Written by Meg Murphy
Recently, Jill Brown, a management professor at Bentley University, went to the doctor. Over the course of her examination, she was directed to get a routine but specialized test at a nearby hospital. Here is the thing: she knew better.
The healthcare industry is changing and you will benefit from learning about the business decisions at play, according to Brown, whose research examines the sweeping changes occurring in the sector.
In this instance, Brown was in possession of a few key pieces of knowledge. Her doctor is part-owner at the suggested hospital; the cost of the test, if done at that location, would not be covered by her insurance; and consequently the referral, while advantageous for the doctor, was not in her best interest. Brown said as much and he scheduled the procedure elsewhere.
“Consumers need to be more informed than ever. You should question where you are told to go for medical services — and why,” said Brown, whose research and teaching addresses strategic management, corporate governance, and ethics.
“This is just the beginning. We are going to see major structural changes to the healthcare system over the next few decades. Some of those changes will be good and some will not. People need to keep tabs on what is happening,” she said.
In a nutshell: healthcare providers, as we do, face ever higher levels of uncompensated care. In an effort to remain competitive, a steady procession of non-profit hospitals, which tend to support high-quality medical experts and invest in new technologies, have begun making big changes. Namely, they are merging and often vertically integrating with for-profit hospitals and vice versa: the number of such mergers or acquisitions has more than doubled from 2009 to 2014
The entities that result are a different kind of beast. There are obvious benefits for the integrated hospital: the non-profit acquires greater financial stability and new market opportunities; the for-profit gains name recognition and enhanced credibility for its physicians and specialty groups.
However, this is not a perfect or an easy union. Brown and fellow researchers observed and interviewed physicians and staff at a nonprofit hospital for 15 months as it integrated for-profit elements, such as shared ownership of facilities with physicians. They studied things like changes in the governance structure and organizational dynamics. In short, they considered how well the moving pieces in this new puzzle fit together.
They found that when integrated hospitals adopt a strategic business tactic — co-opetition or, simply put, cooperative competition — the results are problematic. While co-opetition is quite common in private industry, such as high tech, car manufacturing, information services, it plays out in complex ways when dealing with a hybrid nonprofit/for-profit entity.
Key among the issues: physicians, of course, are tasked with referring patients for various health services, which means sending business either one way or the other. As you may guess, the rewards for referrals increase. Meanwhile, they are also trying to deal with lower levels of Medicare and Medicaid reimbursements as they struggle to cover their own costs. Doctors, as well as we, are now operating in an environment that rewards unnecessary treatments.
“People have more treatment options within this new structure and access to sophisticated equipment and specialists. We benefit in many ways. You just have to know what to look out for,” Brown said. “The climate is not unethical but it is complicated — and consumers must learn to advocate for themselves.”
Brown has written for Business Ethics Quarterly, Organization Science, The Journal of Business Ethics, and Strategic Organization, among others. She is serving as co-author of a leading textbook in the CSR field, Business and Society: Ethics, Sustainability, and Stakeholder Management, co-authored with Archie Carroll for its 10th edition to be published in January 2017.
Dr. Jill Brown is a member of Bentley’s new Health Thought Leadership Network. Learn more about Bentley’s Health Thought Leadership Network.
