Impending Death of Hospitals

A Clear Picture of the Future of Medical Practice

February 8, 2016

Kodak was once the country’s leader in photography. Then along came both Fujifilm and digital photography. And bankruptcy. And a lesson for medical group leaders.

What Kodak fell victim to wasn’t actually the digital camera. That’s because Kodak invented the digital camera. Instead, what drove Kodak into bankruptcy was that it chose largely to ignore the advent of digital photography.

Today’s significant growth in the size of hospitals and, importantly, in the size of hospital systems, is akin in many ways to Kodak’s plan to continue to dominate the film market. That’s because all of that growth in the hospital sector, over 100 mergers a year in each of the past three years, flies in the face of the fact that procedures are moving outside of the hospital world, not to it.

Today, approximately 70 percent of hospital revenue comes from outpatient procedures. Almost all of those procedures can (and soon will be) done for less at freestanding, independent surgery centers. The hospital business, at least in its present form, is dying and will soon be only for the most sick.

Fujifilm survived the digital film shakeout. It continued to derive as much profit as it could from film, but also pushed strongly into digital photography and into completely new ventures.

Many medical group leaders seem to be following the Kodak approach. They’re putting too many of their eggs (actually, often times all) in the hospital basket.

The smarter approach is to mimic Fujifilm. Sure, keep a part of your focus on hospital business, but put tremendous effort into developing new business in the independent outpatient space, as well as in other new ventures.

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