Many patients I have spoken with think that because hospitalisation in Australia is so expensive hospitals are price gouging. Those that work in hospitals know this is far from true. As Dr Simon Woods said at a conference in Sydney in 2014 when he was the Executive Medical Director at Cabrini Health, Malvern, ‘Hospitals are price takers’. Hospitals operate like traditional businesses, but cannot charge prices beyond what is regulated by the government and other payors. Hence, when costs increase for pharmaceutical drugs, materials and services provided to hospitals hospital margins are squeezed. Hospitals are forced to do more with less.
This situation is not sustainable. Hospitals must find ways to change their business model. Google, Apple, Facebook, Amazon and many new-age businesses have changed the way that their industries work. Successful new-age businesses have created a business model that opens up new revenue streams. Authors Geoff Parker, Marshall Van Alstyne, Sangeet Choudary (‘Platform Revolution’), Alex Moazed, Nicolas Johnson (‘Modern Monopolies’), David Evans and Richard Schmalensee (‘Matchmakers’) call this model the platform business model.
When successfully implemented, it is seen by many in the business community as the gold standard for profitability. The platform business model does not own much in the form of hard capital, often they are seen to produce nothing, they only facilitate connections between parties wishing to do business or make personal connections with each other.
To take healthcare into this arena, hospital leaders must choose their point of entry critically. Jonathan Bush, previously from Athenahealth says that many tech visionaries and new-age businesses have tried to transform healthcare but have retreated battered and bruised.
Perhaps hospital insiders will fare better. To explore how hospital leaders can navigate the arena successfully, I’ll be sharing ideas for my book. It will be written in three parts:
Part 1 – The problems hospitals are facing.
Part 2 – Actions hospital leaders can take.
Part 3 – Results that will reap the direct and indirect network effects benefits of platforms businesses.
Please comment, share your thoughts, or give me a call to agree or disagree.