Understanding Business Strategy to Facilitate Health Care Success

Published September 26, 2022

Courses mentioned in this post:Health Care Strategy

Series mentioned in this post: Health Care Leadership

When you think of health care organizations, do the terms sustainable advantage or strategic differentiation come to mind? 

In an industry with increasing competition and innovation, leaders of U.S. healthcare organizations, or those delivering care, need to understand how the success of their business depends on these key principles. This includes understanding the industry you’re in and market dynamics, the forces that make it easy or difficult to capture value, and how you can successfully compete against rivals. 

You must go beyond simply creating value to develop the critical thinking and analytical skills to evaluate the needs of your business, and its constituents, in order to optimize business decisions and inform new or innovative health care ventures.

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Taught by Harvard Business School Professor Leemore Dafny, our Health Care Strategy course teaches learners to align business strategy with the challenges and structures of the health care industry in the United States.

This 5-week course explores four main concepts of business strategy that can enable leaders to deal with the unique challenges and structures of health care organizations. These concepts include:

Value Creation and Value Capture

Value is only created if purchasers are willing and able to pay an amount that exceeds the cost of producing a product or service. Additionally, value creation does not automatically result in value capture.

In Health Care Strategy, learners will exercise how to apply a framework that illustrates value creation and value capture. With case studies from Statins and Livongo, you’ll learn how to determine how much value a seller can capture by considering the competitive environment and the value created for different stakeholders.

Industry Analysis

Within the Industry Analysis module of Health Care Strategy, learners will perform a “five forces” analysis and assess the strength of different forces in different industries through a case study with Advanced Fertility Care. Identifying the forces that drive industry profits is a critical first step to defining a business strategy. A successful strategy combats the forces that diminish industry profits.

Developing a strategy requires making tradeoffs. Through a case study with Oak Street Health, learners will evaluate the tradeoffs made by an entrant in elder care, and how this informs decisions about their growth. Learners will better understand how positioning can enable you to succeed in an “unattractive” industry.

Value capture is more challenging when the value of a product or service is divided among different stakeholders, making this an extra challenge within the health care sector.
 

Competition

Competition among health care providers increases quality, reduces prices, and can increase a provider’s reach. Learners will evaluate the results of a “natural experiment” involving the British National Health Service (NHS) and assess opportunities provided by destination medicine for both providers and employers through a case study with Geisinger Health.

Learners will also analyze business and regulatory moves that reduce and enhance competition in different markets through a case study with the Surgical Institute of Reading.

The Boundaries of the Firm

The last module of Health Care Strategy dissects an organization’s decision to vertically integrate by observing consolidation in Eastern Massachusetts. The decision to vertically integrate depends on several factors, such as the necessity for “relationship specific” investments by upstream and downstream parties, and the degree of difficulty in aligning incentives with arms-length relationships.

Vertically integrated firms may find it more profitable to price their products less than they would if they were not integrated, even if there is no change in production cost from integrating. Learners will assess the effects of vertical integration on pricing under different assumptions.

Lastly, learners will examine the effects of provider-insurer integration on competition, prices, and access for patients through a case study with Civica Rx. Integration can deflect or enhance competition, depending on the industry structure and potential efficiencies created by the merger.

Register for an upcoming Health Care Strategy cohort today to learn how to use business strategy to facilitate health care success.