Organizations that have not traditionally provided healthcare are applying their efforts to meet consumer, payer, employer, or other needs that traditional providers have not been able to meet.
Venture capital is flowing into the healthcare space at a greater rate than ever before ($16.1B in 2015, up 34% from the previous year)1. Other organizations are using variations on established provider models (e.g., concierge medicine, urgent care, etc.) to cater to consumer needs. These moves from outside the established industry are threatening the traditional health systems' market position and relevance.
For many traditional health systems, the response has been to refocus on the core business or to join a larger system to create an oligopoly and thereby afford some protection. This defensive posture is appropriate when the threats are temporary, but becomes less effective when the threat is a fundamental industry restructuring (think car vs. horse and buggy). Others, however, are taking an offensive posture, using their existing resources and relationships to build new models themselves and create partnerships with non-traditional providers. The offensive strategy requires embracing the future and working to shape it from the inside.
For those that want to take this offensive strategy, we offer five tips as they approach non-traditional partners.
1. Recognize the industry change taking place:
Non-traditional providers are garnering interest because there is a real unmet need. What is the unmet need? Why is the need unmet by the traditional providers? What is the best way to solve it? As the unmet need is solved, does it beget more needs?
2. Be realistic about the assets you have and the value you can contribute:
Non-traditional providers know consumers and know that a hospital matters little to a consumer who needs ambulatory services. But, they don't know the intricacies of healthcare, how to connect downstream, and they typically don't understand the depth of the trust relationship created when someone is sick and vulnerable. Traditional providers' key asset is the public's healthcare trust and knowledge of the continuum of care.
3. Be clear about what you want:
Non-traditional providers don't need your permission to enter your market, but they do want the populations' trust, particularly if they are targeting older generations. Be creative in what you want. The desire to partner and control competition is a defensive strategy. Consider an offensive strategy instead, capturing competitors' capabilities so you can build version 2.0 yourself.
4. It is all about the money . . .sometimes:
Depending on the partner, it is likely going to be about the money. Most of the time you view that money as "your money" because you have the patient relationships today. However, if non-traditional competitors fundamentally change the market dynamic, then the patient relationship is up for grabs. Work with the non-traditional provider to capture the market revenue while ensuring the health system maintains the patient relationship for the long-term.
5. Move fast:
Non-traditional partners are not used to being constrained by the regulation inherent in healthcare. While regulations will constrain implementation, health systems must be able and willing to make rapid decisions on the fundamentals of potential deals. Analysis paralysis can quickly box market leaders out of new market opportunities.
What to do when approaching a non-traditional partner:
1. Seek strategic guidance from someone that has insight into how they think – this is a chess game not a game of pong.
2. Be clear on what you want.
3. Think about capabilities rather than services. How are you going to capture their capabilities rather than become dependent on their services?
4. Differentiate between their idea and their implementation. Remember, they don't know healthcare so listen for the ideas and convert them into an implementable and sustainable solution.
5. Understand if you bring legitimacy to them, they won't need you after they are legitimized.
6. Don't assume they think your "assets" are "assets"; they might see them as liabilities.
7. Don't try and contract everything. Get together and learn faster than them. It is about adaptation in a changing environment, not perfect projections.
8. Fast is better than perfect; don't let perfection be the enemy of good.
9. The work of innovation is never done. Keep listening and trying to see new opportunities in the evolving industry dynamic.
Kate Lovrien and Luke C. Peterson are principals at Health System Advisors. They can be contacted at Kate.Lovrien@HealthSystemAdvisors.com or Luke.Peterson@HealthSystemAdvisors.com. Health System Advisors is a strategy think tank and consulting firm with a mission to advise leaders, advance organizations, and transform the healthcare industry. For more information contact HSA at 877.776.3639 or www.HealthSystemAdvisors.com.
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