Telemedicine: Competition and Coopetition

karolinskaIn 1985 I had the good fortune to study in Sweden. I made many good friends and loved the natural beauty. I also learned a lot about healthcare in what is essentially a socialist country.

Sweden was (and is) by no means perfect. Progressive taxation had disincentivized hard work leading to something of a brain drain. Many of the physicians I met were looking to emigrate. On the flip side, Swedish healthcare was accessible and high quality. The government viewed healthcare as a responsibility and right rather than an option. The relatively small and homogeneous population (8 million in 1985) allowed central planning. On the campus of the Karolinska Institute, their version of the NIH, there were regional specialty hospitals: a hospital for the heart, the G.I. tract, the nervous system, etc.

This contrasts with American healthcare where hospitals offer specialty services on nearly every corner. Here in Phoenix, a patient with cancer can choose from Banner / MD Anderson, Mayo Clinic, Dignity Health / UA Cancer Center, and Cancer Treatment Centers of America, along with several other institutes. How did such choice come about? As a nation, we hold certain truths to be self-evident. Near the top of the list, we believe competition is a good thing. In just about every business open markets lead to higher quality goods and services and ever decreasing prices. Right? So how come on almost every measure Swedish healthcare trumps the American system? Sweden spends half as much per capita but on average its citizens live four years longer.

When Convenience in Healthcare Trumps Common Sense

The problem is that healthcare is not like any other market. Decoupled from value, healthcare competition relies on advertising, physician standings, and mostly convenience. This results in counter intuitive business strategies. Consider the following practices:

To compete for payer contracts, hospitals look to offer every imaginable service, sometimes at a loss. For example, rather than transfer patients to other facilities surgeons are hired just in case the need for (heart, brain, orthopedic) surgery arises. In an effort to cover every zip code with beds, insurers agree to contracts with hospitals that prohibit directing patients to the highest-volume / best-outcome facilities. Scenarios such as these create a lose-lose-lose outcome for the patient, hospital and payer.

Coopetition and Telemedicine: Healthcare Innovation Whose Time Has Come

Coopetition occurs when two or more competitors work together to achieve a common goal. One recent example is Ford and Toyota working together on the production of new hybrid trucks. Each company offered skills lacking in the other, allowing a better product at a lower cost. Rather than function as feudal lords managing their fiefs, why can’t healthcare systems share resources in like manner?

Recently, I heard a story of evolving healthcare coopetition in the state of South Carolina. In an effort to improve the health of their citizens, the South Carolina legislature gave the Medical University of South Carolina (MUSC) a 12 million dollar grant for telemedicine. However, rather than have MUSC use the money strictly for their own patients, the grant was given with the purpose of empowering all medical centers across the state to care for citizenry, with MUSC offering operational expertise along the way. Toward that end, MUSC is looking for ways to establish technology and business partnerships, by which gaps in coverage can be filled by providers throughout the State. For example, MUSC has excess capacity for stroke coverage. Their providers can support other hospitals via telemedicine. Alternatively, call coverage could be shared between hospitals (remember, there are often not enough specialists to cover every hospital). This is an exciting example of healthcare coopetition leveraging scarce resources. This is a win for patients, a win for hospitals (who no longer have to pay for expensive services that go unused), and a win for payers (who buy a higher level of care throughout the state).

I see many opportunities for coopetition—powered by telemedicine—to improve American healthcare. One opportunity is ripe where I work, and one that makes even more sense in the current climate of mergers and consolidation. My hospital, a member of Dignity Health, is part of a 43-hospital network operating in three states. Rather than have each hospital compete locally, as they do now, wouldn’t it make more sense for this network to share resources for the best possible outcome throughout the 3-state area? One hospital could take ownership of cardiac, another neurology, and so on.

Ideally American healthcare would offer transparency and value. Patients would see real differences between hospitals and providers. However, until this is a reality, opportunities to collaborate rather than strictly compete on convenience should be explored. I am not suggesting there should be single centers of excellence in specific areas. However, there is clearly a need for consolidation, a middle ground. Not every hospital should offer every service. The goal should be to have the highest level of service at the lowest possible price. Telemedicine offers an opportunity to achieve such a goal, bringing the healthcare community together in the process.

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