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The Hospital Corporation of America, (HCA), founded in 1968, began in Nashville Tennessee as one of the first small hospital chains in the U.S. After enjoying success in the Nashville market, the company and its investors began to purchase existing hospitals throughout the U.S. As HCA grew into a well branded healthcare organization, the senior management and investors saw an opportunity to purchase the nearly defunct Columbia hospital system in February 1994. As a result of this buyout, HCA\Columbia became the largest privatized hospital system in America.
For the third time since its inception, HCA became a privately owned corporation on November 17, 2006. The total value of the leveraged buyout was in excess of $33 billion dollars. At that time, the transaction marked the largest leverage buyout in history. Currently; HCA owns and operates over 268 hospitals and outpatient center in over 20 states and 6 facilities in London, England. HCA employs over 194,000 people and has assets totaling more than $26 billion dollars with annual revenues exceeding $28 billion dollars.
HCA's strategic foundation is based on the following tenants (HCA, 2011).
Putting patients first: Improve care, support caregivers and deliver high quality healthcare.
Investing in the local communities: Continue to renovate and modernize facilities.
Focusing on leading hospitals: Strengthen existing, core facilities in provider areas.
Improve local operations via supply chain and shared business resources: Economic scaling
Building strong physician relationships: Values a strong physician relationship to enhance care.
Managing a multi-billion dollar corporation with international holdings is a difficult task for any company, but add to that, the stringent regulatory laws governing a healthcare corporation under completely different patient access and treatment systems, and the difficulty is increased substantially.
Learning from the previous failures by other healthcare organizations that failed to thrive in foreign markets, HCA has proven that success and profitability can be accomplished with the right leadership, branding and niche marketing. The processes and management of the HCA way of conducting business on a global scale is a story of both success and failure. The following information is a discussion of the rise and ultimate success of this company.
As a first step in gaining some insight into HCA's philosophy, a Porter analysis can be performed. The first threat facing an existing company is the threat of new entrants that create more competition. Some states have laws requiring a healthcare company to prove that a need exists in a given community. This certificate of need must be met before a new hospital is built. I HCA has flourished throughout the U.S. and in England by simply purchasing existing hospitals and clinics, thus forgoing the certificate of need requirement. Add to this strategy, the capital to build new facilities if needed and to renovate and modernize where needed, and HCA projects great strength in the marketplace (McCosh, 2003).
The power of suppliers, as it pertains to HCA has multiple meanings. One of the area's most affected in healthcare, is the shortage of qualified/licensed clinical personnel. The result is an increase in competition between healthcare companies for the best qualified staff. The competition has resulted in increased wages and sign-on bonuses to entice these sought after staff. Secondly, the rising cost of pharmaceuticals and other needed medical supplies has led to the rise of health purchasing groups. Thirdly; HCA, along with other healthcare providers use their collaborative buying power to reduce the cost of pharmaceutical and operational supplies. This purchasing power helps to offset the cost of non-Medicare payments for pharmaceuticals. Finally; HCA has started its own staffing agency; (All About Staffing) to help provide a consistent influx of new potential qualified applicants (McCosh, 2003).
The third tenant of Porters model is the power of buyers. As a leader in hospital services throughout the U.S., HCA has successfully negotiated favorable service payments, with major insurance companies. Another avenue where HCA has shown its ability to manage customer service is its expansion of regional billing centers. By the decentralization of this function, HCA has streamlined communications with the insurance companies, by providing specific resources assigned to that particular provider. As most Americans have healthcare insurance, the inclination is to have more concern about the quality of the care more than the cost incurred. A significant part of HCA's niche market delivery and overseas strategy involves leveraging this quality over price point of view (McCosh, 2003).
The availability of substitute products and services has not historically been a large issue for hospitals in the U.S., as they typically offer similar services and levels of care. However; in recent years, niche hospitals and smaller surgery and outpatient centers are perceived as more convenient, having higher quality standards and perhaps are more innovative in their delivery. This example of consumer confidence and willingness to spend more for the perceived higher level of care and value, is in essence, what has helped drive HCA's success overseas (McCosh, 2003).
Finally; the last part of the analysis is rivalry. As stated previously; hospitals in the U.S. are perceived as providing similar levels of care, however; HCA does have a measurable advantage over not-for-profit facilities by having the option of selling low performing facilities. As a large corporation, HCA also has the advantage of marketing its facilities as consistently purchasing new technologies and being innovators. To its possible detriment; the perception of a large corporation providing healthcare can also be perceived as less caring and more profit driven.
It has been implied by former CEO Frisk that the ideal number of hospitals is around 120, and a number much over that could be too big in relation to cost effectiveness (McCosh, 2003).
There are many facets to managing the human capital that represents the face of HCA. As part of the business model, HCA maintains current social engagement through web content including Face book, Twitter, and offering free Wi-Fi access in their hospitals. Aside from these elements, HCA follows demographic trends by focusing its efforts in the increasing population of the 'sun-belt' area of the U.S (Commins, 2011).
As discussed previously; the perception of a for-profit healthcare organization may be seen as an uncaring, profit-above-patient-care driven company. Due to a guilty finding by the government in a Medicare/Medicaid fraud case that involved Florida Governor and former HCA CEO, Rick Scott, HCA/Columbia and their reputation as an ethical and caring provider was tarnished for several years. Although the resulting government sanctions and penalties imposed against HCA have been lifted, the company continues to emphasize ethical behavior from its staff by mandating annual classes on ethical behaviors and company expectations (HCA, 2011).
As is expected with any for-profit company, cost management is a stated part of the HCA strategy and business plan. As a result of this philosophy, HCA has instituted several, shared resource departments within the company. Some examples of this modular/shared services program include supply chain management, patient registration, medical records and IT&S departments. Through this model, HCA has been able to leverage resources, improve technology and reduce the largest single operational cost, staffing.
The global strategy of HCA is centered on its commitment to provide high-quality, cost effective health care. To this end, they incorporate the following principles.
A major part of HCA's ongoing strategy is the continued growth in densely populated and growing urban markets. As a part of this tenant, HCA continuously builds upon strategic alliances with physicians as well as expanding its community footprint by community involvement and volunteerism.
Achievement of quality patient outcomes by incorporating metrics such as customer satisfaction surveys, infection control initiatives and evidence based medicine programs including innovative imaging technologies (HCA, 2011).
Recruitment and retention of physicians is a high priority strategy for HCA as the need for quality outcomes is a result of quality physician care and clinical patient management.
The sheer size of HCA and the leverage it can employ provides a potential of revenue enhancement. Whether the leverage applied is to streamline supplies or to expand shared service capability, HCA has opened the possibility of providing third party management for other healthcare organizations.
HCA's ability to incorporate other facilities purchased into a cohesive group within the HCA domain. The experience and capital potential is yet another example of their ability to effectively consolidate and thereby increasing market share and presence.
There are other challenges associated with running a global company can be addressed by strategic alliances and affiliations. Such shared resources have been utilized to provide programs such as patient safety, ethics and compliance, national supply contracts and internal audit services.
In the last twenty years, there has been a boom of outpatient clinics and imaging centers throughout the U.S. As a result of this influx in competition, healthcare companies such as HCA have refocused on engaging the market on the same level. By increasing the focus on outpatient facilities, HCA has continued to increase its market share and branding by providing a more convenient source of care (HCA, 2010).
Ultimately; hospitals compete by providing care to communities based upon negotiated contracts with insurance providers. As competition to win those contracts increases, so does the buying power of the providers. Contracts with some healthcare providers can include restrictions or even the elimination of seeking care outside of the network. HCA's success will depend upon its ability to maintain and gain additional managed care contracts.
Although HCA has enjoyed the status of the largest for profit healthcare system in the U.S., they are continuing to reach out to foreign markets in new and innovating ways. HCA operates hospitals and clinics in London, as well as staffing firms and management services throughout the world.
HCA has enjoyed continuous success in the U.S. market, and has leveraged their branding to reach across the Atlantic and emerged as a powerful new entrant into the London healthcare market. As socialized medicine is prevalent in Europe, so is the intrinsic lack of capital to continuously innovate and upgrade equipment. Historically, HCA has flourished and actively marketed in large, densely populated areas. Although HCA has not officially became an entrant in China, co-founder Thomas Frist and Nashville based China Healthcare Corporation is designing a 500 bed hospital in Cixi, China. Although the healthcare in China is socialized and all patients are eligible for care, the profit margins remain 20-40%, as compared to 2-4% in the U.S. For those healthcare companies willing to take the risk, the opportunity is great (Wortham, 2010).
HCA's overseas division, HCA's International has diversified itself within Europe and Asia. Founded in 1973, to manage the King Faisal Specialist Hospital & Research Center, HCA has built its reputation on the delivery of high quality private healthcare to those who want a higher level of service than that of socialized medicine. Not only do they cater to specific companies in providing premium healthcare services in London, but they also help supply qualified staff to the NHS system (Gold, 2011). As part of HCA's nurse staffing recruitment, there is a contractual agreement that requires a 30-month contract with the hiring hospital. The result of this commitment has elevated HCA's international staffing reputation for reliability in an ever decreasing pool of qualified clinical personnel. Aside from the hospital ownership and clinical staffing, HCA also manages over 40 international facilities on 5-continents. As of today, HCA helps to provide a conduit for foreign nurses and other clinical personnel to work in the U.S. (Raiford, 2002).
As with any international company, an evaluation of potential new market risk needs to be conducted. When trying to enter a foreign market as a healthcare provider, there are unique risks. Some of these risks may include governmental control of reimbursement for services provided, foreign currency fluctuations in relationship to loans incurred from that market, the change of regulatory rules by the government, liability and malpractice risks and the destruction of both hazardous and medical waste.
When moving into the London market, HCA knew that their presence would have to come from the purchase of an existing facility. Not only is the cost of real-estate in London prohibitive, but finding the right space in the right community may have made the difference on when they could enter the market. Almost every aspect of hospital management in London differs from the U.S. Operating policies and procedures were carefully crafted to accommodate the national healthcare regulations in London. Senior leadership within the group of facilities as well as legal counsel was obtained from local, London resources. The requirements for licensure, accreditation, environmental laws and compliance, are vastly different and required expertise in operations to become a successful entrant.
HCA began international operations over twenty years ago, when they saw a niche market in providing high quality private healthcare in London. The new hospital gave Londoner's the choice of the free government sponsored NHS healthcare or the American healthcare based HCA hospital. As HCA was able to inject capital and technological advancements in their London facility, the NHS system also benefited by reducing the number of patients going into their facilities. HCA's surprising benefit was the almost non-existence of malpractice lawsuits, and the high administrative costs of meeting government and insurance regulation (Marston, 1996).
Legal considerations including debt collection practices and the potential for government non-payment for services while still requiring a continuation of those services are merely two of the possible legal pitfalls awaiting healthcare in foreign markets. To successfully run a multi-billion dollar company like HCA requires very strong senior leadership, who often take a singular approach to business practices. Careful consideration must be given to insure cultural differences and sensitivities are engaged. Not only are local alliances favorable, but locally employed personnel and supplies must also be a part of the social matrix. One example of a failed U.S. only approach is Enron attempting to enter the Indian market. After several public relation firms were hired for not accepting Enron's 'American' approach to doing business, and subsequently failed (Marston, 1996).
The perception of U.S. healthcare throughout the world may be known as the most expensive, however; it is also known as the best. The idea is to market the best healthcare in the world to a modified market. The successful companies will remain flexible enough to realize what changes need to be made in a given market, that will fit both culture and relative affordability (Marston, 1996).
Initially the reform of healthcare in the U.S. began during the Clinton administration. Although the reforms offered at that time never came to fruition, the idea that the NHS (National Health Service) in the U.K. was to be the model for the future of U.S. healthcare, motivated HCA to explore the U.K. marketplace. HCA has successfully tapped into the London market, in part because English is the spoken and written language and its population has enough wealth to pay for a faster and often more technologically advanced healthcare delivery system (Marston, 1996).
The implementation of the Healthcare Reform Law in the U.S., over the next few years has many providers uncertain if they will be flexible enough to accommodate the new regulations. In this new healthcare environment, HCA's global experiences, may very well provide the edge needed to excel in the new marketplace.