Hospitals and physicians - Hospital Funnel Vision, Market Myopia, and the Great Migration

What: Hospitals profit and admission growth is relentlessly slowing because of combination of “market myopia” and patients migrating to out-of-hospital settings. 1, 2

Why: Because hospitals look at the marketing too narrowly. Instead they keep pouring their capital into expanding their on-campus buildings and services “inside” rather than acknowledging patients are searching for cheaper care and disruptive innovations “outside.” This may be because hospitals have been King of the Health Care Mountain for so long, they can’t see the Barbarians and the Gates.

How: Drop in “inside growth” and admissions occurring because of “outside growth” of less costly and more convenient ambulatory surgical, imaging, multispecialty care, urgent care centers; retail and worksite clinics; detached emergency rooms, specialty clinics, pre-paid and discounted pay at time of service practices, medical tourism and global health care, and disruptive innovations that make care deliverable in homes or without overnight hospital stays.

Where: Where are have the patients gone? Everywhere, to all of the above, because consumers have heard of well-publicized hospital horrors, scandalously high hospital pricing, long waits in emergency rooms, and growing numbers of out-of-hospital options.

Who: Who is responsible for “funnel vision,” dropping growth rates, and outward migration?

Hospital executives, who see the world through the eyes of their own real estate.
Consumers, certainly. They are looking for cheaper, more convenient, and more affordable care not requiring overnight hospital stays and removed from hospital safety hazards.

Physicians, too. They prefer controlling clinical care in their own owned-facilities.

Entrepreneurs, who are actively seeking and investing in new outpatient niches.

Real estate operators, who are only too willing to fill their vacancies with recession-proof health care businesses.

Also it becoming evident, even among liberal reformers, that reform-driven expanded coverage will occur within a market framework and that costs will shift to consumers, who will want more choices, usually outside of hospitals.

Sooner and later, hospital executives will realize patients and revenues are no longer funneling into hospitals. They will begin to know the truth of the maxim,” Old hospital executive never die, they just lose their facilities.

References

1. Preston Gee, “Funnel Vision: Do Health Leaders Have Delivery System Myopia,” Healthleadersmedia.com, August 6, 12008.
2. “Value at the Center: The State of Our Industry- 2007” Advisory Board Report, The Advisory Board Company, Washington, D.C.