Female doctor smiling with male doctor in background (2048 x 1365)

US healthcare is booming. In 2017, healthcare overtook both retail and manufacture as the nation’s foremost employer– not just of physicians and nursing staff, but of administrators, custodial staff, and office workers.

This boom has invited a flurry of massive merger attempts like the one Cigna and Aetna abandoned in February of 2017 after being blocked by the Justice Department. The Trump administration has encouraged heavier policing of monopolies in healthcare, calling for rules and guidelines to, “re-inject competition into healthcare markets by lowering barriers to entry, limiting excessive consolidation, and preventing abuses of market power.”

But while horizontal (like-to-like) mergers like the Cigna-Aetna deal will most likely continue to be stopped under the current administration’s pro-competition policy, vertical deals (eg. insurer-to-pharmacy mergers) stand a much better chance of moving forward.

At the same time, the Trump administration policy of “lowering barriers to entry” has made it easier for organizations to create their own health insurance programs, paving the way for large employers like Amazon to create policies of their own for their employees, or for small, local hospital systems to unleash their own in-network coverage in the style of Kaiser-Permanente.

What will the new landscape of inter-organizational mergers and local networks mean for small, independent healthcare providers?

Small providers will need to become adept at local partnerships.

One of the reasons the healthcare industry has continued to boom while others have declined is its resistance to globalization. While manufacture and retail can live anywhere, healthcare still happens in your neighborhood. This works to the independent provider’s advantage, but only to the extent that the larger healthcare networks in town are not allowed to corner the local market.

Manager and administrator roles have seen the largest job growth in the healthcare industry over the past decade, but this has largely skipped the smaller practices, leaving them more susceptible to mismanagement, competition, and absorption. The right partnership between a small, local practice and a sister provider, such as a local pharmacy, therapist group, or a small hospital, can mean access to business resources and referrals that would otherwise be out of reach. Not only that, some studies suggest these inter-organizational networks could be good news for patients and could mitigate some of the potential downsides of pro-competition policy. However, providers must avoid partnerships that could be construed as tying. Tying is a form of monopoly that controls pricing for two directly related services (such as pulmonology and home oxygen delivery) at the exclusion of all other providers in the area.

Independent providers who wish to remain independent must compete for online presence

In contrast to larger, local healthcare organizations, small providers usually lack the budget for full-time marketing staff. That can mean that web development, online marketing, and online scheduling tools fall by the wayside. This is potentially fatal to a small practice, especially considering the reason for the healthcare boom: baby boomers are aging.

Increasingly their gen-x and millennial children are the ones choosing their providers, making their appointments, and picking up their prescriptions. The vast majority expect to do it all the same way they conduct all their everyday business– from their mobile phones, without a single phone call, if possible.

Without a healthy, mobile-first web strategy small providers are virtually invisible to the next generation of patients and their caregivers. If a full-time admin and marketing staff is out of reach, independent healthcare providers can still do very well with the help of a healthcare marketing agency, and a small, temporary team of freelance web and mobile developers.

Independent providers must learn from the success of urgent care

Expanded hours, easy online scheduling, a team of available physicians… all of these are factors that make urgent care the provider of choice for 1725% more patients than ten years ago. For an independent practice this could be as simple as a wider spread of office hours between partner physicians, and as complex as a new, online portal for lab reports and appointment scheduling. The more flexible and present a small practice can be, the more it can compete with nationwide and local urgent care providers.

Small providers must know the red flags when working with an inter-organizational network

Based on past Federal Trade Commission rulings, independent providers can be confident of a few consistent protections and warnings.

  1. Even when engaged in a partnership or healthcare association, the network cannot stifle competition by banning member practices from truthful advertising– ads that accurately differentiate one provider from another.
  2. Price-fixing – artificially securing an agreed price for service billing across a network of physicians or practices, sometimes as many as 900 at a time – has been successfully prosecuted many times by the FTC.
  3. A network cannot restrict providers from engaging in patient-referral strategies and partnerships with other providers.

The Trump administration’s policy to “re-inject competition” can mean good things for private, local healthcare providers, and patients, too. But with the upcoming inter-functional mergers, and a burst of new, small-network insurance providers, it will take some nimble maneuvering to stay on top.

Alex Membrillo is the CEO of Cardinal, a digital marketing agency focused on growing multi location companies. His work as CEO of Cardinal also recently earned him the honor of being selected as a member of the 2018 Top 40 Under 40 list by Georgia State University as well as 2015 and 2016 Top 20 Entrepreneur of metro Atlanta by TiE Atlanta, Atlanta Business Chronicle’s 2016 Small Business Person of the Year and Digital Marketer of the Year by Technology Association of Georgia (TAG). Cardinal has experienced exponential growth under Membrillo’s leadership, being consecutively named on the Inc. 5000 list of fastest growing privately-held US companies in 2014 - 2016. Membrillo’s innovative approach to digital marketing has transformed the industry and delivered remarkable results to clients of all sizes and markets. He has been featured in leading national publications including The Business Journals, Entrepreneur, Search Engine Journal, and The Wall Street Journal. He has also served as an expert speaker for conferences including the American Marketing Association, SouthWired, and Vistage Executive Leaders, where he spoke on his unique approach to Millennial Management to over 400 CEOs.

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