Millennium Outlook: Focused Factories vs. a Global Perspective

By Coile, Russell C., Jr. | Frontiers of Health Services Management, Spring 2000 | Go to article overview

Millennium Outlook: Focused Factories vs. a Global Perspective


Coile, Russell C., Jr., Frontiers of Health Services Management


The Law of Unintended Consequences demonstrates that we cannot always predict the outcomes of our endeavors-we cannot see how all these unleashed [forces] will affect the professions' future.

-Robert B. Klint, 1999

THE MILLENNIUM IS a time for sweeping visions and grand designs. If s an ideal vantage point for fundamentally rethinking American healthcare, from its market assumptions to its long-term vision. Yet the recent market failures of some of healthcare's most highly touted strategies-physician practice management companies, assuming capitation-risk, and hospital-acquired medical practices come to mind, and there are others--certainly add a note of caution for those who would predict the future of the health industry. In a review of ten years of my annual "top 10" forecasts of health trends, my short-term accuracy rate was 90 percent (Coile 1999). Sounds good. Most trends arrived as predicted. But a more thoughtful, long-term assessment of the viability of the ten most popular trends of the decade was closer to 60 percent, when criteria like sustainability, strategic relevance, and financial performance are employed. Healthcare can sometimes be too trendy, and the pages of healthcare journals and advice-filled newsletters are littered with the carcasses of failed forecasts and trends.

Two of America's most respected thinkers on the healthcare scene, Harvard's Regina Herzlinger and San Francisco healthcare consultant Wanda Jones, provide a "ying-yang" outlook for health delivery in the years to come. The East-West dichotomy is evident from the opening pages, but in reverse. Boston-based Herzlinger is focused like a laser on Western-style micromanagement of patients, one disease at a time. The West Coasts Jones invokes strategies from the East, ranging from "La Nina's" affect on global weather to mind-based medicine.

They could not be more different in their assessments of the $1.3 billion U.S. health industry, or in their solutions to the very likely scenario of rising expectations and costs as the Baby Boomers take charge and become healthcare's dominant customers on a shopping spree in an upscale medical mall, spending on a credit card with no limits. Regina Herzlinger brings a no-nonsense attitude to the debate, cautioning healthcare managers to stick to the knitting. Wanda Jones fears they will do exactly that, and miss the big picture. Both are certainly right.

REGINA HERZLINGER'S WORLD VIEW: FOCUSED FACTORIES

Every healthcare entrepreneur from Nashville to Irvine, California, has read and understands Regina Herzlinger's views on healthcare: the riches are in the niches (Herzlinger 1997). The business plans of successfil niche-players like HealthSouth and MedCath reflect Herzlinger's advice to "focus, focus, focus" on core competencies and highly defined customer segments--especially the chronically ill. Chronic conditions affect 45 percent of the population and account for 75 percent of U.S. healthcare expenditures. This is where the money is in healthcare, Herzlinger advises. Focus, focus, focus on asthma, diabetes, heart disease, oncology, and other conditions where demand is assured and costs are high.

Herzlinger cites Salick Health Care's successful business model for cancer care. Salick employs a three to four times higher use of appropriate postoperative therapy, which results in substantially fewer admissions for chemotherapy. Salicks charges are at least $20,000 lower than most other providers for specialized treatments such blood cell bone marrow autotransplants. Great performance for the focused factory model! What remains to be demonstrated is whether Salick's success was a result of the founder's zeal, and whether that success can be sustained now that Dr. Salick has sold his company to a global pharmaceutical firm.

Successful firms in Herzlinger's framework also focus on the customer. Automaker Chrysler adopted quality criteria from the J. …

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