Look to the Horizon
No glory is harvested from planning. We are rewarded for what we do today, what can be realized from our actions … today.
With a fresh MBA certificate on my wall, I was excited for the invitation that found me mixing with top management in the board room. Two presenters demonstrated something called ‘pong’ on a cathode ray tube. I wondered what they were smoking as they confidently asserted revenues would reach $100 million, 10x the year just ended!
I still reflect on the poignant lessons learned four decades and change earlier. That day we were looking to underpin falling revenues by leasing portions of our market space. This new product was nothing like others in our distribution channel and, already facing financial risk, it was out of our wheelhouse and imagination. As it turns out, we should have been looking further downstream.
Horizons are to be envisioned, not seen.
When consultants speak of navigating a changing landscape, they are referring to the seen space between you and the unseen horizon. The easy money is in reshuffling the seen space and divesting the future. Everyone focuses on building the better mousetrap when the future is devoid of mice.
Every emerging healthcare and faux-care business model today focus on reshuffling the cost model. Micro-hospitals, urgent care, clinics, and other distributed product delivery systems treat the symptoms of failure rather than the disease. Even CVS, the visionary leader of the chain drug industry, seems focused on re-inventing the wheel rather than eliminating it all together.
Hospitals must choose between vying for a share of a dysfunctional state or creating a new future space. The danger of seeing your horizon is that by the time you navigate it, it is no longer there. It has been replaced by the unseen horizon fashioned by someone else. The good news for hospitals is that no one seems to have a cure for the ailing healthcare system and languishing financials remain an option for the near future.
Taking care of the seen space is, of course, priority one. But it is the future state that provides the course. It helps prevent investment detours that consume capital for little or no return. It helps identify what is wrong with the business today and even helps provide a framework for bridge and transformational solutions. It will help identify the right real estate and architecture for both hospitals and satellite health care delivery centers. And it will, of course, turn attention to the gorilla in the room, cost management.
While retailers continue to search for low hanging fruit to include in faux-care, their underlying outdated pharmacy models are significantly dependent on favorable retail pharmacy regulations, DOJ rulings, and the absence of competition. The CVS model, recaptures profit leakage (PBM) and leverages owned populations to put reimbursement pressure on true healthcare providers while lowering the insured risk portfolio (Aetna). Even as a faux-care provider, CVS is the Trojan Horse that could upend healthcare as we know it today.
Regardless, hospital outpatient pharmacies have opportunities that major chains do not (at least in the short term). For one, unlike retailers, outpatient pharmacy leverages a greater investment risk. This means successful outpatient pharmacies, in addition to creating prescription revenue, help lower cost and improve capital returns for other services of a hospital. But, capitalizing on these opportunities requires doing what retailers will never be able to do and that is put medication in a discharged patient hand and provide low cost post-discharge continuity of care.
Hospitals need to envision their future space and carefully navigate through the seen space, avoiding investment distractions, growth restricting short term cost solutions, unfavorable retail contracts, and profit leakage from subcontracting outpatient pharmacy services. This is understandably difficult when all eyes are on current year financial performance.
If all you ever focus on is tomorrow, you will never see the future.