A key insight comes from framing the problem not as how to increase productivity but rather as "how to compete", as Skinner put it in his seminal article (W Skinner. "The focused factory". Harvard Business Review. 1974; May-Jun:113-122): "... a factory [hospital] that focuses on a narrow product mix for a particular market niche will outperform the conventional plant [general hospital] which attempts to be everything for everybody. Because its equipment, supporting systems and procedures can concentrate on a limited task for one set of customers, its costs and especially its overhead are likely to be lower than those of the conventional plant. But, more important, such a focused plant can become a competitive weapon because its entire apparatus is focused to accomplish the particular manufacturing task demanded by the company´s overall strategy and marketing objective" (the brackets are mine, not Skinner´s).
Regina Herzlinger is the mind behind the Consumer-Driven Healthcare concept as the way to achieve system reform (as opposed to top-down initiatives proposed by others in the 90´s and still held by many). Her ideas may be consulted in the numerous books and articles she has published on the subject (and in a not-to-be-missed recent presentation). She believes that true change will only be achieved through an organic, bottom-up process in which each person takes charge as a consumer of health care and entrepreneurial forces will create delivery models and insurance products aimed at better meeting the needs and preferences of consumers (rather than those of providers as it is currently the case). It is in this scenario that focused healthcare factories (a central topic in Herzlinger´s writings) will flourish. Not everyone agrees, though, that this outcome is likely or even desirable.
The competitive advantange of focused factories derives from embracing a specific, differentiated positioning and from gearing operations to exploit it. The focus could be on an illness, on a procedure or on a defined population target with unique needs. Focused providers outperform generalists, both in terms of quality and costs. The well-known volume-outcome relationship helps make the case for focused provider models, regardless of the direction of causality in this relationship ("practice makes perfect" vs. "selective referral patterns"). Costs are also lower, both overhead (due to a lower complexity and variability in operations) and unit costs (that go down with cumulative experience in similar cases through learning economies).
Healthcare´s supply-driven nature is reflected in the homogeneity of provision models and their inertia to change (the organization of hospitals today, for instance, is not too different from what it was decades ago) despite the great advancements in medical and information technology and changes in the relative prevalence of diseases and in the needs and preferences of consumers. Hospitals are very complex organizations designed to treat acute, serious conditions, and whose structure mirrors the division of Medicine in specialties. This self-centered approach is not only anachronic but also a limitation to innovation in itself (ie, by setting barriers to the creation of cross-functional services). Further complicating these matters, in this insurance-mediated market, what doesn´t have a "code" is not reimbursed, thus raising additional barriers to innovation. Email or telephone consultations, patient-provider communication through web applications and many other alternatives, more convenient and potentially more cost-effective, to presential encounters, are not offered because they are not reimbursed.
The specialty hospitals (with a focus in cardiology, oncology, orthopedics) that have emerged in the past few years represent a step in the right direction, if only still just a baby step in terms of what can be achieved. The fierce criticism they face , though, gives us a taste of what may lie ahead: going against the tide in healthcare comes expensive. Specialty hospitals, many of them physician-owned, are in the midst of an angry policy debate over their supposedly cream-skimming tactics (that is, carving out a niche of higher-margin services at the expense of general hospitals). Although there are many other angles to this debate, it is noteworthy that what in almost any other industry would be called "beating the competition" through a more appealing value proposition for consumers is, in healthcare, a questionable strategy.
The future reserves only a marginal role for general hospitals as we know them. Even it they persist in their positioning as generalists, they would do well to incorporate the focused factory approach, creating "plants within a plant" (separating organizationally and even physically the different service units). Also, the hospital of the future will probably not be a "place", as it is today, but rather a collection of diverse focused inpatient and outpatient services (including electronic delivery models) in different locations, networked through a shared information infrastructure.
The most innovative focused factories, though, will be outside of the hospital business. Regulation permitting, we will probably see a rebirth of disease management through a variety of products aimed at managing chronic diseases, new delivery outlets and a marked increase in the offering of preventive services (the healthy are the most neglected segment in the current system). Even more targeted delivery models, focusing on a very specific target population, condition or procedure, will emerge with time.
Focus is a powerful concept that, along with a shift of decision power towards consumers, will result in a much needed redefinition of healthcare services. It will bring greater diversity in provider business models and a broader range of medical services. A new system, more responsive to the evolving consumer needs.
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