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Do Porter’s competitive strategies of cost leadership, differentiation, and niche or focus apply to hospitals or health care organizations?

The Health Care Industry(Case 6)

The health care industry has been going through major structural changes in order to become more efficient to help stem rising costs of health care. During the previous decade, health care organizations hired MBAs to help streamline their organizations, introduce new efficiencies, and market their services. In addition, many physicians are obtaining MBAs in order to help introduce better management into the health care industry. Health maintenance organizations ( HMOs) continue to hold down costs by emphasizing prevention, by limiting access to specialists, by requiring copayments to make patients more sensitive to the costs of health care, and through increased bargaining power resulting from their size. There also have been mergers among health care organizations and hospitals. Unfortunately, many health care organizations have encountered financial difficulties and some have failed. The federal government also has tried to hold down costs by limiting Medicare and Medicaid reimbursements. 1 At the same time that the health care industry is struggling to become more efficient, the demand for health care is increasing and is expected to increase in the future because of an aging population, increased affluence, and advances in technology. By 2008, 7.2 percent of the U. S. population will be 75 years or older. This compares with 5.2 percent in 1978.2 Actual employment levels in selected health care occupations in 1998 and projections for 2008 are as follows: 3

Occupation                                                                      1998                                    2008

Physicians                                                                       577,000                                              699,000

Dentists                                                                                           160,000                                              165,000

Optometrists                                                                   38,000                                 42,000

Physician’s assistants                                                    66,000                                 98,000

Registered nurses                                                           2,079,000                           2,530,000

Physical therapists                                                          120,000                                              161,000

Respiratory therapists                                                    86,000                                 123,000

Dental hygienists                                                                           143,000                               201,000

Clinical lab technologists and technicians                   313,000                                              366,000

Licensed practical and licensed vocational nurses      692,000                                              828,000

Speech- Language pathologists and audiologists       105,000                                              145,000

Questions

1. 1. Most people have some familiarity with hospitals and the health care industry. ( If you lack such familiarity, you may want to interview someone who works in health care.) Based on your knowledge, in which quadrant of the staffing policies matrix ( Figure 4- 3) do you think hospitals are located? Are the staffing policies of hospitals more like baseball teams, academies, clubs, or fortresses?  Explain your reasoning.
2. 2. Examine the projections for the various health care occupational specialties. Are there substantial differences in the rates at which employment is expected to grow in the different occupations? How have the strategic actions by health care organizations, such as mergers, shifts to preventative approaches, and the focus on cost control, affected the expected growth of the different specialties? How is the market demand for medical care expected to affect employment in the different specialties?
3. 3. Given the uncertainty of the demand for health care workers, how can health care organizations be prepared to meet their future needs for such employees? How can they help their employees prepare for their employment futures?
4. 4. Do Porter’s competitive strategies of cost leadership, differentiation, and niche or focus apply to hospitals or health care organizations? Explain.
5. 5. Interview someone from the health care industry about the changes in utilization of human resources that have taken place. What are the major changes? What are their personal views about the value of these changes? How does this person view the effectiveness of the implementation of these changes?

References

1. Braddock, Douglas. ” Occupational Employment Projections to 2008,” Monthly Labor Review 122, no. 11 ( 1999): 51- 80.
2. Ibid.; Fullerton, Howard N. ” Labor Force Projections to 2008: Steady Growth and Changing Composition,” Monthly Labor Review 122, no. I I ( 1999): 19- 32.

3. Braddock. ” Occupational Employment Projections to 2008.”