Thursday, October 17, 2013

The Impact of Free Agency on Healthcare

If you google the term “destination provider” you’ll find links to vacations and moving companies among the top results.  In healthcare, the phrase refers to specific physicians that patients will travel to seek for care, sometimes great distances.  Often specialists or surgeons, these physicians are frequently the centerpiece around which different programs or service lines are developed and tend to have a strong influence on many of the strategic decisions an organization will make.  Over the last few years, the National Basketball Association (NBA) has evolved in a similar manner with the pursuit of superstars for to immediately impact a team’s fortune around which the remainder of the roster is built and personnel decisions are made.


In July 2010, “The Decision” was a television special in which NBA star LeBron James announced that he would play for the Miami Heat prior to which he was actively courted by no less than five other teams.  Just days before, Chris Bosh joined the team to form part of a dynamic trio including James, Bosh, and Dwayne Wade that would lead the team to the last two NBA championships. 

If you look at many of the NBA rosters most would consider successful, a common trait nearly all possess is the presence of at least one “franchise” player.  Unlike some other sports where the draft serves as the foundation of the organization, the NBA has evolved into a sport where teams are built around these “franchise” free-agent players.  This is not to diminish the importance of the NBA draft because it still produces these great players but it’s the true superstars of NBA can turn a lottery team into a potential championship contender.  While these superstar players are few and far between, there are NBA rosters full of first round picks that have failed to meet expectations yet have respectable careers as role players. 

NBA owners realize this and when these superstars become available, teams will pull out all the stops in their efforts to make an offer more appealing.  In addition to the significant contract they’ll sign, this range from having a say in a team’s overall free-agent recruitment efforts to deciding on who will be the next head coach.  Teams understand that in the NBA, the quickest route to becoming a contender is to recruit one of these superstars and to build a team around them.

Take a look at almost any health care organizations’ strategic plan and chances are that it includes an approach or tactic aimed at developing various service lines for future growth.  Moreover, due to the potential for strong positive margins with consideration given to the current needs and demographics of a region, there are probably specific surgical specialties that are targeted within those service lines.  In addition, while the push towards population health may have some leaders feeling the need to take advantage of multidisciplinary approaches, subspecialties, or technological advances regardless of the approach it will require a strong physician to be successful.

The strategy behind recruiting a high-profile surgeon or “destination provider” is based on creating a service offering compelling enough to increase the geographical range on which the hospital draws for referrals.  It provides a unique opportunity for the hospital to distinguish itself in the market and patients will travel farther for care at a center that offers advanced programs featuring specialized staff with a greater degree of expertise in treating their disease.

A recent study by the Advisory Board Company identified targeting specialists for recruitment as a best practice for increasing market share and noted that there is “no substitute for star physicians”.  In addition to financial incentives these physicians are given, recruitment efforts often include commitments to a new capital, dedicated staff, and an infrastructure that positions them to have a strong influence on the strategic direction of the organization.  Furthermore, if it’s possible to recruit these specialists from the medical staff of a competitor facility, the potential gains in market share could be significant as the volumes for the specialty procedures they perform will follow the physician.

The NBA has largely become a league of have's and have-nots.  The teams with superstars are the teams that are consistently more competitive and able to distinguish themselves from the rest of league.  In the hospital world, the ability to grow or develop a service line is no small task and it involves a number of moving parts.  However, successful efforts to recruit a superstar or “franchise” free-agent surgeon/specialist can quickly change things in a market and for a hospital.

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