Hospitals face numerous pressures: the need to operate at a sustainable margin, regulations to comply with, their often charitable mission of caring for those who can’t always pay, increasing payer bargaining power with reimbursement rules that are not on pace with inflation, and a relative inability to compete on price and quality.
The increasing number of free-standing clinics has compounded the problem. These clinics are not subject to the same regulations and with newer equipment and lower overhead, they can carve out the highest margins in the market for themselves. They can capture more profitability while utilizing the hospital for the higher risk, uninsured and complex cases.
Where does this leave the hospital? Playing catch-up. Just to stay competitive, they must upgrade and expand facilities, implement expensive new technology and compete for a shrinking pool of qualified staff, increasing their debt load all the while. This spend-and-borrow treadmill will not sustain itself when paired with flat or shrinking margins, so hospitals need to redefine the business they are in.
Physicians are under pressure too - from shrinking reimbursement and higher costs. All the same, they don’t all want to be businesspeople. Many desire a relationship that allows them to focus on their practice. These factors suggest an interdependent relationship rather than one of competition. What can be done to align these two parties? A strategy that identifies the issues for each party and builds on the potential for interdependency is vital.
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