• Specialized medical care considered Rethinking the Hospital - Value of business models for hospitals

Rethinking the hospital The value of business models for hospitals Master thesis Maarten den Braber (m@mdbraber.com)

What is this presentation about? • Strategy • Hospitals • Value • Business model Business model Customer! Value! Market! Strategic! Value! Competitive! Cost /! Value ! preferences ! proposition! segment! position! chain! strategy! revenue! delivered ! value! value! implementation! creation! appropriation!

Question: what is important for you?

Running a hospital is a balancing act 4

Demand-side demographics disease patterns public expectations Pressures are rising Supply-side knowledge workforce Societal ﬁnancial pressures internationalization global R&D

Zero-sum competition • No value is created • Competition is about shifting costs, increasing bargaining power and competition to capture patients • Escaping through value-based strategy Porter & Teisberg (2006)

Reactive behavior is not enough

Field research: 11 interviews - 2 sessions

• Specialized medical care considered core business • Decisions often supply-driven • Scale and scope important decision criteria • Governance structure complicated • What are reasons for success and failure? What issues? 5 examples

Current literature: boxed solutions • Darzi (2007) • MacKinnon (2002) • McKee & Healy (2002) • NVZ vereniging van ziekenhuizen (2000)

Darzi as example: 6 boxed solutions

But “one size does not ﬁt all”

How to build your speciﬁc hospital?

Strategy helps determine direction

Value-based strategy?

Value is deﬁned by attributes • Viewed from the customer perspective • Spans the complete process • Delivered through a sustainable process

Value-based strategy requires balance

Outside-in: customer preferences

Inside-out: organizational preferences

Models help solving complex problems

Business model Customer! Value! Market! Strategic! Value! Competitive! Cost /! Value ! preferences ! proposition! segment! position! chain! strategy! revenue! delivered ! value! value! implementation! creation! appropriation! Business model: build strategy • Comprehensive • Coherent • Structured

Value! Market! Strategic! Value! Competitive! Cost /! proposition! segment! position! chain! strategy! revenue! Value proposition: core functions • What (and for who), where, how and when? • What are your core functions? Curing sick people or keeping people healthy? • Who are your stakeholders? Patients, family, physicians, nurses, insurers, ... • Who is your customer?

! Current value proposition: different?

Value! Market! Strategic! Value! Competitive! Cost /! proposition! segment! position! chain! strategy! revenue! Market segment: define potential • Who and how many? • What defines your market? Geographic region, specific illnesses? • What is your market potential? Market size, share, volume, growth, ...

Value! Market! Strategic! Value! Competitive! Cost /! proposition! segment! position! chain! strategy! revenue! Strategic position: link with environment • What is inside and what is outside? • What is our position in the value chain? Who comes before, who comes after? • How do we balance scale and scope? Compete, collaborate, collaborate to compete? • What is our governance structure? Who runs the organization, what are the dependencies?

Health care value chain

Value! Market! Strategic! Value! Competitive! Cost /! proposition! segment! position! chain! strategy! revenue! Value chain: exchanging value • How to structure processes? • Link value exchanges to the core functions Does the exchange add real value? • Optimize the value chain Lean management,TQM, Six Sigma...

Value! Market! Strategic! Value! Competitive! Cost /! proposition! segment! position! chain! strategy! revenue! Competitive strategy: stay ahead • What is your advantage? • Tools and techniques already available PESTEL, SWOT, 5 forces, ... • Non-proﬁts need competitive strategy Just as for-proﬁts organizations do • Current: quality is medical-technical quality What other types of quality are possible?

Quality can be many different things

Value! Market! Strategic! Value! Competitive! Cost /! proposition! segment! position! chain! strategy! revenue! Cost structure / revenue potential • Make your activities sustainable • Cost and revenue mean more than accountability Investment needs, projections, variable/ﬁxed costs, ... • Balance your service portfolio Proﬁt centers versus cost centers • Tools: do not reinvent the wheel BCG matrix, GE matrix, ...

Business model: strategy building tool Comprehensive. Coherent. Structured.

Business model and the hospital • Does it ﬁt? (suitability) • Will it work? (feasibility) • Will it be used? (acceptability)

Suitability: does it ﬁt? • Makes decision-makers smarter • Aligns with organizational speciﬁcs • Makes knowledgeable about succes and failure • Possible to test current and analyze new scenarios

Feasibility: will it work? • Not easy moving away from established policies • Business model helps building and connecting logic • Many tools available already that can help • Strategic mindset in the whole organization is needed

Acceptability: will it be used? • Again: not easy moving away from established policies • There is willingness to change • Inclusive ways are an addition to current methods • Business model reduces complexity

Conclusions about the business model • Business model makes decision makers smarter • Comprehensive. Coherent. Structured. • Aligns well with the organization • Needs effort and time to be implemented • Delivers value... for customer and organization

Remember this?

With the right tools

We can build this!

! And now...