Your Competitor is No Longer the Hospital Down the Road; There's Much, Much More to Worry About

Hospital executives are conditioned to think in terms of service area. What is your hospital or system's service area, and how does that compare to your competitors? Where will you locate new medical office buildings, urgent care centers or target physician acquisitions to protect or expand your territory?

In the past, a competitive analysis typically only required examining your hospital or system and one or two other health systems in your market. Today, though, potential competitors — disruptive ones — are arising from places that never before concerned even the most competitive hospital executive.

Retail clinics
Retail clinics are quickly becoming a new alternative to the primary care physician, one of the most important referral sources for hospitals. And, as healthcare shifts toward capitated and population-based models, the number of aligned primary-care physicians a health system has will essentially dictate its market share.

The number of retail clinics is expected to double between 2012 and 2015, from about 1,400 in 2012 to more than 2,800 by 2015, according to Accenture. Retail visits are expected to account for about 10 percent of all outpatient visits by 2015. While this is a relatively small percentage, it certainly represents a big change for how healthcare is delivered.

I am one of the many Americans that use retail clinics fairly regularly. I have a primary care physician who is part of a major health system here in Chicago, and she provides good care, but getting in to see her is a bit of a hassle. I can call, work with a scheduler and hope to find a convenient time in the next couple of days, or I can simply walk over to the Walgreens that is two blocks from work and have a guarantee that I’ll be seen in 20 minutes. Living in Chicago (which I recognize has more retail options than many areas), there are Walgreens and CVS clinics closer to my home and work than any primary care office, and I can go over lunch, or before or after work. I don't have to call ahead, and it's often my first choice when the visit is for something fairly straightforward, like an eye infection or persistent cough.

Health systems have started to recognize this and are partnering with these clinics on clinical affiliations that refer patients to their systems when more complex care is needed. And while these referrals are better than nothing, it's the pharmacy chain that's getting reimbursed for every one of those clinic visits, not the health system. As these retail sites grow, and patients catch on about just how convenient they are, health systems could be in trouble if they don't adapt, offering more convenient care to patients. Northwestern Memorial in Chicago seems to have caught on — just last week I received a flyer in the mail saying it had opened an urgent care clinic just off Chicago's Michigan Avenue, no appointment required.

If patients flock to retail clinics because of convenience, imagine how much they'll like telehealth/e-consult services. Teledoc is one company offering online and phone-based consults with board-certified, U.S.-based physicians, and the company has an average call-back time of just 24 minutes.

Patients generally have to pay out-of-pocket, but the cost qualifies for payment with health savings accounts. As patients take on more financial responsibility for care, and deductibles rise, expect these low-cost visits to increase in popularity. Is your organization prepared?

Beth Israel Medical Center in New York seems to be. It partnered with Teledoc to offer its own Teledoc service with video consults available for $45 and under.

Insurers, other competitors

Retail and teleheath are far from the only new competitors hospitals must prepare for. Dialysis provider DaVita acquired multi-state medical group HealthCare Partners, for $4.4 billion in May 2012. Insurers are also acquiring physicians. In April, Pittsburgh-based health insurer Highmark acquired West Penn Allegheny Health System to better compete with UPMC. Recently, UnitedHealth Group has been buying medical groups and launching physician management companies. CIGNA Medical Group launched its CareToday clinics in 2006, providing "an alternative to traditional [physicians'] offices" in Arizona. And, Louisville-based Humana purchased Concentra, an urgent-care system based in Addison, Texas.

The point being: the competitive landscape for hospitals and health systems has changed dramatically. And, convenience is an area where competitors almost always have an edge. Health systems today must compete on convenience, taking on a retail mindset, to maintain their market share, and their competitiveness, in the future.


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