The proliferation of specialty hospitals since the 1990s has immense strategic implications for other players in the market (Al-Amin, Zinn, Rosko et l. , 2010). For instance, in 2003, a law was passed to prohibit referrals of Medicare patients to specialty hospitals where attending physicians had ownership of stakes. According to Al-Amin et al. (2010), the expiry of the moratorium in 2007 led to increased calls for ne stringent policies to curb the rising number of specialty hospitals. Examination of vertical integration, which refers to contractual or ownership of relationships between hospitals and physician practices (Baker, Bundorf, & Kessler, 2014), established that while the integration can cut costs and improve the quality of care, it potentially increases the providers’ market influence and facilitate payment of kickbacks for inappropriate referrals. Such dynamics in the specialty hospital market potentially affect performance of both institutions and physicians, affecting competitiveness of the latter and its financial performance. Analysis of market environment for specialty hospitals is necessary to ascertain existing structural and policy frameworks that affect performance.
The Northwestern Memorial Hospital in Chicago is one of the top ranked medical facilities in the US. The leading hospital in Chicago Metro and state of Illinois has 864-bed capacity and is ranked the best in 12 adult specialties. The specialties from highest to lowest include neurology and neurosurgery, orthopaedics, diabetes and endocrinology, urology, digestive disorders (gastroenterology), gynecology, geriatrics, heart (cardiology) and cardiac surgery, pulmonology, cancer (oncology), nephrology (kidney disorders), ear, nose and throat (otolaryngology), and as high-performing in rheumatology and ophthalmology (Leonard, 2013). Therefore, Northwestern Memorial Hospital is likely to have a high number of patients in ICU following intrusive procedures that requires close monitoring and specialized care. The services offered by the Northwestern Memorial Hospital and others of its ilk inspired the position statement by the American Association of Orthopaedic Surgeons (2016) in which a paradigm shift was noted in the healthcare industry. Specialty hospitals from the latter half of the 20 th century follow the industrial strategy of less diverse and more specialized business establishments with the objective of achieving lean production, flexible specialization, and focused service delivery. The American Association of Orthopaedic Surgeons (2016) posited that specialty hospitals have expanded the scope of services, leading to concentration of the market. According to Dewenter, Jaschinski, and Kuchinke (2013), market concentration of hospitals potentially influences discrimination of patients based on insurance policies. The implication is that specialty hospitals are profit oriented and treat market trends with the seriousness of traditional business establishments. Therefore, the Northwestern Memorial Hospital faces potential competition from existing and emerging specialty health services providers, and must strategize to remain competitive in the increasingly dynamic market. Environmental analysis of the market presents the best starting point for judging Northwestern Memorial Hospital place in the specialty hospital market.
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External Environmental Assessment/Market Analysis
The dynamic nature of specialty hospital industry has inspired strategic management geared towards profitability. Town and Vogt (2006) observed that mergers were common occurrences in the specialty hospital industry. Mergers and acquisitions of nearby facilities has the sole objective of creating local and regional chains with greater bargaining leverage. A similar strategy was employed by Northwestern Memorial Hospital, which serves as the primary teaching hospital for Northwestern University's Feinberg School of Medicine; and also runs the Prentice Women’s Hospital and Stone Institute of Psychiatry. The strategy allows specialty hospitals to provide care in different contexts contrary to traditional healthcare facilities. According to Robinson (2011), the consolidation of the labor intensive industry is intended to increase the market share and attract lucrative, privately insured patients. The strategy justifies concerns raised about the role of hospital concentration on patient discrimination (Dewenter et al. , 2013), and the associated vertical integration on services, pricing, and spending (Baker et al. , 2014). However, the implication on nursing is the rise in demand of skilled labor due to the increase in the number of patients spending time in ICU. This has seen the rise in wages, which may be an incentive for Nurse Compassion Fatigue in long-term acute care hospital ICU.
In a US market research report on specialty hospital industry, IBISWorld (2017), established that the sector generates approximately $49 billion in revenue, has 1,228 businesses, and employs over 320,000 people. The industry annual growth between 2012 and 2017 was 2.8%. The industry is characterized by low level of capital intensity and intensive labor. According to IBISWorld (2017), labor accounts for 39.3% of the cost, which depicts the high demand for skilled full-time and contract labor provided by surgeons, physicians, and nurses. However, the industry faces a potential threat from advancement in technology. Constant development of new devices and proliferation in their use and cost implies that Northwestern Memorial Hospital must invest in the technology to remain competitive. The pressure from competitors is immense and the hospital cannot afford to stagnate in its strategic management.
Specialty hospitals assume business strategies in their management implying profitability is the driver (Baker et al. , 2014; Dewenter et al. , 2013; Robinson, 2011). In this regard, the industry in which Northwestern Memorial Hospital operates has key success factors that are instrumental to its growth and market penetration. The first is access to highly skilled labor, implying that the hospital must beat the competition from other players in the industry that may be offering competitive remuneration packages, and better working environments. Northwestern Memorial Hospital must also situate its operations in proximity to the target market, which in respect to services and products it offers, is challenging. Mergers and acquisitions are strategies for meeting this objective at a low cost. Nevertheless, the hospital’s high rank nationally gives it a competitive edge as a brand that stands out. In addition, Northwestern Memorial Hospital is accredited by authoritative sources and is likely to be highly recommended (IBISWorld, 2017).
Internal Environmental Assessment to include SWOT analysis
Strengths
In 2010 fiscal year, over 2,100 clinical research studies were conducted in Northwestern Memorial Hospital. This demonstrates the hospital’s commitment to continuous improvement. By giving importance to research and development, the hospital comes across not just as the consumer, but also the developer of services. The strategy is crucial in improving its diverse gamut of healthcare services. The hospital’s success is founded on well trained and qualified professionals who also serve as academics at Northwestern University's Feinberg School of Medicine. The hospital emphasizes on patient care and its recent policy places the patient at the center of all operations. Northwestern Memorial Hospital has various accreditations and its position as the sixth best hospital in the US makes its brand recognizable. The hospital can exploit such recognition to gain networks with other health providers.
Weaknesses
Northwestern Memorial Hospital has a local presence, which impairs its objective to figure in the global healthcare landscape. While implications of research and development from the hospital may be far reaching, the demand for its products and services is global and the hospital must strategize to exploit the international market. Pricing is a major concern among consumers and the hospital is a victim of price apathy. The lack of marketing plan, which could have been crucial in addressing some of the challenges, is of concern. The hospital current has 864 bed capacity, which is small given the diversity of products and services it renders. Expansion of the bed-capacity is of paramount importance to realize growth in revenue.
Opportunities
Northwestern Memorial is the only academic center in Chicago that participates state Level I trauma networks and as a Level III neonatal intensive care unit, which have enabled partnerships with nearby health facilities. The hospital banks on growing health concerns, considering that the most affected are among the rising aging population and insured individuals that have the potential to drive growth in revenue (IBISWorld, 2017). Provisions in healthcare reforms could potential drive consolidation, which has the capacity to incentivize specialty hospitals to form large systems of care and command market influence (Robinson, 2011). New technologies can also be incorporated through research and development for improved and quality services and health outcomes.
Threats
The proliferation in players in the specialty hospital industry (Al-Amin et al. , 2010; American Association of Orthopaedic Surgeons, 2016) poses significant competition to Northwestern Memorial. The prospects of new entrants into Chicago with advanced specialized services rivalling those offered by the hospital cannot be ruled out. The over 1,228 specialty businesses provide stiff competition and Northwestern Memorial must innovate both in terms of service and product delivery and strategic management to remain competitive. The growing costs of healthcare in relation to new technology and affordability to patients is a concern for the hospital and the industry. The high demand of skilled labor can result to lose of staff or associates to competitors. There are potentials for shift in market demand and referral sources as competitors employ aggressive marketing and distribution channels.
Conclusion
Specialty hospitals could potentially set new benchmarks in product and service delivery by taking advantage of related economies of scale and scope. The outcome can be lowered cost of healthcare and possible improvement in quality as expertise is concentrated to augment patient choices. However, the industry is labor intensive specifically in relation to Nurse Compassion Fatigue in long-term acute care hospital ICU. In addition, conflicts of interest are likely to emerge due to ownership and referrals that may lead to patient discrimination. Specialty hospitals cannot be wished away, hence the need to embrace them and develop appropriate policies that influence managerial aspects to drive focus on quality healthcare rather than profitability.
References
Al-Amin, M., Zinn, J., Rosko, M. D., & Aaronson, W. (2010). Specialty hospital market proliferation: strategic implications for general hospitals. Health care management review , 35 (4), 294-300.
American Association of Orthopaedic Surgeons. (2016). Position statement: Specialty hospitals . Retrieved from https://www.aaos.org/uploadedFiles/PreProduction/About/Opinion_Statements/position/1167%20Specialty%20Hospitals.pdf
Baker, L. C., Bundorf, M. K., & Kessler, D. P. (2014). Vertical integration: hospital ownership of physician practices is associated with higher prices and spending. Health Affairs , 33 (5), 756-763.
Dewenter, R., Jaschinski, T., & Kuchinke, B. A. (2013). Hospital market concentration and discrimination of patients. Schmollers Jahrbuch , 133 (3), 345-374.
IBISWorld. (2017). Specialty hospitals: US market research report . Retrieved from https://www.ibisworld.com/industry-trends/market-research-reports/healthcare-social-assistance/hospitals/specialty-hospitals.html
Leonard, K. (2013). "Best Hospitals 2013-14: Overview and Honor Roll". U.S. News & World Report . Retrieved from https://www.cbsnews.com/pictures/us-news-17-best-hospitals-in-america/7/
Robinson, J. C. (2011). Hospital market concentration, pricing, and profitability in orthopedic surgery and interventional cardiology . American Journal of Managed Care, 17(6) e240-e248.
Town, R., & Vogt, W. B. (2006). How has hospital Consolidation affected the price and quality of hospital care? The Synthesis Project: New Insights From Research Results. Robert Wood Johnson Foundation. Research Synthesis Report No. 9. Retrieved from http://www.rwjf.org/files/research/no9researchreport.pdf. Published February 2006.
