Why Big Companies Struggle with Healthcare Delivery
Why Big Companies Struggle with Healthcare Delivery
Healthcare is Hard: It's about the patient...right? But why are the mega-insurers and corporate employers of the physician workforce getting it so wrong?
The healthcare industry has long been considered a challenging field for any business to navigate, let alone large public companies. Despite their resources, many big corporations find it difficult to make a significant impact in healthcare delivery. The complexity of the industry, combined with evolving dynamics, has created a tough landscape for these companies to thrive in. Here’s why “healthcare is hard” for big businesses and how the landscape of physician employment has shifted dramatically over the past two decades. Is there a way to reverse this? Merge Medical is a strong supporter of independent medical practice.
The Complexity of Healthcare
Healthcare is inherently complex due to its multifaceted nature. It involves a mix of public and private funding, stringent regulations, and a highly skilled workforce. For large companies accustomed to more predictable industries, these variables pose significant challenges. Companies like Amazon, Walgreens and CVS have ventured into healthcare, only to discover the nuances that make the sector tough to navigate. From dealing with insurance companies to understanding patient care, the learning curve is steep and often unforgiving.
As part of a $1 billion cost-cutting strategy, Walgreens is abandoning its primary care business venture in several states less than three years after launch. Eighty VillageMD clinics will close nationwide, with shutdowns in Massachusetts, New Hampshire, Florida, Indiana and Illinois.
How Teeny-Tiny VillageMD Brought Walgreens Its First Net Loss in 122 Years
by Sergei Polevikov, ABD, MBA, MS, MA 🇮🇱🇺🇦
The Financial and Operational Hurdles
Big public companies are no strangers to competition and financial challenges, but healthcare presents a unique set of obstacles. The financial risk in healthcare is immense, with high operational costs, ongoing research and development expenses, and the need to maintain cutting-edge technology. Additionally, the operational challenges of integrating healthcare services into existing business models can be daunting. CVS has faced significant hurdles in effectively managing its healthcare ventures. As highlighted in Hospitalogy “The CVS Struggle: Why CVS can’t get out of its own way in 2024”, CVS has struggled with integrating its acquisitions and developing a cohesive strategy, often getting in its own way and failing to capitalize on its investments in the sector.
Regulatory Challenges
The healthcare industry is one of the most regulated sectors in the world. Companies must navigate a complex web of federal, state, and local regulations, which can vary significantly across regions. Compliance with these regulations requires extensive resources and expertise. For large public companies, staying compliant while trying to innovate can feel like walking a tightrope. The penalties for non-compliance are severe, making it a high-stakes endeavor. Amazon's One Medical has encountered significant issues, as revealed in leaked documents reported by the Wall Street Journal. These documents exposed patient safety concerns, showcasing the difficulties large companies face in maintaining regulatory compliance and ensuring quality care.
The Shift in Physician Employment
One of the most significant changes in the healthcare landscape over the past two decades is the shift in physician employment. Twenty years ago, approximately 60% of physicians were independent practitioners. Today, that number has dramatically decreased, with nearly 80% of physicians employed by large entities such as hospital systems, private equity firms, and other healthcare organizations. This shift has been driven by a variety of factors, including the increasing complexity of healthcare administration, the rising costs of running an independent practice, and the lure of greater financial stability and work-life balance.
Implications of the Employment Shift
The shift towards employed physicians has significant implications for the healthcare industry. Employed physicians often have access to more resources and support, which (in theory) can enhance patient care. However, it also means that large healthcare entities have more control over the healthcare delivery system. This centralization can lead to efficiencies and standardization of care, but it can also result in a loss of autonomy for physicians and potential conflicts between clinical decisions and corporate objectives (profits over safety).
Dr. Bruce A. Scott, the recently inaugurated 179th President of the AMA has this to say: “Almost two-thirds of physicians show signs of burnout. One-third plan to reduce their hours. One in five physicians are hoping to stop practicing or retire in the next two years. Physicians are literally closing their doors.” “We can’t afford to lose even one more doctor! As a physician in an independent practice…I feel the urgency of the moment.”
Physician Autonomy and Altruism
Becoming a licensed physician is a long and arduous process that requires years of education and training. Many physicians enter the field driven by a sense of service and altruism. When physicians are independent, they often feel more engaged in their practice and with their patients. They can make decisions based solely on patient welfare without the influence of corporate profit motives. This level of engagement is threatened when physicians are employed by large entities. The demands of the job and the loss of autonomy can erode these characteristics, as corporate entities can prioritize profit over patient care. The sad fact is that publicly traded companies are beholden to quarterly growth, their board, and their shareholders, and not to the patients whom they should be serving.
Most people believe that independent physicians are more dedicated to their patients, aligning with the principles of the Hippocratic Oath, which emphasizes patient safety and ethical medical practice. In contrast, large companies do not adhere to this Oath and are driven by fiduciary responsibilities to their shareholders, which can conflict with patient care. It is remarkable that there are laws prohibiting physicians from owning hospitals, as who better to ensure patient care than those who have dedicated their lives to it?
Case Studies: CVS, Walgreens and Amazon's One Medical
The struggles of CVS, Walgreens and Amazon's One Medical illustrate the broader challenges faced by large companies in healthcare. CVS's inability to streamline its operations and strategic vision has resulted in missed opportunities and financial losses. Amazon's One Medical, despite its promise of innovative healthcare delivery, has faced serious patient safety issues, highlighting the difficulties in maintaining high standards of care while scaling operations. These cases demonstrate that even the most resource-rich companies can falter in the healthcare arena.
Looking Ahead
As large public companies continue to explore opportunities in healthcare delivery, they must recognize and adapt to the unique challenges of the industry. Success will require a deep understanding of healthcare's intricacies, a commitment to regulatory compliance, and a willingness to invest in the necessary resources and expertise. Additionally, the ongoing shift in physician employment will continue to shape the landscape, presenting both opportunities and challenges for all stakeholders involved.
While the entry of big public companies into healthcare is a sign of the industry's potential for growth and innovation, it also underscores the saying, "healthcare is hard." The complexities and challenges of the sector require a thoughtful and informed approach to truly make a positive impact. The question still remains, if quarterly growth and shareholders remain the primary focus, can these entities ever effectively deliver quality healthcare?
Topic for Future Discussions
Can new healthcare delivery models that support independent practice find a foot hold and slow or stop this shift? Multiple commonsense factors have been lost in the business of medicine. Is it possible to focus on these factors to create superior delivery models that focus on safety, healthcare, provider autonomy, patient satisfaction, and improved outcomes. How about price transparency? Greater control of the healthcare spend by employers? Far more healthcare dollars going to healthcare rather than the profit column of the mega-carriers and corporate employers of the physician workforce.
Here’s a LinkedIn quote on this topic from Dr. Adam Bruggeman “Amazon could own a hospital but a doctor can’t. Just think about that as you read this article (“Leaked Documents...”) Time for reform. Repeal Section 6001 of the Affordable Care Act.
Follow Dr. Bruggeman on LinkedIn (Link)
References:
AMA examines decade of change in physician practice ownership and organization
The CVS Struggle: Why CVS Can’t Get Out Of Its Own Way In 2024
Leaked documents reveal patient safety issues at Amazon's One Medical