The Hospital As a Business

The rhetoric has been pretty hot as the presidential candidates face off in the final sprint to the finish line. Much of the discussion concerns the Patient Protection and Affordable Care Act, but no small amount of attention has also been paid to a debate about the respective roles of business and government, beyond health care, in the broader economy. It is a somewhat timeless debate, and one that is full of philosophical disagreements that go to the core of our republic and the vision of its founders. Which of our institutions is better able to navigate the uncharted waters that are the result of a stressed-out global economy? Are they mutually exclusive, or are they inextricably tied in a unique way that is emblematic of our nation’s exceptionalism? Indeed, one of the most fascinating reads, this summer, has been a book by historian Arthur Herman,¹ Freedom’s Forge: How American Business Produced Victory in World War II. It is a gripping account of the crucial role played by US business and industrial leaders in winning World War II through their innovation, dedication, and ability to transform and ramp up the country’s manufacturing capabilities to supply the military. It was a nearly impossible task, and business leaders made it happen—a perfect alliance between the military establishment and the entrepreneurial ethos that has been unique to the United States. What are the implications of this for today’s hospitals? Are they businesses subject to the ebb and flow of traditional market-based economic principles and models? Can hospitals learn, from entrepreneurs, the best ways to position themselves for success in a chaotic and changing environment that requires the ability to move quickly, act decisively, and take risks? Do hospitals rely on customers and their loyalties to sustain their revenues? Do hospitals create value for their stakeholders? Do hospitals function within a competitive landscape subject to their ability to differentiate themselves? Is a sophisticated system of analytics and information not the most crucial element of modern health care? This sounds suspiciously like a business, and my guess is that today’s health-care executives are trying to learn everything they can from the best and brightest in the business world—so that they can succeed in a model that will look increasingly like a Fortune 500 enterprise. I had lunch recently with the CEO of a rather large hospital that is part of a significant health system, and I was intrigued by his choice of words and descriptions as he reviewed the challenges facing the institution. He talked of the need to package the products and services offered by the hospital in ways that will clearly articulate their value to its various customers. The organization has been successful, but is being tested in ways that its leaders might not have imagined only a few short years ago. Physician relations are much more complex; competitive pressures are much more acute; and sophisticated branding, messaging, and broad-based marketing are much more essential. These are the tools of business. Make no mistake: They will be the most important elements in the hospital’s survival strategy. Of course, clinical quality and patient care are the foundations of the enterprise; that goes without saying. In an era, though, when many hospitals can claim top levels of quality, technological parity, and impressive outcomes, the key differentiators just might be customer service and the ability to create a platinum-level patient experience. The message for the hospital’s future success is clear. If you are among those health-care executives who still find business somehow less than attractive as a construct, you are most likely to find yourself at the wrong end of the negotiating table when it comes time to align with the entity that embraced, early on, the principles, strategies, and tactics of today’s most successful businesses. Hospitals have always reached out to local business and industrial leaders for their development boards and trusteeships. Health-care CEOs have historically understood that they need business support. What they face now, however, is different. They are increasingly trying to migrate their own models toward those more reflective of contemporary business practices, and they are doing so in increasing numbers (and at a record pace). Memo to hospital CEOs: Team up with a businessperson, or maybe even supplement your MHA with an MBA. This is the way to embrace the future.