Rethinking the hospital
The value of business models for hospitals
Master thesis Maarten den Braber (m@mdbraber.com)

What is this presentation about?
• Strategy
• Hospitals
• Value
• Business model
Business model
Customer! Value! Market! Strategic! Value! Competitive! Cost /! Value !
preferences ! proposition! segment! position! chain! strategy! revenue! delivered !
value! value!
implementation!
creation! appropriation!

Question: what is important for you?

Running a hospital is a balancing act
4

Demand-side
demographics
disease patterns
public expectations
Pressures are rising
Supply-side
knowledge
workforce
Societal
financial pressures
internationalization
global R&D

Zero-sum competition
• No value is created
• Competition is about shifting costs, increasing
bargaining power and competition to capture
patients
• Escaping through value-based strategy
Porter & Teisberg (2006)

Reactive behavior is not enough

Field research: 11 interviews - 2 sessions

• Specialized medical care considered core business
• Decisions often supply-driven
• Scale and scope important decision criteria
• Governance structure complicated
• What are reasons for success and failure?
What issues? 5 examples

Current literature: boxed solutions
• Darzi (2007)
• MacKinnon (2002)
• McKee & Healy (2002)
• NVZ vereniging van
ziekenhuizen (2000)

Darzi as example: 6 boxed solutions

But “one size does not fit all”

How to build your
specific hospital?

Strategy helps determine direction

Value-based strategy?

Value is defined by attributes
• Viewed from the customer perspective
• Spans the complete process
• Delivered through a sustainable process

Value-based strategy requires balance

Outside-in: customer preferences

Inside-out: organizational preferences

Models help solving complex problems

Business model
Customer! Value! Market! Strategic! Value! Competitive! Cost /! Value !
preferences ! proposition! segment! position! chain! strategy! revenue! delivered !
value! value!
implementation!
creation! appropriation!
Business model: build strategy
• Comprehensive
• Coherent
• Structured

Value! Market! Strategic! Value! Competitive! Cost /!
proposition! segment! position! chain! strategy! revenue!
Value proposition: core functions
• What (and for who), where, how and when?
• What are your core functions?
Curing sick people or keeping people healthy?
• Who are your stakeholders?
Patients, family, physicians, nurses, insurers, ...
• Who is your customer?

!
Current value proposition: different?

Value! Market! Strategic! Value! Competitive! Cost /!
proposition! segment! position! chain! strategy! revenue!
Market segment: define potential
• Who and how many?
• What defines your market?
Geographic region, specific illnesses?
• What is your market potential?
Market size, share, volume, growth, ...

Value! Market! Strategic! Value! Competitive! Cost /!
proposition! segment! position! chain! strategy! revenue!
Strategic position: link with environment
• What is inside and what is outside?
• What is our position in the value chain?
Who comes before, who comes after?
• How do we balance scale and scope?
Compete, collaborate, collaborate to compete?
• What is our governance structure?
Who runs the organization, what are the dependencies?

Health care value chain

Value! Market! Strategic! Value! Competitive! Cost /!
proposition! segment! position! chain! strategy! revenue!
Value chain: exchanging value
• How to structure processes?
• Link value exchanges to the core functions
Does the exchange add real value?
• Optimize the value chain
Lean management,TQM, Six Sigma...

Value! Market! Strategic! Value! Competitive! Cost /!
proposition! segment! position! chain! strategy! revenue!
Competitive strategy: stay ahead
• What is your advantage?
• Tools and techniques already available
PESTEL, SWOT, 5 forces, ...
• Non-profits need competitive strategy
Just as for-profits organizations do
• Current: quality is medical-technical quality
What other types of quality are possible?

Quality can be many different things

Value! Market! Strategic! Value! Competitive! Cost /!
proposition! segment! position! chain! strategy! revenue!
Cost structure / revenue potential
• Make your activities sustainable
• Cost and revenue mean more than accountability
Investment needs, projections, variable/fixed costs, ...
• Balance your service portfolio
Profit centers versus cost centers
• Tools: do not reinvent the wheel
BCG matrix, GE matrix, ...

Business model: strategy building tool
Comprehensive. Coherent. Structured.

Business model and the hospital
• Does it fit? (suitability)
• Will it work? (feasibility)
• Will it be used? (acceptability)

Suitability: does it fit?
• Makes decision-makers smarter
• Aligns with organizational specifics
• Makes knowledgeable about succes and failure
• Possible to test current and analyze new scenarios

Feasibility: will it work?
• Not easy moving away from established policies
• Business model helps building and connecting logic
• Many tools available already that can help
• Strategic mindset in the whole organization is needed

Acceptability: will it be used?
• Again: not easy moving away from established policies
• There is willingness to change
• Inclusive ways are an addition to current methods
• Business model reduces complexity

Conclusions about the business model
• Business model makes decision makers smarter
• Comprehensive. Coherent. Structured.
• Aligns well with the organization
• Needs effort and time to be implemented
• Delivers value... for customer and organization

Remember this?

With the right tools

We can build this!

!
And now...