Episode 3: Many Healthcare Models in Many Ways
Nicole Cottrill and Michael Burcham examine the ways healthcare business models have evolved throughout history.
Dolly Parton’s family famously paid the doctor who delivered her with a bag of cornmeal. And until recent years, transactions like this were not uncommon, as medicine was primarily practiced by independent physicians or doctors at charitable institutions.
In this episode of The Untold Stories of American Healthcare, host Ryann Petit-Frere talks with Nicole Cottrell, head of health provider services at Finn Partners, and Michael Burcham, executive partner at Shore Capital Partners. They discuss the evolution of healthcare from the pre-for-profit era to today and explain how changes to the way healthcare is delivered will likely impact the future.
The Early Days of Operating a Healthcare Businesses
Before medicine became professionalized in the 1800s, hospitals were almost exclusively for people who couldn’t afford to pay a doctor otherwise, and they were often created by religious institutions like the Catholic Church.
“People who could afford really great healthcare, as it existed in the 17th and 18th centuries, typically were cared for at home, or they had very exclusive institutions where they could go. What is our hospital system as it exists today really sprung up from charitable organizations,” Cottrill explained.
Over time, those institutions evolved to our modern conception of a hospital system. Cottrill identified four major types of hospital systems that exist in America today, each with its own set of advantages: Non-profit systems, government-owned entities, for-profit systems, and academic medical centers.
Even though each of these systems has a unique business model, Cottrill stressed the fact that every healthcare system does make a profit, which is essential for investing into staff, technology and more.
“We’ve come to look at profit in healthcare as a very ugly thing, when really at the end of the day, profit is part of what makes this industry work,” she argued. “It’s part of what helps the industry grow and improve.”
And while some individuals may benefit from visiting one type of hospital over another — such as a person who needs highly specialized care that’s only available at an academic medical center — most individuals just go to the place that’s available in their own community.
“I think we spend a lot of time looking at the operational differences in these different kinds of entities, when what we really should be looking at is, ‘What makes for a good hospital, and how do we make sure that all the hospitals across our nation, regardless of their tax status or their operational structure, is doing what it needs to do in its community in the best possible way?’” Cottrill explained.
Emerging Models of Care – Innovation in Operating Healthcare Businesses
As a 40-year healthcare industry veteran, Burcham has seen firsthand how pivotal changes, from the implementation of Diagnosis Related Groups to the Affordable Care Act, have transformed the way healthcare is delivered and paid for.
As he looks to the future, Burcham identified several key trends which he believes will inform the way healthcare works for years to come.
One major change is the increased opportunities for individuals to receive care from a variety of places, such as new retail clinics, urgent care centers, and even telemedicine.
“I expect we’re going to have many new front doors to the healthcare system, whether that be a pharma, whether that be an employer-based clinic where the person can seek healthcare right at the worksite, that could be one of Walmart’s new initiatives with their model of a walk-in service,” he explained.
Those changes are also impacting the way providers think about their “ecosystems” of care, which creates new challenges but also new opportunities for collaboration.
“Those of us in the industry have long known and believed that wherever the patient starts impacts dramatically where they’ll end up. If the primary care physician is located on my campus, they’ll likely see a specialist on my campus, which means they’ll have their surgery on my campus if they need a surgery,” he shared. “All of that is pretty much in a free toss up right now, because there’s so many new front doors emerging.”
Additionally, Burcham believes private equity will play a major role in the future of healthcare business models, especially for smaller organizations that don’t have access to other capital.
“In today’s market — when the shifts of technology, the shifts of consumer sentiment, the need for direct consumer marketing and just always updating the physical plant is a reality — every type of provider needs access to capital, not necessarily because they wanted to consolidate, but simply to stay in business and be relevant in today’s marketplace.”
To learn more about the Nashville Health Care Council and follow along on our journey through the Untold Stories of American Healthcare, visit healthcarecouncil.com. And be sure to subscribe, rate and review this show wherever you get your podcasts.
