How to compete when value based surgery becomes a commodity

Value based surgical care for bundled payment, along with other value based medical services. is progressing. At some point, however, preferably sooner than later, as everyone has access to comparable surgical outcomes data and prices start to revert to a mean, surgical services will become more and more commoditized, with less and less geographic variation, much to the pleasure of multiple stakeholders including payers and patients.

When products get commoditized, the usual business strategy is to compete on price. Unless you have the clout to pull it off, like a Walmart, that idea drives you to be the lost cost provider and usually takes you to a very bad place.

When healthcare gets more commoditized, and it is , there will be some significant results and impacts on patients, providers, payer and industry partners.

1. Patients will get what they are asking for i.e. more power to make decisions. With that, however, comes the responsibility to do something with the information and accept the consequences of their actions.

2. Providers with have to innovate to separate themselves from the crowd instead of offfering me-too products and services.

3. Hospitals will have to cut the fat without amputating the bone and the muscle.

4. Caregivers will have to switch from a focus on quality, that is increasingly becoming normalized and commoditized, to other patient defined value factors like speed, access, price, experience and service.

5. Doctors will have to focus. They can't increasingly be all things to all patients, nor should insurance companies or government payers expect them to be.

6. The doctor-patient relationship will continue to deteriorate as patients place value above loyalty.

7. More and more patients will leave home for "good enough" quality of care they can get an affordable price.

8. Employed physicians will become increasingly disenchanted and disengaged working for employers they see as stagnant and uninspiring.

9. Because of the way most companies think and do, more and more hospital systems will offer more and more incremental improvement and continue to tinker.

10. True innovation and value creation will be the coin of the realm.

When that happens, then, how do you compete as more a more competitors enter the market?

  1. Better, cheaper, faster, smarter analytics and data science driving business intelligence, operational efficiencies and continuous quality improvement and cost reductions
  2. · Provide better customer service
  3. · Provide more attractive delivery or distribution
  4. · Create unique or more convenient distribution by making the product available in a place that is not currently served
  5. · Provide a better overall customer relationship by bundling with other products/services
  6. · Offer attractive pricing - usually enabled through lower manufacturing or distribution costs
  7. · Innovate with the pricing model - think a monthly Spotify subscription vs. pay per song music downloads on iTunes
  8. · Create better branding or advertising that appeals to a specific customer segment
  9. · Improve ease of use
  10. Staying close to your customers and providing them with the the value factors they want, like speed, convenience, experience and service.

Marketing ultimately becomes a bedrock of competing in a commoditized service industry, particularly in a business to business model. Here are some other tactics.

As value based reimbursement transforms medicine, it will hopefully bend the cost curve. However, it will also mean that market competitors will have to learn a new way of not just taking care of patients, but taking care of business as well.

Arlen Meyers, MD, MBA is the President and CEO of the Society of Physician Entrepreneurs