Making The Bet Without Knowing The Odds – The Risk of “Large”
The Business of Healthcare

Making The Bet Without Knowing The Odds – The Risk of “Large”

06/24/2024

If you’re going to bet, be smart enough to know the odds.

And, in your search to understand risk, don’t fall for the simple heuristic that bigger is better. Of course, bigger might be better for some period of time, that is, until it’s not. Then bigger is far more dangerous.

For many providers, pharmacies, and facilities, the cyber-attack on Change Healthcare, the behemoth in HIPAA clearinghouseland, impacted their business, sent their patients into needless uncertainty, and cost them significant dollars.

But similar stories, from the destruction of value within Envision Healthcare to the outright destruction of physician staffing company American Healthcare Partners, also ring true far outside of healthcare.

Take, for instance, this past week’s (i.e., June 19-20, 2024) cyber-attack on CDK Global affecting approximately 15,000 car dealerships across the country. CDK provides “one stop” cloud-based software services that car dealers use to manage their sales, payroll, and general office operations.

According to a quote in the Wall Street Journal, Geoffrey Pohanka of Pohanka Automotive Group, whose company relies heavily on CDK for its day-to-day business operations, commented that “they’re a very integrated company. It’s better for us to deal with one vendor than two dozen small vendors.”

Well, at least, I might add, until it’s not better to deal with one integrated vendor.

The CDK/Change Healthcare/put-all-your-eggs-in-one-basket worldview has it benefits, but it also introduces far more fragility into the system, both for itself and for those businesses and individuals with which it deals, than most bother to consider.

It might be, á la CDK’s 15,000 car dealers, better on the surface to deal with one vendor, or in the spirit of a hospital CEO, to deal with one mega group for all of its hospital based physician services. That is, until it’s not. The supposed beauty is then only skin deep, with ugly cutting all the way to the bone.

Don’t believe me? Just ask Mr. Pohanka how it’s working out for him.

This provides instructive lessons both for those interested in competing with large entities and for those evaluating or reevaluating relationships with them: their supposed strength is also their weakness.

Need help finding your competitor’s soft underbelly? Let’s talk.



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