Market Threats in the EmergingHealth Care Environment:
Background Slides
Eric D. Kupferberg, PhD
October 2010
Market Threats
• Market threats are endogenous• They arise from the operation or inner workings
of an organism, system or organization• Can be due to the interaction of that system
with its larger environment (i.e., exogenous variables) or outside entities
• They can also emerge with no apparent external cause
• In either case, we have some control over them
Recognizing the Threats
• Planning for future is difficult in a rapidly changing and instable environment
• Some of the changes are predictable (e.g., aging population, chronic diseases)
• Other changes are anticipated but their full implications are not completely understood (e.g., new technologies)
Recognizing the Threats
• A few changes arrive with little advance warning (e.g., DTC advertising, evidence of Coxx-2 side effects)
• A highly integrated health care market among purchasers, providers and payers creates ripple effects across the entire field
• Small profit margins render certain market sectors more susceptible than others (e.g., not-for-profit hospitals)
Some of the Issues We Face
staff shortages
declining reimbursement
rising prescription costs
medical errors
bioterrorism
HIPAAHIPAAJCAHO
technology
aging population uninsured patients
crowded emergency departments
patient diversity
workforce diversity
informed consumers
medical cost inflation
OSHA
market competitionmarket competition
needed capital improvements
physician relationships
community health
hospital “report cards”
health disparitieshealth disparities
workplace workplace hazardshazards
CMS
patient safetybed shortages
genomics
medical research
undocumented aliens
physician “loyalty”
alternative medicine
shift to outpatient services
underinsured population
access to capitalaccess to capital
hospital mergershospital mergers
union issues
medical educationpatient satisfaction surveys
nursing shortages
health departmentstock market devaluation
Leapfrog Group
internetinternet
telemedicineroboticsrobotics
clinical trialsclinical trials
chemical warfare
consumer confidence
workplace violence
malpractice rate increases
ethics
mass casualties
staff satisfaction
employee benefits
staff education
recruitment/retention Board of Trustees
parkingparking
universal precautions
corporate compliance sexual harassment operational efficienciesrisk management
workers compensation
security
system disintegration
Last update: 5/8/06
“Toxic Environment for Pharma”
ReimportationReimportation
Shrinking patent life
Affordable access to the uninsured
Incessant generic Incessant generic entrantsentrants
Maintaining the flow innovation (pipeline)Regulatory Issues (OIG Guidance, HIPAA)Regulatory Issues (OIG Guidance, HIPAA)
Bioterrorism
DTC
Medicare Modernization ActPublic access to innovative medicines (aka Public access to innovative medicines (aka
mandatory generics)mandatory generics)Shifting public perceptions of the industry
Customer consolidationCustomer consolidationGrowth of mail order & therapeutic switching
Continued cost shifting to patients
MediaMediaGrowing number of uninsured
Healthcare as a right/entitlementHealthcare as a right/entitlementCDHC – shift in powerAccess & decision
makersBreakdown of blockbuster model
E-prescribingE-prescribing
Payer influencePayer influence
Interest in low price comparisons
Uncompensated Care
Recognizing the Threats
• We provide a broad survey using six examples: personnel shortagesmalpractice crisisreimbursement levelsgovernment regulationsstrained organizational relations
• Many threats are regional:nursing and physician shortagesmalpractice litigation
Recognizing the Threats
• Some will certainly worsen:Medicare & Medicaid reimbursement levels
• Some may find remediation:federal legislation limiting non-economic malpractice awards
• Some affect certain sectors but not others:strained physician-hospital relations
Shortage of Physicians
• Acute in primary care, where decreasing salaries have lead and medical school cultures have led to lower recruitments
• Shortage in some specialties (e.g., thoracic surgery reporting near crises)
• Shortages augmented by aging population which requires procedures not dominant in current population
Physician Shortage Causes
• Aging population requiring more medical care
• MDs opting to work part-time or on a temp basis
• New restrictions on internationals
• Difficulty recruiting MDs in underserved areas
• Liability crisis worse in some regions and specialties
Shortage of Nurses• Nationwide shortage of nurses will increase from its
current 6% level to 29% by 2020
• Demand for nurses will increase by 40% from 2000 to 2020, compared to the 6% expected growth in numbers of nurses
• Increasing demand due to aging population and improved health education
• Nursing shortage increases pressures on physicians and increases health care costs
Nursing Shortage Poses Increasing Threat
• Cost of outside nursing temp agencies and internal HR efforts
• Lower quality of service from temp nurses
• Limits on patient capacities due to nursing shortages
• Multiplier effect from unfilled beds
Medical Malpractice Tort Cost: Growth Continues, Though Modestly
$ Billions
$1.2$1.4$1.8$2.2
$4.8$5.8
$6.8$6.7$6.9$7.3$7.6$8.5$9.2$10.1$10.6
$11.5$12.5$13.3$14.1
$15.5$16.4
$17.9$19.6
$21.7
$24.2
$26.5$28.2
$29.4$30.3
$2.7$3.4$4.1
$0$2$4$6$8
$10$12$14$16$18$20$22$24$26$28$30$32
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
•Over the period from 1990 through 2006, medical malpractice tort costs rose 229%, more than double the 90% increase in tort costs generally over the same period.
•Over the period from 1975 through 2006, medical malpractice tort costs have increased at an annual rate of 11.1 percent, versus 8.2 percent for all other tort costs.
2007 Top Ten Verdicts
Value Issue State
$109 Million Medical Malpractice New York
$102.7 Million Premises Liability, Death Florida
$55.2 Million Product Liability, Death California
$54 Million Private Air Crash Florida
$54 Million Nursing Home, Death New Mexico
$50 Million DUI Crash Florida
$50 Million Product Liability, Death Alabama
$47.6 Million Prempro Nevada
$47.5 Million Vioxx New Jersey
$45 Million Auto Crash, Death Florida
1 of the top 10 awards in 2007 was related to medical liability
Market Disruptions as Strategy
• Most everyone behaves in a defensive & reactive way
• High risk environment provide a chance to separate yourself from your competitors
• Mistaken belief that threats are imposed entirely from the outside
• In the words of Adrian Slywotzky, “Strategic Risk is one of the best avenues for growth . . . You find a big risk and you turn it around.”
Between You and Your Market Environment
• Not all markets are the same• A single market is constantly changing• Market strategy derives from
understanding an environment’s turbulence and the companies goals and capabilities
• Look to change the rules of competition and influence the environment