government employees in addition to over 1,300 public agencies, their employees, and retirees. CalPERs issued an RFP to directly contract with providers for their self-insured HMO business.
10. Other
Effectively, any entity that makes it easier, better, faster, or cheaper to improve one’s health is likely to be a competitor downstream.
For those facing these new competitors, ways to respond include establishing a niche, engaging and aligning providers, emphasizing value to the community, and ensuring patient-centeredness. Above all, develop and strengthen the continuum of care and referral relationships. Competition will happen, and the competitors will keep changing. Anticipate their presence, as they may well improve the value that your organization provides.
VirginiaTyler is a vice president at The Camden Group. She can be contacted at vtyler@thecamdengroup.com or at 585.512.3902.
Structuring Hospital Service Line Management for Success
From Silos to Service Lines: Integrating Care to Meet Hospital Goals
Here are ten non-traditional competitors that have emerged, and "real world" events that were unthinkable even five years ago.
1. Service providers not subject to Certificate of Need rules
In New Hampshire, the big threat for many years was outmigration to Boston. Earlier this year, however, the state legislature voted to allow specialty providers to enter the market without being subject to the rigorous CON laws in the state. As a result, the entry of external, for-profit companies such as Cancer Treatment Centers of America will significantly change the competitive landscape in already competitive southern New Hampshire.
2. Niche providers operating in non-traditional settings
When retail medicine came into vogue, numerous hospitals signed contracts with retailers like Walmart to offer in-store clinics. Now, however, many of the retailers are forming their own networks of providers to compete with the local urgent care centers. Consider CVS' MinuteClinic, which operates 600 locations in 25 states. Their physician assistants and nurse practitioners provide care that is designed to be "high quality, accessible, convenient and coordinated." For any existing provider with access or information flow issues, these retail clinics are significant competitors.
3. Affiliates of organizations that are not current competitors...but could be
Competition is also increasing because of consolidation. Consider Dignity Health's acquisition of U.S. HealthWorks, the largest independent operator of occupational health and urgent care centers in the country. As a result of the acquisition, the parent company, which runs 40 hospitals in California, Arizona and Nevada, and is close to entering southern Oregon, will transform into a national healthcare system with 172 centers in 16 states. Dignity Health plans to expand U.S. HealthWorks operations nationally and strengthen surgical and imaging services through partnerships with United Surgical Partners International and SimonMed Imaging.
4. Payors acquiring providers
Independent medical groups also face pressure from those who are not providers. There has been a trend of payers acquiring medical groups to enhance their vertical integration and strength in the marketplace. Examples of this include United’s subsidiary, Optum, purchasing Monarch Healthcare in Irvine, California; Highmark’s agreement with West Penn Allegheny Health System in Pittsburgh, Pennsylvania, and the acquisition of CareMore, which includes both a health plan and medical group, by Wellpoint.
5. Catholic hospitals/health systems
Hospitals have trouble competing if they are deferring maintenance or working with inefficient facilities. In many markets, Catholic hospitals are getting a new infusion of capital and administrative support through Ascension Health Network. Recently formed through a partnership with capital investors, Ascension is acquiring distressed Catholic hospitals, investing in their development, and even starting new Catholic systems from previously independent Catholic facilities (e.g., in New Jersey).
6. Private equity firms
Private equity firms have been investing in hospitals and health systems, expecting that increases in healthcare services from the impact of healthcare reform and the aging population will result in returns on their investment. For hospitals and health systems, these private equity firms, which typically have multiple cash flow resources, can help meet their capital needs. Examples include Cerberus Capital, which purchased Caritas Christi Healthcare (subsequently converted to for-profit Steward Health Care System). Another high profile private equity firm, Blackstone Group, holds the majority equity in Vanguard Health Systems.
7. Out-of-state growth
New competitors to consider include health systems seeking to grow outside of their local markets by acquiring medical groups and/or other facilities. Examples include Iowa Health System, which has entered into the Illinois market. In 2011, it finalized its partnership with Illinois-based Methodist Health and recently finalized an agreement to affiliate and add Quincy Medical Group, located in Quincy, Illinois, into its ACO.
8. Online health consultations
Technology firms such Revolution Health Networks, which merged with Waterfront Media to compete against WebMD, have become competitors as well. New tech firms set virtual visits that can bypass local providers and offer "shopping" sites that create a retail marketplace.
9. ACOs for employees/retiree population
Employers have started creating their own ACOs with networks of providers for their employees/retiree population. An example of this is the California Public Employees’ Retirement System, the health benefits purchaser for all of California’s state government employees in addition to over 1,300 public agencies, their employees, and retirees. CalPERs issued an RFP to directly contract with providers for their self-insured HMO business.
10. Other
Effectively, any entity that makes it easier, better, faster, or cheaper to improve one’s health is likely to be a competitor downstream.
For those facing these new competitors, ways to respond include establishing a niche, engaging and aligning providers, emphasizing value to the community, and ensuring patient-centeredness. Above all, develop and strengthen the continuum of care and referral relationships. Competition will happen, and the competitors will keep changing. Anticipate their presence, as they may well improve the value that your organization provides.
VirginiaTyler is a vice president at The Camden Group. She can be contacted at vtyler@thecamdengroup.com or at 585.512.3902.
More Articles From The Camden Group:
Aligning Case Management Processes With the Revenue CycleStructuring Hospital Service Line Management for Success
From Silos to Service Lines: Integrating Care to Meet Hospital Goals