While the vast majority of American healthcare executives swear that "healthcare is a local business," consumers, investors and savvy entrepreneurs are uniting to build a global "bypass" that will transform the delivery of health services in less than a decade. To respond effectively, healthcare leaders will have to change their view of the market.
American automakers faced similar challenges in the early 1970s. By ignoring early warnings about the threat from Japanese companies, they lost 30% of their domestic business in less than a decade. Is it too late for "traditional" healthcare leaders to respond to their latest challenge? No. But first the challenge must be understood.
Who are these guys? A quarter-century ago, the U.S. auto industry had the advantage of seeing a visible enemy advancing slowly. The American healthcare industry today is less fortunate. New "stealthcare" providers are swifter and less visible than the foreign automakers.
In just a few years, online pharmacies, Internet companies and thousands of other unconventional invaders have succeeded in constructing new veins and arteries around a healthcare industry that has been slow to respond to the changing market.
Of course, hands-on services will always be needed in healthcare. Patients will need to be seen by practitioners. Complex surgery will still require the resources of acute-care hospitals. But healthcare consumers' point of entry tomorrow is likely to be dramatically different, in ways that can already be seen today.
What's coming? If access, service, quality, convenience, price and value are hallmarks of every successful service business, how will traditional providers respond if Hilton, Hyatt, Marriott, Kmart, Sears, Walgreen's, Wal-Mart, Ford, General Motors and Toyota enter the healthcare arena or expand their current healthcare presence-with physicians or health systems owning local, regional, national or international distributorships?
And what if such consumer-friendly primary-care centers are connected online to fewer than a dozen academic medical centers of excellence for worldwide consultations, referrals and admissions? What will that mean for community providers?
Some may think such a scenario is unthinkable. But consider these points. Each of the corporations mentioned above already has:
* Hundreds of thousands of employees and dependents for whom they purchase healthcare services from a highly fragmented group of qualitatively diverse providers.
* Millions of customers, some of whom visit once or twice per week.
* Internationally known point-of-entry brand names, something remarkably missing from the U.S. healthcare industry.
* Proven service marketing, management and information systems.
Some already have existing healthcare business units: pharmacy, optical, over-the-counter medicine, employee health clinics, insurance subsidiaries, credit card processing, financing and assisted living. Like other major businesses, all are looking for new ways to leverage their customer relationships and brand names while reducing operating costs. Where better to look than the world's largest, most fragmented, unbranded, recession-resistant business?
Beyond those companies, a second wave of stealthcare providers is on the way. How will traditional providers and employers respond when global pharmaceutical companies combine proven direct-to-consumer advertising with company-owned and franchised medical offices inside tens of thousands of retail pharmacies and with round-the-clock online links to globally licensed physicians?
In one-third the time needed to pay off a new hospital bond issue, the third wave of stealthcare providers will arrive-genetic interventionists and microbiological bulletmakers, who will pull even more patients out of hospitals and traditional medical offices.
What's a survivor to do? Hospitals first need to understand the new environment. Once that happens, e-commerce and service marketing tools will become more critical than bricks and mortar. Information technology outsourcing will be needed to respond to competition in a timely and effective manner. Medical staff members will be required to be electronically connected to affiliated hospitals and pharmacies.
Other referral-dependent providers with "downstream" brand name identities (such as the Mayo Clinic and the Cleveland Clinic) will need to reinforce their channels of business. Options include long-term, franchise-like relationships with medical retailers (stealthcare's first wave), wholesalers (insurers and managed-care organizations) and independently owned and operated medical offices.
Physicians are seeking and finding unexpected new allies to stay competitive. The American Medical Association and other national medical specialty societies are pursuing creative solutions with technology companies such as Intel Corp.
A worldwide perspective. Ironically, at the very time when U.S. healthcare providers are most capable of exporting medical consultation and services worldwide, anti-competitive forces at home are using state licensing laws in an attempt to erect trade barriers and preserve the status quo.
Historically, the marketplace has a way of frustrating monopolists. Stealthcare providers-and revitalized major employers facing double-digit medical cost increases-will be hard to intimidate with such tactics. When healthcare costs exceed the price of steel, who is going to tell GM or Ford that they can't use e-commerce to secure better global healthcare value? And who will tell Kaiser Permanente that it can't contract with a group of world-class radiologists in Japan for round-the-clock service and image storage at a fraction of what they're paying now?
After a hundred years of defending free enterprise, the growth of technology and medical consumerism, how will the AMA and the American Hospital Association respond when members see their professional world being changed so dramatically by the very market system they have embraced?
Ron Hammerle is a longtime healthcare management and strategic planning consultant. He is vice president of strategic services at Savatar, a WPP Group company headquartered in Boston.