Healthcare, and the hospital industry specifically, is the last commercial segment of the U. S. economy that has not been fully transformed into a market-driven industry. Over the late 1990s, the financial (reimbursement) model for hospitals turned upside down. Healthcare moved from an era in which it easily and unilaterally controlled its revenue to an era in which its payers dictate the price of its services. These managed care initiatives sparked this transformation and it is well underway.
The primary barrier to responding effectively to this transformation is that the hospital industry does not view itself as a business. Although hospitals are unique businesses, they are, nevertheless, businesses. They must employ the same sound management principles that transformed (1) the automotive industries of the early 1900s and again in the 1980s; (2) the inefficient steel industry dinosaurs into successful “mini-mills”; (3) the regulated airline industry of the 1980s into the lowest fares the world has ever known; and (4) even the euphoric “dot com” “capital drains” of the 1990s into successful businesses of the early-and mid-2000s.
The hospital will change, or else! The financial pressures are too great. The pendulum has swung too far.