February 25, 2024

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A Cautionary Note On Retail’s Incursion Into Healthcare Delivery

Amazon, CVS and other retailers have made big headlines in recent by acquiring companies and announcing partnerships to speed their push into healthcare delivery. The deals could transform the industry and the patient experience, but they could also be disastrous and highly-public failures.

I’m rooting for the former, but unless corporate leaders step carefully I can easily see the latter taking shape. The difference-maker, I believe, will be whether these companies can essentially build a cultural and operational wall around their care-delivery divisions and assign gatekeepers who’ll turn away those who might infect those divisions with the typical corporate nonsense, while carefully letting others enter.

I’ve seen post-merger debacles happen before, as have others in the care-delivery industry. It often follows a familiar script: well-meaning and extremely ambitious corporate leaders, typically in spaces adjacent to care delivery, grow enamored with a healthcare upstart and they succumb to what I think of as SDD, or Synergy Delusion Disorder.

It’s the first stage in an often fatal and progressively debilitating condition, followed by Synergy Disillusionment Disorder (SDD Stage 2), and, finally, Synergy Disaster Disorder (SDD Stage 3).

SDD is closely related to a similar condition, magical thinking, which I wrote about here. But they’re not to be conflated. Those with SDD typically present in the first stage with a troubling and distinct set of symptoms, including (just to name a few):

  • Wildly hyperbolic rhetoric; most often carried in announcements that include the words “revolutionary” and “unprecedented.”
  • Difficulties with basic math; manifested by executives using exponents where they should be using addition signs
  • Leaders expressing blithe confidence in the prospects of merging the cultures of the combined companies.

Here’s the hitch: if you somehow believe that the culture of any care-delivery operation can be easily merged with that of anything else, your “1+1” will equal less than zero.

I can hear all but hear my old business school classmates spitting out their coffee as they read this. And I get it. Everybody thinks their particular industry is a utopian ecosystem unto itself, not to be sullied by the meddling hands of outsiders.

But the fact is, they’re wrong. The culture of healthcare delivery isn’t like trucking. It’s not like packaged goods. It’s not even like health insurance.

I could argue that most industries can be successful with roughly similar corporate cultures.

But healthcare delivery? It’s a completely different animal. Patients must always and authentically come before profit, and the company’s commitment to this principle must show up daily in the decisions made by executives and managers alike.

That’s because front-line workers – nurses, physicians, medical assistants and others – joined this industry not because they had notions of growing rich (surely they want to be comfortable and rewarded for good work), but because they wanted to make a difference in the lives of patients, and these people, and not corporate executives, create the true value of the enterprise.

Brief aside: this is the typical moment in any argument where corporate strategists (who don’t understand healthcare) trot out the “no margin, no mission” trope, as if the phrase is a sort of armor-piercing grenade to be lobbed at whenever a hard business decision is at hand.

The counterpoint is painfully simple. No mission, no company.

Organizations lose the hearts and minds of the front line when short-term thinking mortgages the long-term prospects. Scarcity of resources and the drive towards earnings can lead to anti-patient decisions that erode morale and destroy long-term value.

For senior executives, preventing this means doing something that’s often counseled against by consultants and theorists.

Step one: build a silo.

Step two: put a moat around the silo.

Step three: put sentries around the moat, and arm them with the corporate equivalent of laser-guided missiles.

I’m overstating it, of course, but the point is that if your legacy products and services are not closely related to care delivery, you as a leader must create – and continually optimize – a distinctive operating culture for the care-delivery organization within the context of the broader organization.

In practice, this means employing three possibly heartburn-inducing strategies for executives, likely followed by some deep breathing while informing board members of these decisions.

First: avoid the temptation for corporate conformity. To protect the healthcare-delivery culture, you need to maintain different HR processes, different compliance requirements, and different financial management systems and personnel, because all of them require a distinct lens. Big companies who do similar sounding and related but fundamentally different things (think health insurance vs. health care delivery; pharmacy vs. primary care) tend to demand and expect homogeneity.

That’s anathema to any newly-acquired care-delivery organization.

Second, focus closely on talent retention. In clinical companies, again, the product is the clinician-patient relationship. Big companies tend to treat frontline workers like they are interchangeable parts. This is a losing strategy when the patient’s allegiance to the doctor trumps their allegiance to the company, the health system, pharmacy, or the health insurer.

There’s an enormous population of professional healthcare nomads who’ve lost count of the number of overly-corporatized medical practices they’ve ditched. Because rare exceptions exist, they keep searching, and, too often, failing. Retention is not only the right strategy, but if you’re playing the long game, it’s fiscally wise too.

Finally, remember that silos have doors, so use them creatively and carefully. The Amazon and CVS deals were built on the premise that 1+1 could equal 3, and it’s indeed possible that the whole can be greater than the sum of its parts.

Amazon could potentially connect its Prime services with its primary care capabilities; CVS its pharmacy with its primary care. These connection points represent the innovation promise of these deals. But because the silos in large corporations are often sealed shut, such opportunities can get shelved quickly. Corporate politics and fiefdoms get in the way of true value creation.

These “synergistic opportunities” (to check off that box on everyone’s merger bingo sheet) are real, and they must be granted entry into the care-delivery silo.

How to do that without ruining the care-delivery culture? Again, look to the front lines. Demonstrate that these new components can improve the patient’s experience and health outcomes. Ask the front line workers to inform the strategies for implementing these components. Respect them when they signal hesitation, and test your ideas (with their collaboration) before moving forward.

Both Amazon and CVS have, in in Amir Dan Rubin and Amar A. Desai, MD, MPH, world-class operating executives in place to shepherd the acquisitions. But for these deals to live up to their potential, their leadership will matter tremendously.

The tendency to tell leaders to “figure it out” won’t be enough. There will need to be clear direction from the CEOs of both corporations—Andy Jassy and Karen S. Lynch—and the kind of upfront problem-solving that happens far too rarely in big corporations.

Time will tell if they can get it right. I sincerely hope they do.