Private equity is the canary in the medical disruption coalmine

7 minute read

Private equity and Uber are the sound of distant thunder in the healthcare sector. There's a storm coming


As digital disruption wreaks havoc on whole industries – media to provide one example close to my heart – the ‘people fallout’ can be very distressing.

In media swathes of jobs just aren’t needed anymore. People who worked for years in newspapers, magazines, and even TV, have found that what defined a lot of their lives and sense of self worth, is suddenly not relevant. And they aren’t happy.

A common reaction has been for some of these people to respond by digging in. Usually such stalwarts will start a blame game that runs a spectrum of ‘technology is bad thing’, through to ‘people running technology companies are bad’, all the way to ‘my boss is bad because he (or she) is making all my friends redundant and restructuring my life away while earning a fortune’.

Look no further for an example than Fairfax Media, once our country’s most austere and respected hub of journalism. In the space of just five years this organisation has been decimated.

Blame has been laid at the feet of Google, Facebook and LinkedIn, which ‘old media’ will often refer to as non-tax-paying digital imperialists which need to be regulated by government. The boss of Fairfax, once a journalist himself, is now seen by most of his staff as a pariah who sacrificed ‘his people’ by chasing investor returns and a big bonus cheque.

At The Medical Republic we run a series of conferences that focus on the technology-facilitated disruption issues facing incumbent companies. We often counsel managers and staff in these companies to stop blaming the profiteers and opportunists and start thinking about beating them. We say they are almost always a symptom, not the cause. And if you concentrate on the cause and accept that change is going to happen, then your perspective will change and so will your ability to manage change.

This is a circuitous way to introduce the idea to doctors that when you suddenly see private equity and venture-capital firms funding new groups that are starting to make you feel very uncomfortable about your future, don’t expend too much effort on blaming them.

Of course they are bloodsucking maniacs you’d prefer not to have on your back, but what you should ask yourself perhaps is , what brings these strange beings to your, until now relatively peaceful, shores? These guys only appear when there is an opportunity to make a lot of money. So what is that opportunity, and why aren’t doctors in front of it instead of the bloodsuckers? Not so much to make all that money necessarily, but perhaps to manage the change in your own best interests, those of your patients and the healthcare system overall.

Private equity is the canary in the medical disruption coalmine. Which means medicine, and likely the lives of many thousands of doctors and patients will be changing significantly in the not-too-distant future. That’s if you don’t think it’s already amid that change.

Like technology disruption in other industries before it, the changes about to beset medicine aren’t all going to be pretty. The sooner doctors start managing their own destinies in this new world order, the better.

An example of ‘the symptom not the cause’ paradigm might be the current furore over ‘after hours’ and National Home Doctor Service (NHDS). This service is our biggest and fastest-growing deputising group, owned and run by, you guessed it, private equity. NHDS has been portrayed as a fraudulent bunch of overnighters, who intend to exploit the system, destroy the businesses of hard-working doctors, provide services patients don’t need and rob the taxpayer. That they are run by private equity is the cause of much of the discontent on comment forums.

Private equity obviously saw an opportunity in NHDS. That seems to be a mix of technology facilitating a cheaper, faster and nationally run service, growing patient demand (or, God forbid, meeting an unmet demand), and a desire on the part of government to save money by reducing emergency department (ED) presentations.

Many doctors, especially younger ones, didn’t become doctors so they could do house calls at 2am. Certainly not for a measly $74.95, and for most doctors not even at the often-quoted-as-fraudulent urgent call-out rate of $129.80.

At that higher rate, even if doctors are attending to someone’s pimple, as was recently claimed on the TV show The Project, such a system is still far more efficient than these people attending our EDs (cost a minimum of $400 each time). Whether it’s fraudulent or not, it’s actually probably better for everyone from an efficiency perspective.

Any chance your surgery could compete with NHDS going forward? Or even work with it to solve some of your patient’s after-hours needs, thus creating a better relationship with your patients?

Both seem likely to be options in the future. Patient demand isn’t going away. It’s neither efficient nor fun for patients to go to ED and wait up to nine hours. So as they get used to the services of groups such as NHDS, you can only imagine they (pesky consumers that they are) are going to want more and more of the same. In some ways you might have to put aside that they don’t actually need that service. The way the new economy is working is that they want it. And someone is going to give it to them.

Ouch. Growing consumer (patient) expectations of service around new technology drivers is a bitch. Just ask the taxi industry. Is the healthcare sector so special that we can ignore consumer demand, no matter how much we think that demand might be wasteful?

Here’s a scenario that might be a positive way to look at the changes that seem to be heralded by NHDS and the private-equity canaries. It is a tad futuristic, but it’s certainly feasible with technology that is available today.

What if, in the near future, you get yourself a cloud-based patient management system (PMS)? Such a system will eventually allow you to connect to your patients seamlessly and offer all manner of services more cheaply and efficiently.

If you build up a big enough set of services and patients on your PMS, you’ll be able to network with other ‘friendly’ surgeries and form your own local ‘after- hours’ service based on you and a few other surgeries distributing the work among all the doctors on your network. This would be much better than NHDS as you’d be seeing your patients with much better data, histories and continuity. You can also do some calls via distributed telemedicine by scheduling your doctors to work on call from home via their iPad or laptop. If you have overload and your local area doctor network can’t manage the jobs, it will algorithmically default to a centralised provider, such as NHDS. That is if technology like this, and the ingenuity of groups of doctors crowd-sharing on their new ‘owned and self-forming’ networks, hasn’t driven NHDS out of business.

Healthcare is a lot more complex in economic terms than many of the other industries that have already been hit by disruption, so calling something like NHDS the ‘Uber of medicine” is too simplistic. But it is a good warning analogy because the very mention of ‘Uber’ is the sound of thunder in the distance of the healthcare sector. Doctors need to think harder about what’s coming and how they are going to get in front of it before those ‘bloodsucking maniac canaries’ make the bucket-loads of money that you could be making and redistributing between yourself, your patients and our healthcare system.

By the way, in case you were wondering, people who run tech companies are bad.

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