Navigating the Complexities: Unraveling the Healthcare Dilemma and Financial Challenges Faced by Hospitals,
Part 1- Healthcare Dilemma
Just the news of Hospitalization, even today, ignites a sense of anxiety and grave concern in the schema of social structure we are part of. Which is the reason why, we avoid visiting doctors or a nearby hospital set up for any medical problems we have. From making life style changes to consuming home made medicines, we practice everything at our expense to keep ourselves away from getting into this “healthcare trap” of having to consume their expensive services.
Despite this conscious effort to keep a safe distance from hospitals and doctors, we have to accept – almost inevitably - that health care is the most basic need for all of us. It is just not sensible to ignore a prolonged cold/cough you have, the chronic knee pain your mother has or a chronic Gastro-intestinal problem your Dad has, which can by the way, potentially be an unexplored heart condition.
Concerns around hospitalization among people in general is mostly driven by
1. Affordability –
Hospital Industry, by nature of it is a service based industry, meaning, it is obvious that it has high fixed costs to provide the infrastructure required for comprehensive health care, further, necessity to cater for plethora of different patient cases extracts even more cost. To counter for this effect, pricing strategies in hospital industry – like in any other service industry - are aligned towards achieving high contribution margins.
Unfortunately however, unlike other service based industry, which mostly cater to sophisticated needs, hospitals cater to the most basic need of people i.e. health care.
It is only frustrating for us that we have to helplessly pay super high prices towards our basic requirement.
2. Ignorance towards the nature of service
From the point of admission to their final bill settlement post discharge, the patient and his/her attendant’s time in the hospital is stressful. Apart from having to deal with the ill patient, which in itself is nerve racking, the attendants have to work on formalities of patient admission, deposit payments, ensure to talk to the primary consultant, even arrange for the medicine requirements of the treatment in some cases.
To add to that, uncertainty associated with patient journey, from requirement of additional investigations than planned to having to get the surgery done, adds to the cost of treatment and consequently further burden on patient attendant. Being financially & psychologically prepared for this experience is a huge mental task.
Hospital going experience is dreadful, even the thought of it does make the patients stay away from hospitals, even when they very much need it.
Part 2 – Story of loss making hospitals
When such is the situation, it is obviously unreasonable to assume, hospitals/ doctors, do not care for these pain points. From a pure business perspective at least, hospitals are trying hard to reduce stress among patients and their attendants while also working on Optimizing operations for cost reduction.
Yet, the perception stays among general population that big hospitals are blood sucking machines, and sadly/surprisingly enough most of these hospitals are in a financial distress, hospitals are making losses at large.
It is this classic loose-loose scenario that is driving our healthcare fate.
Decoding the cross roads
We have to accept the fact that, no matter what is the purpose of a health care organisation, it is ultimately a business, it has its challenges in managing its operations, finances and their marketing strategies.
1. Managing operations for patient experience.
From not receiving a proper medication on time to AC not working in their wards, patient experience can get spoiled, if there is mismanagement in any of these aspects. A distressed patient is bad for hospital branding team, yet due to its extremely complicated operations network, hospitals do fail to deliver higher proportion of happily discharged patients.
When most of the strong focus has to be on getting the patient treated with the best doctor in place, taking up the operational tasks such as : planning for the critical medicine inventory, training and aligning the entire team of nurses to extract best and timely care, maintenance of high end complicated devices in hospital to deliver timely reports is a huge burden for hospital management too.
This consequently also leads to higher operational costs for the hospital and patients have to end up paying higher prices for their care than they need to.
2. Marketing strategies.
Unlike usual businesses, hospital marketing strategies by design are not straight forward, they do have so many beds to fill to ensure their asset utilization. Hospitals - for their business- have to strategize ways of identifying ill patients and then attract them against their competition, some of the commonly used strategies are:
1. Creating a tie-up with big corporate companies with customized plan for their employees
2. Empanelment with Health Insurance companies to attract their clients
3. Associating themselves with reputed doctors to get patient referrals.
The inevitable requirement of these agencies to reach the patients takes a serious hit on planned contribution margins for the hospitals even at their so called super high prices.
3. Managing the finances.
It is not a rocket science to correlate complicated operations & marketing chains to the financial planning burden over hospital management.
Hospitals on top of it face the issue of blocked capital due to problems in cash collection such as
a. Delay in payments from their TPAs for the cashless treatment offered
b. Cash patients, who default on their payments due to un-affordability
Blocked capital, leakages due to operational efficiencies, having to ensure the timely cash outflow towards vendor and doctor payments hits hospital management with huge interest costs which leads further reduction in their contribution margin.
Growth of hospital business gets stuck, irrespective of how many patients the yare working with and what their purpose is.
Possibility of health care utopia
Hospitals do need a comprehensive business design & a sustainable model with a patient-centric purpose at heart. A serious intervention towards establishing and standardizing the processes for hospital administration is a critical need of the hour. Because ultimately, it is our own lives that are at stakes with a very high price to pay for it.
If the intervention can create Transparency between hospitals and its patients, it can perhaps change into a win-win situation or perhaps even a health care utopia.
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