Wednesday, March 23, 2011

Cleveland Clinic - Unable to Reinvent the Business Model?

When I read “Reinventing Your Business Model,” I thought of Cleveland Clinic. Cleveland Clinic and its multispecialty clinic model had enormous impacts on the healthcare industry. Traditionally, the provision of medical cares has been organized around medical disciplines such as pediatric, radiology, surgery and so on. Cleveland Clinic, however, identified an opportunity to “bring a job-to-be-done focus” which was not met by the existing model; realizing that the existing model is not patient friendly, the clinic saw an opportunity to improve the quality of care and patient’s satisfaction. To serve patients better, it reorganized its organizational structure around medical conditions such as heart, eye, and cancer beyond conventional medical disciplines. This model was called the multispecialty clinic model. The model includes quality measures as a part of the balanced scorecards of clinics and physicians. It also started employing its own physicians instead of contracting with independent practitioners. With this model, the clinic has not only improved quality of care but also made huge cost savings.

This innovative business model, however, is not applicable to all hospitals. The article I found on The Wall Street Journal website illustrates this point (“Replacing Cleveland Clinic’s Success Poses Major Challenges”: http://online.wsj.com/article/SB124831191487074451.html). According to the article, “the multispecialty model isn’t easy to replicate widely” due to cultural issues, especially the resistance from independent physicians. In the context of our article, even if a hospital identifies circumstances that requires business model change (unmet job from the patient’s perspective) and finds a way to increase customer value proposition (the multispecialty model), the organization is not necessarily able to reinvent its business model if it does not have enough key resources (employed physicians) and processes (know-hows) to make that change.

So my question is what we should do if an organization lacks key resources and processes to reinvent its business model? Let’s say you are a CEO of a community hospital. Your competitor is reorganizing its business model to capture unmet demands. You know the multispecialty clinic is a way to go, but you know there is a huge gap between the existing model and the new clinic model you want to make. What would you do?

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