use data to determine the patients to seek in your market
TRANSCRIPT
Use Data to Determine
the Patients to Seek in Your Market
Originally presented February 2010
AGENDA
Background Why Blue Ocean Strategy & What Is It? Success Stories How It Applies To Home Health How Bloody is My Ocean How Blue is My Ocean Underserved Demographic Chronic Patients Alternative Settings Other Blue Ocean Opportunities Conclusions
SPEAKER BACKGROUND
Over 20 years in home care
Over 35 years of marketing & planning experience
MBA from Mass. Inst. Of Technology Sloan School
President, Healthcare Market Resources—a market intelligence company providing customized local market research for home health agencies & hospices
INDUSTRIAL HISTORY Did these industries exist in a meaningful way?
150 years: automobiles, music recording, petrochemicals, aviation, pharmaceuticals & management consulting
30 years: mutual funds, cell funds, biotechnology, discount retailing, express package delivery, coffee bars, & home videos
THIS IS WHERE FORTUNES ARE MADE
WHAT IS BLUE OCEAN STRATEGY? Created by Professors W. Chan Kim & Renee Mauborgne,
who are both professors at the INSEAD at Foutainbleau, France—one of Europe’s top business schools. They published their findings in a book-Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant.
BOS is the result of a decade-long study of 150 strategic moves spanning more than 30 industries over 100 years.
The aim of BOS is NOT to out-perform the competition in your market, but to create new market space or Blue Ocean, thereby making competition irrelevant.
BOS is a process with frameworks & tools, covering both strategy formulation and execution.
Red Ocean Strategy Blue Ocean Strategy
Compete in Existing Market
Space
Create Uncontested Market
Space
Beat the competition Make the competition irrelevant
Exploit existing demand Create & capture new market
demand
Make the value-cost trade-off Break the value-cost trade-off
Align the whole system of
company’s activities with its
strategic choice of differentiation
or low cost
Align the whole system of
company’s activities in pursuit of
differentiation & low cost
RED VS. BLUE OCEAN
Cirque du Soliel At the time of Cirque du Soliel’s debut, circuses
appealed to children; business was in long-term decline; lots of other formats, competing for children’s entertainment $$,- sporting events, concerts, television & video games
Circuses featured three types of entertainment: High risk acrobatics and “stunts” Clowns, primarily engaged in slapstick humor Animal acts
3 ring format had different acts, competing for the audience’s attention
Cirque du Soliel Eliminated animal acts-lower costs in
trainers/handlers, support personnel, transport, maintenance & liability insurance & less issues with animal rights groups
Moved to single ring format requiring fewer acts
Clowns’ humor became more sophisticated, less slapstick
Experience became more theatrical with a story line/theme which ran through the performance
Cirque du Soliel Event now appealed to adults, which meant that ticket
prices could be higher Initially kept tent as performance venue, because of its
traditional circus imagery, but added creature comfort. It did not need to rent out high cost large indoor event sites, such as convention centers or sports arenas.
Did not promote “name” acts, which traditional circuses had done, which rose costs, but not attendance.
Positioned the entertainment experience between the fun & thrill of the circus and the intellectual sophistication & artistic richness of the theater & ballet
Cirque du Soliel stripped the product down to only those elements which enabled it to deliver the entertainment experience it wanted.
CURVES Fitness market had two alternatives—home exercise
programs & health clubs Home Exercise
Limited accountability & motivated; many distractions Lonely, but private Little or no equipment; instruction limited to “star” on video
Health Clubs Significant physical plant – full range of exercise equipment, locker
rooms & showers, juice bar, & possibly swimming pool & racquet sports
Co-ed; “lots of beautiful people” spent 1-2 hours per visit Classes & instructors Monthly fees in the $50-$100; upscale urban market primarily Initial investment - $500K-$1MM for 35K-100K sq ft
CURVES Found niche in-between both markets & tapped into
women having difficulty keeping in shape through sound fitness
These female non-athletes do not “eyed” by males while exercising in their leotards
Does not want to fiddle with equipment, because someone physically larger and stronger preceded her on it. Less likely to lift weights
Increasingly does not have 1-2 hrs. for a fitness routine
Placed equipment towards the middle of the space, not lined up in rows @ health clubs
CURVES Its Quickfit training system uses hydraulic
exercise, which need no adjustment, are safe, simple to use & nonthreatening. Specifically designed for women, they reduce impact stress, while building muscle & strength
Environment is social, supportive & non-judgmental
Circuit of machines takes 30 minutes Prices per month fall to around $30. The business focuses on those elements of the
service that their customers want.
CURVES Start-up investment for a site is $25-$30k,
(excluding $20K franchise fee). Variable costs are significantly lower
Fewer personnel Less maintenance Reduced rent, since requires only 1500 sq.ft. in
nonprime suburban locations
Franchises become profitable in a few months, while membership reaches 100.
Franchises are now selling in the $100K-$150K range
WHY BLUE OCEAN IN HOME CARE? Home health services are perceived as a
COMMODITY in the eyes of the buyers
In some markets, the phrase “VNA” is used to refer to any home health agency
Discharge planners have very little invested in the home health referral once they leave their facility
Are the benefits of switching worth the risk?
HOW BLOODY IS MY OCEAN? Competitive Market Metric
Agencies/100K Medicare Patients by State
MARKET COMPETITIVENESS CALCULATION EXAMPLE
There are 7 meaningful home health agencies in a 4 county area with 22,000 Medicare patients
Competitiveness factor = 7/2.2 or 3.2
There is a moderate level of competition in this market
RULE OF THREE Professors Sheth & Sisodia studied over the evolution of 200
industries and saw the development of 2 types of firms Full Line Generalists
Product/Market Specialists Hospital based or local VNA – market specialist
Ortho agency – product specialist
Over time, 3 full line generalists grow to 70%-90& of the share
Increased share results in better performance for the full line generalists, but weaker results for the specialists
UNDERLYING ASSUMPTION: The more concentrated a market is, the more difficult it is to gain market share
HOW BLOODY IS MY OCEAN? Market Concentration Metric based on “Rule of
Three”
It infers prospects for future success.
Once referral source have “locked in” a preference, it requires a greater degree of differentiation to get their attention and gain trial
Referrals to captive agencies by parent organization employees are not a “free market” situation.
MARKET CONCENTRATION CALCULATION Segment market between facility-based/affiliated
agencies & freestanding agencies Very difficult to take market share away from a facility-
related agency(unless the rules of the game change) Focus on freestanding market segment Combine market share of three largest freestanding
providers If combined market share is above 65-70%, this is a
concentrated market This means that referral sources have “locked in” their
agencies and it will be very difficult to get trial, unless the agency can create a very meaningful difference.
MARKET CONCENTRATION CALCULATION EXAMPLE Agency Episodes Overall Mkt
Share Freestanding Market
Freestanding Mkt Share
Medical Ctr 650 32.5%
Community Hospital
350 17.5%
Local VNA 275 13.75% 275 27.5%
Nat’l Chain 225 11.25% 225 22.5%
Independent 150 7.5% 125 15.0%
Regional Chain 225 11.25% 225 22.5%
Mom & Pop 125 6.25% 100 10.0%
Overall Market – Unconcentrated(63.8%); Freestanding – Concentrated(72.5%)
HOW BLUE IS MY OCEAN
Relative level of home health utilization can measure how much growth opportunity there is in a market
Home health utilization=Medicare Patients Served
Medicare FFS Eligible
HOW BLUE IS MY OCEAN
** Unweighted ***Weighted Utilization=Pts Served/Medicare FFS Eligible
IF IT HAS NEVER BEEN DONE IN YOUR SERVICE AREA,
THEN IT IS A
NEW MARKET SPACE
BLACK PENETRATION
Black Penetration = % Black Discharges/% Black Population
ETHNIC/RACIAL FOCUS Compatible ethnic/racial ownership
Racial/ethnic staff-both clinicians & office staff
Language fluency
Familiarity with diet & customs
Relationship with ethnic/racial MD’s
Link to visiting MD/NP program
Medical director
Informal caregiver support –volunteers/church groups
CHRONIC PATIENTS
Re-cert Rate = (Episodes/Discharges)-1
CHRONIC PATIENTS Focus on diagnoses with high re-cert rates
Diabetes
Wound care
Stroke
Mental Health & B12(High LUPA rate)
Seek out more community-based referrals
Hospital-based agencies have 20%% lower re-cert rate than freestanding agencies
Approach physician offices with disease management programs
Offer solutions, such as Anodyne Therapy
LOW VISION PROGRAMS Program to provide visual training to low-vision patients
along suggestions of equipment & aids to make their home environment more livable.
Patient is able to stay independent longer, enjoy better quality of life and avoid injury
Identified group of elderly patients with a need that were previously untapped-”blue ocean of ophthalmology” 12-15 million patients
1. Macular Degeneration 4. Diabetes
2. Retinitis Pigmentosa 5. Glaucoma
3. Neurologic Disorders
Serve non-homebound patients through Part B billing
MEDICARE HOSPITAL DISCHARGES
Top 5 = RI, VT, MA, DE & NH Bottom 5 = PR, HI, WY, SD & MT
HOSPITAL REFERRAL OPPORTUNITY
Top Performers to Natl Avg Comparison
MEDICARE HOSPITAL DISCHARGE BY SITE OPPORTUNITY
Supervised = Home Care + Facility Top Performers = Median of 90th Percentile
REHAB W/O WALLS Program provides clinical resources at home indicative of
inpatient rehab facility
Added team members could include neuropsychologist, dietitian & recreational therapist
Medical leadership could be a physiatrist(rehab specialist)
Targeted at managed care organizations, which usually means younger patients; could be alternative under post-acute bundling
National chain has sought out CARF accreditation to gain credibility
NURSING HOME ALTERNATIVE What does a nursing home offer?
Round-the-clock nursing care
5-6 days per week of therapy
More medical direction
Rehab reimbursement in nursing homes changed as of 1/1/10; therapists cannot bill for multi-person sessions simultaneously
Why are traditional home care therapy plans for 3X per week?
Data collection phase of post-acute demonstration project completed in 2011.
SOLUTION: Front load therapy visit schedule to mirror SNF service
levels
HOSPITAL RE-ADMISSIONS Hospitals, under Healthcare Reform Act, would
penalized for higher than permitted levels of re-admissions for their Medicare patients, starting 2013
Blue Ocean opportunities include
Lower level of discharges going home unsupervised—most re-admission vulnerable population
Sell telemonitoring program to hospitals for non-homebound patients
OBSERVATIONS Differentiating(red ocean) requires a “tweaking” of
operations; blue ocean may require a whole new way of doing business-more risk for the agency.
Having a referral source give you a new patient is less painful for them than giving you someone else’s patient.
It is easier to get a referral source’s attention talking about something new than trying to differentiate yourself from the pack.
RESOURCES Check out the following URL’s
www.blueoceanstrategy.com
www.filestube.com/aa312b511a928a9903ea/go.html
www.thenext.ca/files/read-blue-ocean-strategy.pdf
ACTION PLAN Gain management agreement to assess Blue Ocean
Strategy approach
Determine if Blue Ocean Strategy opportunity exists
Examine individual Blue Ocean Strategy situations—Plagiarize
Select approach and modify agency operations to deliver service
Identify “buyers” of new service & solicit trial
CONCLUSIONS Blue Ocean Strategy is an alternative
approach to growing your agency’s revenue.
It requires a complete commitment, upfront investment and willingness to take a risk.
It should only be employed after a thorough analysis of your market and a careful development of a well-thought out plan.
CONTACT INFORMATION Rich Chesney
President, Healthcare Market Resources
215.657.7373
215.657.0395(f)
www.healthmr.com