HFMA VIEWS

Scott MacStravic, Ph.D.

The authors of the book on the “blue ocean strategy” [WC Kim & R. Mauborgne The Blue Ocean Strategy, Harvard Business School 2005] have made a strong case for finding or creating the blue ocean strategy rather then persisting in fighting over scraps in the “red ocean,” the only other kind and dominant type of market. The usual market is red because of the bloodshed among competitor fighting for the little opportunity that exists to gain market share, growth and profits, given the hordes of others seeking precisely the same things.

By contrast, the “blue ocean” is new, unoccupied, and reflects markets that no one has discovered or created yet. Some examples the authors cite of such oceans include the high-end coffee experience market before Starbucks. When you are the first to discover or invent a market, the opportunities can be immense, while the competition is non-existent, at least for a while.

The so-called “healthcare system” (which is in the sickness care, not the healthcare business, and is anything but an organized system) is clearly in the red ocean at present. Not only are providers fighting desperately with each other over scraps, but the scraps are getting smaller and less nourishing as payers keep trying to put the brakes on their spending. Even as the boomer generation promises dramatic increases in sickness care demand, payers promise to find ways to cut their costs of paying for that demand.

The Blue Ocean Market

There is at least one blue ocean out there that providers might consider. And since health care is usually a local market, this means hundreds or thousands of blue lakes or ponds, rather than just one national or global ocean. This opportunity with few active competitors is the market for health-productivity management (HPM). What has kept this market from exploding is the combination of payers’ focus on reducing sickness care costs, and the difficulties involved in measuring the productivity-health connection.

HPM is, simply put, the full range of preventive/proactive health initiatives that have as their object and effect the reduction in the incidence and prevalence of disease and injury. What makes it different from the many disease and risk management efforts already underway is first that HPM focuses mainly on employees, rather than on commercial or government insurance beneficiaries. And second, it focuses on the productivity and other performance impacts that protecting and improving the health of employees can produce.

There have been a host of studies on the connection between health and productivity. On average, they have concluded that the productivity/performance consequences of employee “unhealth” are between two and five times the costs of sickness care alone. In other words, employers can afford to pay somewhere between two and five times as much to proactive health providers than can insurance plans. At such levels of payment, or “gainsharing” arrangements when agreed to, providers can find it profitable to deliver HPM to far more employers in far more markets than is the case today.

Tomorrow: The blue ocean strategy measurement challenge.