National Medical Enterprises

Role: New hire to Piche

Task: Give Piche advice

Answer: Build partnerships with physicians and include them in the HMO and PPO plans so they aren’t seen as a negative if they are included?

Centered Argument:

        Value proposition-

Supporting Case Observations:

• “Traditionally, patient flow in hospitals has been physician directed. Third party payers, industry HMOs and PPOs, will increasing control this vital element” →  since these health care arrangements were all still relatively new developments for NME, the Hospital Group management had little experience to fall back on as it tried to influence the evolution of these new activities (p. 14, ¶ 2)1.
• The marketing principle focus group is directed at the physicians. There are the primary customers because they are the ones who refer most patients to the hospital. So it is important to make NME increasingly attractive to the physician (p. 13, ¶ 4)1.
• NME’s entry into HMO and PPO arrangements were viewed with disfavor by many physicians who saw them as potential threats to their practices (p. 14, ¶ 2)1.
• While these parties welcomed the additional patients HMOs and PPOs might provide; they were less favorable disposed to the reduced-fee features of these programs. The resulting trade-off between additional patients versus any loss of revenue associated with full-paying patients transferring to the contract service was difficult to predict (p. 16, ¶ 1)1.
• An HMO or PPO will probably have to include competing hospitals in the plan in order to create a sufficiently large provider network to secure a viable membership base (p. 16, ¶ 4)1
• The HMO, PPO, and free-standing clinic programs all held great potential for affecting Hospital Group results (p. 14, ¶ 2)1
• Av-Med, Instant Care Centers of America, and Stein Women’s Center were each owned 20% by the founding physician. Each of these entrepreneurs had joined NME with the expectation of achieving rapid profitable growth, and held aggressive priorities for their particular units → Getting these key people to back a strategy aimed primarily in support of NME hospitals would be difficult (p. 15, ¶ 3-4)1, (p. 16, ¶ 5)1.
• Whether or not NME would approve the business development expenditures that each of the entrepreneurial physician wanted and expected could be a problem (p. 16, ¶ 5)1.
• These clinics potentially could enlarge the patient base available to feed the acute-care hospitals, but they also promised to compete with these hospitals for outpatient and emergency care (p. 16, ¶ 2)1.
• “Given it’s size and ambitions, the company is beginning to encounter capital constraints. The problem of who gets money is beginning to surface. Since NME has not had any problem raising funds, we don’t really have a system for allocating capital, nor do we have any experience along these lines. In the old days, if you wanted something, you got it. Now you have to justify it” (p. 18, ¶ 1)1.
•  “We are moving into a lot of businesses we know little about. Obviously, the company needs to keep its options open. Sometimes we’re afraid that we might be missing something. But there’s an important distinction between doing a million things and doing them well” (p. 18, ¶ 6)1.
• “We are in a simple business. Basically, we are in the business of delivering patient care. Acute, long-term psychiatric and home care are all part of this business. People will want an integrated package of total health care from birth to death” (p. 19, ¶ 2)1.
• “Very little really changes in our business. Ninety percent of what you do this year, you will do next year. People focus too much on the 10% change” (p. 19, ¶ 3)1
• Competition for investment funds was increasing in the health care field in general as well as among NME’s business groups → Instead of moving into businesses that they know little about they should use their funds to grow on the ones they have more experience in and get the most revenue from like acute patient care (p. 9, ¶ 4)1.
• “The centerpiece of our company is the acute care hospital operation. But despite its past accomplishments, or maybe because of them, this division had begun to lose some of its zip” (p. 9, ¶ 5)1.

Weakness of Position:

• Lawsuits and fraud.2
• “The reason that NME is involved in so many aspects of health care is that there is uncertainty as to where the industry is going.” → By them getting involved in many different business operations it limits their ability to do each of them well.(p. 18, ¶ 5)1.