analyze the attractiveness and viability of IPUs into the current market
WednesdayFeb 2 at 5:31pm
Good Afternoon, Professor and Class:
Porter’s Five Forces is a framework for understanding the competitive forces at work in a industry and which drive the way economic value is divided among industry actors (Harvard Business School). The five forces are as follows: Bargaining Power of Buyers; Bargaining Power of Suppliers; Threat of New Entrants; Threat of Substitute Products or Services; and Rivalry Among Existing Competitors. Over the past weeks in this course, we have analyzed data and research supporting value-based care, ACO Programs, and the overall need for change in the American Health Care System. Implementing new primary care practices will be a challenge.
The need for change in US Health Care is confirmed by the application of Porter’s Five Forces to analyze the state of the market. The problems in US health care are systemic. The majority of current approaches are patches to medicate symptoms and not cure diseases. (Stef-Praun, 2016). Interestingly enough, Michael Porter expresses the US needs to embrace the pay-for-value model to fully manage the delivery of health care that produces healthy individuals, and not just dispenses medical procedure to sick people (Stef-Praun, 2016).
In order to achieve this, Integrated Practice Units or IPUs can be implemented as an extended health care model. This model would host multiple specialists, medical and administrative staff specializing in one medical condition. (Stef-Praun, 2016). From our prior weeks’ learnings, we know that value-based care and the power of ACOs can transform the current health-care market. For instance, these models ensure that facilities, managed by providers and specialists, will deliver centralized care focused on the treatment of one categorized condition.
Porter’s five forces framework can analyze the attractiveness and viability of IPUs into the current market, as follows:
Buyer’s Bargaining Power: In the current market, patients have their choices heavily determined by their insurance companies or governmental agencies. We know from prior learnings that some Americans choose not to seek care based solely on its cost. With the implantation of value-based care, IPUs, or any relatable model, patients will be more inclined to visit their providers for specialized care. Therefore, the businesses are not losing customers (patients).
Supplier’s Bargaining Power: Private practices like hospitals and corporations run the current healthcare market, because that is where the money is at for providers. Providers wouldn’t necessarily choose a pay-cut over anything. However, as IPUs or other relatable models become implemented and more popular, providers would be more inclined to provide their services through them. This would ultimately lead to better care for patients as it is less financially motivated for the supplier.
Threats from New Entrants: Currently, with how the healthcare system is set up in the U.S., healthcare is sporadic and doesn’t provide for end-to-end care. “Private practices can simply recruit doctors with complementary specializations and become IPUs.” (Stef-Praun, 2016). Hospitals and other facilities can easily rework their admissions and care processes to provide end-to-end care; ultimately leading to new entrants in the market.
Threats from Existing Substitutes: If value-based care was implements in parts around U.S. as an introductory service, patients could still choose the current market over the new. However, as the newly implemented service becomes more popular and matures across suppliers and buyers, patients would be more inclined to jump on board.
Industry Rivalry: Rivalry would not be an issue in introducing value-based care in the market. If fact, as the market matures in value-based care, there will not be much of a rivalry at all. Because the market will now be segmented into different specialties that focus on end-to-end care, this will ultimately avoid direct competition.
All in all, implemented a value-based care model is possible in the current market and definitely should be considered, given the state of the current market. IPUs, offered by Porter, are a viable option; however, there are many other options to implement a value-based care model.
Harvard Business School. (n.d.) The Five Forces. Institute for Strategy & Competitiveness. Retrieved from: https://www.isc.hbs.edu/strategy/business-strategy/Pages/the-five-forces.aspx (Links to an external site.)
Stef-Praun, T. (2016, May 12). The future of healthcare – the Porter-on-Porter Perspective. LinkedIn. Retrieved from https://www.linkedin.com/pulse/future-healthcare-porter-on-porter-perspective-tibi-stef-praun/ (Links to an external site.)