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Discover how the transformation of healthcare will impact you
Citation preview
Industrialization of Medicine:
From Cottage Industry to 21st Century Business
Robert Bond, MBA | [email protected] | 484.431.3015 (mobile)
ACOAdvantage (www.acoadvantage.com)
Breakthrough Performance in the Health Reform EraACOAdvantage
www.acoadvantage.com
Intention of this PresentationForecast the opportunities created by the movement
towards accountable care and value based medicine. We
use lessons learned from the transformation of other
industries and apply them to healthcare to highlight key
trends and opportunities
1
Providers Vendors / Consultants Investors
Consider how accountable
care and health reform will
impact you. Learn what
are the key steps towards
care transformation
Gain a competitive advantage
and stay ahead of the curve.
Learn what the healthcare
market will demand in the
months and years ahead
Grow your investments.
Create new opportunities
through mergers, acquisitions,
and investments in new
ventures
What you will gain from this presentation
2
Part 1 – What can we learn
from other industries?Consider that healthcare is following a path taken by other
industries transforming from cottage based industries to
mass industrialization. In this section, we examine what
makes these industries successful
Our World is Mass Produced…
Automobiles Consumer
Products
Agriculture
Cottage
Industry FormModern Form
…made possible by the transformation of cottage
industries to mass production entities
Textiles
Grocery Stores
Agriculture
Lower CostCost per unit of production
are decreased Higher QualityTight integration of
processes creates high level
of quality. Handoffs
between process steps is
coordinated and well-
engineered
Rapid InnovationResearch & Development
costs can be spread over
larger production volume
leading to shorter innovation
cycles
EfficiencyProduction efficiencies
provide for higher output.
More customers can be
serviced
ReliabilityQuality is built into the
process not in the
individual craftsman
Why Did this Happen?(Or who drives a hand-crafted car anymore?)
ACOAdvantage©
In summary, suppliers created goods and services with a
competitive advantage in terms of quality, cost, or experience.
Less competitive suppliers went out of business or evolved
IndustryBarriers to
Entry
Degree of Benefits
Derived from
Economy of Scale
Areas Benefiting from Economies of Scale
Textile
ManufacturingLow Excellent
Capital Costs
Set up Costs
Distribution Costs
Buying Power
Agriculture Medium Excellent Capital Costs Buying Power
Computers Medium ExcellentManufacturing
R&D
Brand Power
Customer Support
Retailing Low GoodBuying Power
AdministrationBrand Power
Trucking Low PoorAdministration
MarketingBrand Power
Medicine
Varies by
Specialty
and Services
Offered
Excellent
Capital Costs
Setup Costs
R&D
Brand Power
Administration
Negotiation Power w/ Payors
Automobiles Medium ExcellentCapital Costs
Setup costs
Brand Power
R&D
Marketing
Effects of Scale - Industry Dynamics Drive the Characteristics of that Industry
Success of these suppliers rests on a set of practices many of
which are lacking in the practice of modern healthcare
Process metrics
Output metrics
Measurement
Supporting Infrastructure
Information Technology
Human Resources Management
Risk Management
Financial Management
Quality Control
Business modeling (e.g., value
proposition, profit model)
Operations design Business Design
Common Practices of Successful Large Scale Industries
ACOAdvantage©
Business Model Type Description ExamplesProfit
Model
Solution
Shop
Business model type suited to delivering
products and services when knowledge about
them is still low, generally at the unstructured
problem-solving and early pattern-recognition
stages of the problem-solving continuum
McKinsey &
Co
Boston
Consulting
Group
Fee for
Service
Value-
Added
Process
Such businesses produce high-volume solutions
at low cost; their success lies in their ability to
invent, manufacture, market, and distribute their
goods or services to the market at scale.
Toyota
McDonald’s
Fee for
outcome
Facilitated
Network
Business model in which a system enables like-
minded customers to exchange goods and
services, share information, collaborate, or
socialize with little intermediation
eBay
Aetna Health
Plans
Subscription,
Premium,
Advertising,
etc
Source: The Innovator's Prescription: A Disruptive Solution for Health Care
By Clayton M. Christensen, Jerome H. Grossman, and Jason Hwang.
Business model design is the foundation of these practices.
Consider that there are three archetype models which form the basis for the majority of successful businesses
Part 2 – How will the
healthcare industry evolve?We examine current trends and lessons from the
transformation of other industries to highlight the areas of
change. Change in healthcare represents both a
challenge and an opportunity
At a macro level there are two key trends which
are driving the transformation of healthcare…
DemographicsOlder Population
TechnologyUnderstanding at the Molecular Level
Unavoidable economic realities
created by demographic trends
(e.g., rising life expectancies,
aging population) are forcing
key stakeholders (e.g.,
employers, law makers)
towards change
The casual mechanisms of disease
at the molecular level are being
revealed through medical science.
Better understanding will lead to
more effective treatment and also
drives the trend driving rising life
expectanciesACOAdvantage©
…and are strongly propelling the practice of medicine
from a cottage industry towards mass industrialization
High
Efficacy
Low
Efficacy
Tre
atm
en
t E
ffecti
ven
ess
Evolution of Medicine from Art to Scientifically Based
Heuristic Empirical Scientifically-Based
Depends heavily on physician’s skill and judgment
Diagnosis made based on symptoms
Efficacy of treatment outcome is uncertain
“Pattern recognition” is key element of diagnosis and treatment
Outcomes can be predicted in probabilistic terms
Diseases can be precisely diagnosed
Treatment based on rules-based therapies
Outcomes are predictably effective
ACOAdvantage©
Investment Area Description Examples
DiagnosticsAccurate diagnosis forms the basis for treatment.
Value of accurate diagnostic tests are significantly
higher than current reimbursement formulas
Genetic Biomarker Tests
Portable Imaging Devices
MetricsManagement without metrics is not effective.
Standards and capture methods for metrics are of
great interest as demonstrated by meaningful use
Process metrics
Outcome metrics
Information
TechnologyInformation technology is a key enabler of
business process design and decision making
Workflow Management
Mobile Health
Business Intelligence
Data Analytics
Natural Language Processing
Human
Resources
Management
New models and methods of provider
incentivization are under development to
encourage teamwork, use of evidence-based
medicine, and lower cost care staffing
Provider Incentivization and Training
Non-physician Care Delivery
Business
Model Design
Business model design is fundamental to care
process integration and realization of value for
both patient and provider
Specialty Hospitals
Retail Store Based Clinics
Web-based Support Models
Operations
Design
New care delivery operational models support
disease prevention and wellbeing which reduce
care utilization
Home Care
Remote Patient Monitoring / Engagement
Medical Home
…and in turn is driving investment in key areas.
Significant activity in these areas represent both a
challenge and an opportunity
ACOAdvantage©
Robert Bond, MBA
Partner
ACOAdvantage (www.acoadvantage.com)
[email protected] | 484.431.3015
Part 3 – How can you stay
ahead of the curve? Learn more by contacting us today