In Part 3 of our "The New Rules of Engagement: Competing in the Age of Mobile Healthcare" blog series titled "Unearthing the Catalysts: The Forces Driving Healthcare Change", we unraveled the catalysts of change in healthcare, taking a deep dive into the major shifts over the past 15 years. We followed a trail of innovation that led us from the global financial crisis of 2008 and the HITECH Act of 2009, all the way through the transformative shockwave of the COVID-19 pandemic. We saw how the rapid acceleration of digital technology has ushered us into a new age of healthcare, one defined by convenience, innovation, and an extended reach beyond traditional geographic boundaries.
In the era of digital healthcare, we are witnessing a story that is as old as time itself. Much like the biblical tale of 'David and Goliath', we are observing a monumental battle. However, this time, it's not fought on a desert plain but within the complex landscape of healthcare. On one side, we have the 'Goliaths': the large, resource-rich health systems and metropolitan hospitals. On the other side, we have the 'Davids': the smaller suburban, community, and rural critical access hospitals.
Today, we will delve into this contemporary 'David vs. Goliath' narrative to understand how the evolving dynamics of healthcare are creating new challenges and opportunities in this digital age. Join us as we explore the sizeable resource gap between large and small hospitals, analyze the implications, and chart the path forward in this intricate tug of war.
Geographical Boundaries: Once A Shield, Now A Mere Formality
Until now, the vast geographic distances served as a reliable security buffer for many hospitals. Their local monopoly status remained uncontested, primarily due to the sheer inconvenience of long-distance travel for their patients. Simply put, a patient's choice in where they receive care has been largely dictated by their proximity to that care. However, in the wake of digital healthcare innovation, these boundaries are fading fast. The modern age is not bound by the physical barriers of the past. Today, a patient living in a rural area can easily consult a specialist from a metropolitan hospital, many miles away, thanks to telehealth advancements. The once formidable geographic moat that safeguarded smaller hospitals has been bridged by the digital highway, leaving them vulnerable to new waves of competition.
See the following for a more detailed description of this: Part 1 | An Introduction To Tomorrow Today: Navigating the Changing Landscape of Healthcare
The 'Alexander The Great' Move in Modern Healthcare
This disruption in healthcare is reminiscent of the strategic brilliance of Alexander the Great, who leveraged the innovation of deep water navigation to expand his power beyond traditional boundaries and conquer Egypt with the greatest of ease as up until that point Egypt had no need to innovate in areas of national security. In a similar vein, larger hospitals are harnessing the power of telehealth innovations to project their influence and reach, transcending geographic restrictions. Through virtual consultations, remote patient monitoring, and digital health platforms, these healthcare Goliaths are expanding their patient base, conquering territories that once belonged to the smaller Davids.
The Plight of Smaller Hospitals
This technological onslaught poses a grave challenge for smaller suburban, community, and rural critical access hospitals. Striving to match the digital prowess of their larger counterparts, they often find themselves on the back foot, constrained by a significant resource gap. The war chest of larger hospitals, empowered by their substantial Net Patient Revenue (NPR), allows them to invest not just in advanced technology, but also in comprehensive marketing and communication strategies. They can effectively broadcast their capabilities, enticing prospective patients with the allure of top-tier care, all from the comfort of their homes. In this race for digital supremacy, the smaller hospitals are in danger of being overshadowed.
The Motivation Behind Expansion: Reclaiming Lost Revenue
It begs the question, why are larger metropolitan hospitals motivated to expand? One key driver is the revenue lost to specialty services. Specialty surgical centers, pain clinics, and other specialized service providers have carved out a niche for themselves. They offer high-quality, value-for-money services, with a strong focus on patient experience, chipping away at the market share of larger hospitals. To counter this, larger hospitals are using their digital and financial muscle to broaden their reach, aiming to recapture lost revenue and patients. This expansionist strategy, while resource-intensive, promises to pay dividends in the long run, further fueling the competitive pressures on smaller hospitals.
The enormity of the resource disparity between large and small hospitals can be a difficult concept to grasp fully. Numbers, in their stark clarity, can help illustrate this situation in a compelling way. To truly appreciate the scale of the challenge that smaller hospitals are up against, we're going to compare the Net Patient Revenue, otherwise known as NPR (the amount of money generated from patient services, regardless of the payer), of some of the U.S.'s largest health systems to the Gross Domestic Product (GDP) of entire nations. This juxtaposition may sound dramatic, but it offers a sobering perspective on the financial might of large health systems.
Let's start with the combined NPR of five largest health systems in the US:
- Hospital Corporation of America (HCA) - 209 hospitals | $47.44B NPR
- CommonSpirit Health - 165 hospitals | $31.02B NPR
- Ascension - 129 hospitals | $21.99B NPR
- Kaiser Permanente (HCA) - 43 hospitals | $21.45B NPR
- Providence St. Joseph - 57 hospitals | $17.32B NPR
Collectively their revenue amasses to an eye-watering $139.24 billion. To put that into context, this figure would rank this collective group of health systems 57th in the world from a GDP standpoint, sitting snugly between the GDP of Hungary, a country with a population of nearly 10 million people, and that of oil rich Kuwait. These are entire nations we're comparing with a group of healthcare systems, highlighting the astonishing scale of resources at their disposal.
These are absolutely massive systems that can span multiple states. Let's shift our focus to a different type of large hospital; one that's more regional focused for their metropolitan area. Once again we encounter astronomical figures in terms of Net Patient Revenue. Let's take a look at the following metropolitan hospital systems to see how they stack up in terms of NPR:
- UCHealth, Denver CO - 5.45B NPR
- Beth Israel Lahey Health, Boston MA, - $4.68B NPR
- KU Health, Kansas City KS - $2.73B NPR
- Barnes-Jewish Hospital, St. Louis MO - $2.32B NPR
- Methodist Health System, Dallas TX - $1.89B NPR
Contrast these figures with those of smaller hospitals, and the disparity becomes painfully clear. Below are the average NPR data for smaller hospitals. These figures, while substantial in their own right, are massively overshadowed by the financial prowess of their larger counterparts.
Average NPR of Smaller Hospitals
- Hospitals with 101-200 beds - $170.59M NPR
- Hospitals with 50-100 beds - $135.02M NPR
- Critical Access Hospitals (between 1-25 beds) - $86.57M NPR
As you can see from the carts above the numbers are so staggering in comparison that the bars representing the NPR for smaller hospitals completely fails to register when compared against large health systems and barley even registers when compared against metropolitan hospitals. It is within this stark disparity that the struggle for smaller hospitals exists, exacerbated by the technological and marketing onslaught led by the Goliaths of healthcare. The challenge is formidable, and recognizing the scale is the first step in strategizing a response.
Implications and the Path Forward
It's crucial for smaller hospitals to not only recognize the size and scope of this challenge but also to prepare to confront it. Their survival, growth, and ability to serve their communities hinge on their strategic response.
In the face of this adversity, smaller hospitals have the potential to leverage their own unique strengths – community connections, personalized care, and local trust. They may not have the war chests of the large hospitals, but they can forge a path that balances tech-enabled care with a patient-focused approach that capitalizes on their intimate understanding of their communities.
As we've delved into the enormity of the resource gap between large and small hospitals, it's clear that the healthcare landscape is evolving in significant ways. The digital age has leveled geographic barriers, enabling larger hospitals to extend their reach like never before. The implications of this expansion and resource disparity are profound, particularly for smaller, rural, and suburban hospitals who are grappling with the pressures of technological advancements and increased competition.
The ‘David vs Goliath’ comparison goes beyond illustrating the scale of the challenge. It also serves as a reminder that smaller entities can still find ways to compete and thrive amidst giants. In our story, David needs to acknowledge the scale of Goliath's power, understand its tactics, and devise a strategy that leverages his unique strengths.
It's also crucial to remember that large hospitals, while wielding considerable resources, face their own set of challenges. They have lost revenue to specialty services that excel in specific sectors, driving their expansionist strategies. But expansion is not without its pitfalls. Larger systems need to navigate the complexities of serving broader and more diverse patient populations while maintaining service quality and patient satisfaction.
In the next installment of this series, "Comparative Analysis: Threats and Opportunities for Small and Large Hospitals," we'll go deeper into this discussion. We'll uncover the playbook that each type of system - large health systems and metropolitan hospitals as well as smaller suburban, community, and rural critical access hospitals - can use to navigate this new landscape. We'll delve into the unique challenges each faces, the opportunities they can seize, and how they can leverage their distinct strengths to create value for their patients.
The evolution of healthcare in the digital age is a complex narrative, filled with both obstacles and opportunities. It is our hope at Novel Koncept that through understanding and strategic planning, hospitals of all sizes can adapt and thrive in this new era. If you'd like to discuss how these changes affect your hospital and discover potential strategies to remain competitive, please don't hesitate to CONTACT US. We're here to help you navigate the future of healthcare.