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Retail Medicine Models: Lessons Learned

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  • Current inpatient business with existing payor reimbursement models can achieve 2% margin at best—your revenue won’t change, so all you can do is grow volume or cut cost, which becomes a zero sum game—this is NOT what we are going to talk about Revenue gains are only going to come from tapping the “disposable income” businesses, or shifting your business to lower cost settings that also have market appeal that can result in better margins—this is what we mean by RETAIL strategies
  • Location should match your business model. Don’t put a boutique in a warehouse. Boutique: Location should be very private, a spa or resort. High class. Very specialized. Upscale Retail: Location should be prestigious. The right side of the tracks Mainstream retail: Easily accessible to the mainstream public. Easy to find. Good Parking. Discount: Often urban or centralized. Hard to find. Part of a building complex. Parking difficult or confusing or remote Wholesale: Cheap property location for warehouse. Good access to transportation and shipping.
  • Hospitals began as a cottage industry that went to mainstream retail. Because of cost increases and spread to mass markets, and the overlay of the insurance industry Hospitals have become discount businesses. To become mainstream retail, upscale retail or boutiques, hospitals will need to make a shift away from the hospital discount business model and rethink how they operate as a business in retail markets
  • Convenience issues of parking, way-finding, distance from parking to services, ease of driving access, payment options, distance from home etc All these variables are a part of the “retail” equation. Issues that hospitals are often inflexible to adapt given existing infrastructure Edifice Complex
  • What everybody wants is to have some sense of control or participation in what happens in their life. While this has become axiomatic for consumer products (e.g. old Avis Slogan above) it’s the emerging trend for consumption of healthcare services
  • Consumer ownership over health care buying decisions More consumers in health plans with incentives to manage the price for services used (BCBS Options Blue) Increasing polarization between the extremes of “heavy users”, e.g., seniors, chronic illnesses, cancer, trauma, and the “light users”, e.g., young singles and families opting for low cost health plans and the need to purchase retail Increasing co-payments that steer purchasing Technology shifts that encourage ambulatory treatment Mobile, office based equipment now available Outpatient diagnosis and treatment replacing inpatient setting Treatments increasingly available without a physician prescription Delivery system more fragmented, more consumer choice Physicians trying to “cherry pick” high-end services to augment their incomes, opening freestanding specialty centers and hospitals Hospitals facing competition from myriad sources: specialty niche players—inpatient and outpatient, drug and device suppliers, retail pharmacies, internet offerings, etc.
  • Brokers nationally report consumers will switch plans (assuming they have a choice) for 8% premium differences regardless of benefit sets Stats re: out-of-pocket spending for healthcare and related services Give examples of consumer strategies in healthcare, e.g., direct mail, coupons, gift certificates, package pricing
  • “Smaller” means ambulatory and potentially retail Molecular medicine can be done in small labs with genetic markers on mircoarrays- the result is “Personalized Medicine”, drugs and therapies to fit the individual Better, faster, more robust imaging Swallowable cameras instead of scopes Technology often outpaces cultural willingness to adopt e.g. Japanese toilet that does multiple lab tests . Advances in technology can make a once specialty product/service controlled by doctors and medicine an OTC retail option.

Transcript

  • 1. Retail Medicine Models: Lessons Learned SHSMD September 4, 2003 Geoff Kaufmann V.P. Clinical Development Center for Diagnostic Imaging Janet Guptill President KM at Work Inc. Steve Pew, PhD Clinical Transformation Texas Health Resources
  • 2. What Is “Retail”?
      • A Noun
        • Selling of goods and services directly to customers -
            • I work in retail
      • An Adverb
        • Purchased at customer price -
            • I bought it retail
      • A Verb
        • Selling goods and services –
            • This retails for $10
  • 3. What Is “Retail Medicine”?
    • Demand driven
      • payor demand in the past
      • patient demand moving forward
    • Consumer focused
      • patients increasingly willing to pay for things that their insurance might not cover
    • Partnership healthcare model
      • Patient, Family, Professionals share knowledge and decisions about care, and the customer will pay “retail” to have more control of their healthcare experience
  • 4. What Are Examples Of Retail Medicine?
      • Body scans as birthday presents
      • Drive-through pharmacies for strep tests
      • Dermatologist selling “beauty”—botox, facial scrubs, cosmetics distributed solely through physician offices
      • On-line doctor consults and appointment scheduling. On-line pharmaceuticals
      • Massage as an option with physical therapy routine
      • Laser eye surgery
      • Weight loss/surgical/procedural/behavioral
      • Body sculpting plastic surgery and other methods
      • Dental cosmetics, whitening, braces for adults
      • Herbal remedies. Homeopathic remedies
      • Stress testing
      • Sonograms of the “baby” in the malls (baby pictures)
    • Are you thinking retail ?
  • 5. Is Retail Medicine “Cash Based”?
    • Are we moving toward a 3 tier system of care?
    • Shift from “entitlement to excess”—”right vs. privilege” levels of care
      • What the governmental payors cover (the basics)
      • What the commercial payors cover (benefits vary)
      • What people will buy that isn’t covered at all
    • Perhaps “Retail Medicine” is trying to selectively grow in areas where greater net margins are possible… FOLLOW THE MONEY
  • 6. Learning Objectives
    • 1. Understand which services are more likely to be delivered in a retail model
    • 2. Share lessons learned from hospitals that have incorporated retail models into their business
    • 3. Learn a process for transforming key services into a retail delivery model
  • 7. What Will You Get From Us?
    • A decision making framework for hospitals to use when considering entering the retail market
    • Lessons learned from hospital providers that have made these shifts
    • Critical success factors for a retail medicine model
    • Tools for managing and measuring successful transitions
  • 8. Sales Continuum
    • Wholesale
    • Discount
    • Mainstream Retail
    • Upscale Retail
    • Boutique
  • 9. Sales Continuum Wholesale Discount Mainstream Retail Upscale Retail Boutique Warehouse Focus on Distribution Institutional HVAC Warehouse Arranged for convenience of handlers Little if any service except minimum required by law Large building strategically located in shopping area Customer Friendly Service is as important as product quality Brand Names Convenience Exceptional facility Spa-like atmosphere Privacy Custom Service Personal Service Amenities Upsells Single specialty service Focus on highest quality Highest personal service Personal relationship with customer Repeat business
  • 10. Sales Continuum: Grocery Example
    • Wholesale: Allen Foods
      • Sells products to grocery stores
    • Discount: Costco, Sam’s Club
      • Sells products to public in volume but at a reduced price
    • Mainstream Retail : Albertsons, Kroger
      • National chain that sells products to public at standard prices
    • Upscale Retail: Central Market, Whole Foods
      • Offers specialty products to the public at premium prices
      • Provides exceptional service, has reputation for outstanding service
    • Boutique: Omaha Steaks
      • Offers specialty products to the public within a particular category at premium prices
  • 11. Sales Continuum: Healthcare
    • Wholesale: Vendors
      • Sell products to hospitals and GPOs
    • Discount: Hospitals
      • Provide services for Medicare, Medicaid, HMO, PPO participants at discount prices
    • Mainstream Retail: Pharmacies, Urgent Care Centers
      • Offer standard services to customers at standard retail prices
      • i.e. Services for customers who do not need “larger volumes”
    • Upscale Retail: Specialty Clinics/Hospitals, Menningers, ATCs (Betty Ford), Mayo
      • Provide specialty services at premium prices
      • Possess a reputation for premium care, customer service, or experience
    • Boutique: Cosmetic/Plastics, Dermatology, Laser Eye, Weight Loss
      • Offers specialty services to the public within a particular category at premium prices
  • 12. Location: Marketing Tactic Or Retail Strategy??
    • Changing the location of a hospital to suburbia without changing the delivery/business model is simply a marketing/location tactic.
    • Operating in a new location using institutional delivery methods, institutional pricing, and providing little service is really just the same snow but a different drift. It does not make retail medicine.
    • Retail medicine is a different business model and care delivery model than traditional hospital medicine.
    • To enter the retail medicine market, hospitals must think in a completely different way and conduct business in a completely different manner.
    Retail Medicine-What it isn’t Retail Medicine-What it is
  • 13. The New Economy
    • “ Customers and employees will be empowered in new ways..and essentially calling the shots”
    • “ Information is free, Insight is not.”
    • “ The biggest problem for senior executives will be facing the fact that they are no longer in charge…the customer is”
    • “ No competitive advantage is sustainable. We wil have to continually create new competitive advantages”
    • C.K. Prahalad, Professor of Business Administration, Michigan Business School,
    • Consumer-Centric Views
  • 14. It’s this desire to participate that drives the retail healthcare demand
    • Convenience
    • Timeliness
    • Cost/payment options
    • Weighed against other purchase options e.g. a vacation in the tropics
    • A collaborative care model
  • 15. Evolution Of Healthcare Models Traditional Model
    • Professionals Huddle to determine what’s best for the patient
    • Treatment is imposed by experts
    • Knowledge is closely held and protected by each professional
    • The patient and family are outside the circle of knowledge and decision making
    • Outcomes are a result of the best intentions/skill of caregivers.
    Patient Family Caregivers Knowledge 20 th Centruy
  • 16. Evolution Of Models Ctn. Patient Centered Model 1980’s
    • Professionals circle the patient to coordinate treatment options.
    • Professionals “steer” patient toward their own ideas about best options for treatment.
    • Limited knowledge is shared among professionals
    • Patient and family have very little information
    • Outcomes are judged on clinician proclamation and patient satisfaction
    Patient Family Caregivers Knowledge
  • 17. Evolution Of Models Ctn. Customer Service Model 2000’s
    • PProfessionals provide “services” to the patient and family
    • KKnowledge is shared to the extent needed to “satisfy/serve” the customer
    • IInformation sharing among professionals is limited. Each is focused on what they uniquely provide
    • RRestaurant model
    • OOutcomes are a combination of patient satisfaction and caregiver satisfaction with services rendered
    Patient Family Caregivers Knowledge Flaw…Nobody bleeds at Bennigians
  • 18. Evolution Of Models Ctn. Collaborative Model The FUTURE
    • PProfessionals include the patient and family as an integral and honored part of the healthcare team
    • PPatients personal “expertise” about their body/health is valued
    • KKnowledge is community property
    • FFinal decisions belong to the patient and family
    • OOutcomes are collaboratively evaluated by multi faceted criteria e.g. clinical results, patient/family satisfaction, caregiver satisfaction
    • BBest practices in the industry
    Patient Family Caregivers Knowledge
  • 19. “ Retail” Puts The Customer In The Driver’s Seat Patient Centered Model 1980’s Patient Family Caregivers Knowledge Collaborative Model of Healthcare The FUTURE Traditional Healthcare Model 1900’s Customer Service Model 2000’s Copyright: The Center for Collaborative Health and Patient Advocacy 2003
  • 20. Trends Affecting Retail Shift
    • Consumer ownership over health care buying decisions
    • Technology shifts that encourage ambulatory treatment
    • Delivery system more fragmented, more consumer choice
  • 21. Consumer Shifts
    • Consumers are sharing the cost of health plan coverage and more consciously deciding how to spend health care dollars (benefit sets, medical spending accts, deductibles, other out of pocket)
    • Consumers are creating medical savings accts with pre-tax dollars to create disposable income for health care services
    • Consumers are seeing that they can buy health care services without going through physicians
    • More information and direct services are available on the internet
  • 22. Consumers As Healthcare Buyers Are you watching the advertisements???
  • 23. Examples of Retail Marketing
  • 24.  
  • 25.  
  • 26.  
  • 27.  
  • 28.  
  • 29. Technology Enablers Of The Retail Shift
    • Easier to use
    • Safer
    • Cheaper
    • Disposable
    • More widely available
    • Internet makes is easier to promote
  • 30. Enabling Technology
    • Implantables (spine supports, dissolving chemo, shunts and pumps, organ stimulators, monitors) for at home treatment
    • Minimally invasive surgery; robotic surgery
    • Ultrasound replacing selective surgeries for breast cancer, uterine fibroids and prostate cancer; Imaging replacing procedures (colonography)
    • Portable, digital patient records
    • Drugs replacing treatment (heart conditions)
    • The promise of gene therapy
  • 31. Enabling Technology Examples
    • Mobile MRI—the size of a desk chair (arm, leg)
    • Swallowable cameras
    • Laparoscopic procedures
    • Botox treatments
    • Early pregnancy testing
    • Defibs in airplanes, factories (AEDs)
    • Blood sugar testing pens or strips (non-invasive)
  • 32. Technology Impacts Utilization
    • Shifts inpatient to outpatient to…retail?
    • Decreases intensity of service
    • Creates new demand
    • Focuses on earlier detection
    • Decreases the time required for care
    • CAD assists providers in looking for pathology
    • Turf battles will erupt between physicians
  • 33. Specialty Niche Retail Competition
    • Plastic surgery centers
    • Screening services (Body CT, genetic testing, chiropractic evals.,
    • OTC drugs (allergy, Viagra, internet ordering)
    • Health clubs/massage/spa services
    • Complementary/integrative providers
    • Drug store “providers” (urgent care, mammo)
  • 34. Impact Of Internet On Retail Strategies
    • Increasing number of websites for health information and advice
    • More physician on-line consults
    • On-line pharmacies with minimal physician involvement
    • Sites for second opinions (“get 3 medical opinions anonymously for $14.95”)
    • Report cards that compare provider cost and quality scores
  • 35. Examples From Your Markets
    • Hospital “hotel” services (meals, rooms)
    • Inpatient Brand Identity extended to retail
    • Brand restaurants in hospitals
    • “ Scan vans”
    • Lasic centers
    • “ Personal” physicians for annual fees
    • DTC medical device marketing
    • GNC and other supplement stores
    • E-health sites and stores
  • 36. Solucient Survey: 82% of hospitals offer off-campus services
  • 37. Solucient Survey: 68% say these services increase pt satisfaction plus…
  • 38. Solucient Survey: Only 35% saw improved MD relations, 44% increased market share, plus…
  • 39. Solucient Survey: Physicians still the primary partnering strategy
  • 40. Solucient Survey: Retail marketing strategies have been limited
  • 41. So What Are You Going To Do?
    • What clinical services do you want to move to a retail setting?
    • What are your options for delivering these services in a retail model?
    • How much has “retail medicine” already begun in your market?
    • What do you want your retail position to be—a leader, a follower, or a non-player?
    • How will you have to reinvent yourself to go from a discount hospital to a retail provider?
  • 42. Anticipate The Future
    • “ If you went back 100 years and asked a farmer
    • what he wanted he would likely tell you he
    • wanted a bigger horse that ate fewer oats.
      • He would not tell you he wanted a tractor.”
            • CEO Hewlett Packard
    • Find out what’s on the technological cutting edge…invest in future technology…beat the customer to the market…but not by too much. Don’t be an also ran in the retail business
  • 43. Decide Where To Go Retail
    • Specialties to consider:
      • Plastic Surgery (aesthetics)
      • Dermatology (chemical peals, dermabration, permanent makeup)
      • Emergency Medicine (24-hour free-standing ERs)
      • Urology (impotence)
      • Occupational Medicine (work hardening)
      • Podiatry (orthotic and running clinics)
      • Dental (smile appeal)
      • Ophthalmology (lasic)
      • Anesthesia and Radiology (pain management)
  • 44. Decide Where To Go Retail
    • Services to consider:
      • Complementary to IP but uncovered by health plans
      • MDs won’t/can’t provide in their offices
      • Support but don’t compete with MDs
      • Easy, cheap technology
      • Chronic conditions: diabetes, pain, arthritis, heart disease
      • Diagnostic services: imaging, lab
      • Don’t overlook the obvious: flowers, gifts, food
  • 45. Decide Where To Go Retail
    • Cultural issues to consider:
      • Build in extensive training program: how to cross-sell, customer service, accepting payment
      • Utilize contracted, part-time, and temp positions; may require HR policies separate from the hospital
      • Choose an entrepreneurial manager; create incentives for both individual and team performance
      • Have dedicated marketing support
  • 46. Do Your Homework
    • Analyze market demand by product line, both inpatient and outpatient, assess the competition, calculate physician supply for related specialties
    • Interview physicians in the market, ask about referral patterns, ascertain revenue potential of alternative retail strategies
    • Estimate potential impact on inpatient business and reactive strategies required
    • Figure out organizational structure, operating policies, etc.; don’t “hospitalize” the service
  • 47. Get Close To The Customer
    • Focus on convenience;
      • ask them what they want;
      • survey regularly;
      • analyze current customer base
    • Innovate
    • Understand how to cross-sell related services
  • 48. Be Credible
    • Don’t risk your reputation on marginal technology by overpromising results that are not yet proven.
      • E.g.. “Virtual” colonoscopy
      • Penis enlargement
      • Hypnotic breast enhancement
      • etc
  • 49. Understand How To Run A Retail Business
    • Focus is on building revenues and generating add-on sales
    • Less focus on how to do what you are already doing cheaper
    • Need HR policies and culture distinctly different from the hospital; emphasize both individual and team sales success
    • Local “ownership” is critical
    • Ability to make quick decisions is also critical
  • 50. Marketing In Retail Is Different
    • Quick, customer responsive (seasonal discounts, competitor reaction, reflects local market attitude and happenings)
    • More salesy than a typical hospital
    • Think carefully about branding decision; hospital or independent
    • Utilize local market data on marketing effectiveness: radio, billboards, direct mail, newspapers, magazines, etc.
    • Remember to sell to the intangibles—how people will feel about themselves as a result of using your service
  • 51. Consider Your Partnering Options
    • Physicians
    • Franchises
    • Local businesses that serve a similar customer
    • Technology companies
    • Related services companies
  • 52. Example: Open Off-site Pain Management Center
    • Who is your customer? What will they want?
    • What services would you offer?
    • What would differentiate you from your competitors?
    • How will you market?
    • How would you go about setting up the program?
    • How would you “sell” your approach to the hospital?
  • 53. Solucient Survey: Lessons Learned
    • Market research is crucial to assuring success. You have to understand how the customer wants to receive services.
    • Need to be more aggressive in market promotion.
    • It has been very difficult to integrate these services with our campus based …services from many perspectives: integration/continuum of care, uniform Human Resources, Administrative and Billing practices, etc.
    • These things take time to grow. Also, market surveys don't always tell the whole story.
    • Market assessment is vital. Physicians play a strong impact and can't be ignored. Physician ownership/commitment critical.
    • Address operational and patient satisfaction issues continually.
  • 54. Critical Success Factors for Retail
    • Offering fits local market demand and supply characteristics
    • Business is incredibly attuned to consumer preferences
    • Retail brand and model is separate from hospital culture yet consistent in its values
    • Partnering approach matches the market strategy
  • 55. Critical Success Factors for Retail
    • Choose the right partner
    • Need to “share” profits
    • May need to walk away from inpatient bricks and mortar investment
    • Work through legal complexities and costs
    • Adequately address operational risks
    • Have a back-up plan for unwinding at any moment in time
  • 56. Other Lessons Learned
    • Need experience in retail marketing—go buy it
    • Make sure you don’t under fund the marketing effort
    • Invest in consumer surveys, customer usage analysis, and continual market recognizance
    • Be flexible and innovative; respond to market dynamics instantly
    • Run it like you personally own it—or give people incentives to do so
    • Don’t confuse “partner” and “customer” designations
  • 57. Questions?