The Business of Healthcare

Today, Healthcare in the US is just under 18% of GDP or close to $3 Trillion in annual expenditures and in the next five years is predicted to go to $3.5 trillion and be at 20% of GDP.
This makes it by far the biggest sector of the overall economy – not to mention being critical (at some point) to every man, woman and child. But despite its size, the healthcare sector is the US is under huge pressure to perform at a higher level and it is on the business side of healthcare that this needs to be achieved.

Profits Medical Business eBookUnfortunately, the sheer monolithic scale of the healthcare sector tends to make it difficult to influence or control. After all, there are many sub-sectors or discrete industries under the broad banner of healthcare that are huge by themselves. This includes community based primary care, the drug industry, senior care, the so-called med-tech sector, and physicians (both as generalists and specialists) to name just a few. Even within one of these sub-sectors , there are often very large groups of healthcare organizations that would be a whole industry elsewhere. For example, there are close to 90,000 dental practices across the US and around 12,000 of these in California alone (with each office employing close to 3 dentists). This makes “dental practices” a big employer when viewed as a collective whole.

So how do we get our head around the challenge of managing the business of healthcare or help healthcare leaders across each individual sector to address business needs concurrently with addressing their patient’s medical needs? This is no easy task, of course, and requires considerable “juggling” of priorities (something hospital leaders across the US have struggled with for several years now as they have faced enormous financial constraints).

However, unless a given healthcare organization is a viable business it can have no long-term future. As such, an investment in setting up sound business practices at every level is a necessary foundation upon which to build sound care-based services. What this means in practical terms is that every healthcare organization needs to focus on four key areas:

A) Know exactly who its customers/patients are now and in the future and what’s the most optimal or effective way to meet their needs. B) Appreciate the key operational processes by which products or services are rendered and design them to. be as efficient and effective as they could be. C) Review what core people skills are needed, in what quantity and where in each process area and then ensure that individuals know what is expected of them D) Ensure that revenues are designed and set up to exceed costs on a continual basis (with enough contingency to cover any short term gaps that might occur).

Every one of the above four areas needs quality time to be devoted to the review process at least every month (and sometimes more often). Additional time is then also needed to make changes/adjustments as necessary. Some of these changes can be handled within the organization and its existing resources. However, it is also sometimes necessary to involve external business support and help. This does not need to be a long-term and even costly intervention as an initial audit is likely to expose many more opportunities to efficiency and savings.

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Dr Jon Warner

Dr. Jon Warner
CEO-RX4 Group-Taking Care of the Business of Healthcare

Jon is the CEO of RX4 Group based in Los Angeles, California. He can be reached at

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