Healthcare analytics is fantastic, as the word is understood etymologically: “based on fantasy” . Most of what is called “healthcare analytics” is in fact reporting, and what remains rarely meets the definition of analytics: “the method of logical analysis” . The way in which health systems “analyze” market share is one of the most damning examples, in the sense of “leading to…ruin” .
Some health systems calculate market share based upon the “analysis” of data provided by the state hospital association; other health systems calculate market share based on 30-year old data models that estimate market share based on a sample of claims data, a Census bureau projection, and the CDC’s National Ambulatory Medical Care Survey, the most recent version of which is from 2016 .
Only in that part of the U.S. economy known as healthcare does it pass muster to calculate market share based on half of the volumes or dollars in a market. Such an approach is completely illogical, which, by definition, means that it is not analysis, although it has a passing resemblance to Mark Twain’s notion of “lies, damned lies and statistics.”
So what? Commercially insured patients are the lifeblood of the U.S. hospital business (and it is a business), and the number of commercially insured patients in the U.S. is declining, which makes the hospital business a negative-sum game.
Game theory is infrequently, if ever, discussed in healthcare systems, but nothing will affect the performance of America’s hospitals in the next 20 years more.
“The most difficult problems are negative-sum situations, where the pie is shrinking. In the end, the gains and losses will all add up to less than zero. This means that the only way for a party to maintain its position is to take something from another party, and even if everyone takes his or her share of the "losses," everyone still loses in comparison to what they currently have or really need. This type of situation often sparks serious competition” .
In a negative-sum game, analyzing market share correctly is fundamental to survival. Instead of focusing on estimates of market share based on less than half of the volume of and charges for the care delivered in a market, health systems should theoretically be trying to understand the consumption of all healthcare services in a market. The fact that understanding all of the consumption of all healthcare services in a market is impossible presents a challenge, but that is a challenge that every other industry in the U.S. has also faced. Spoiler alert: none of those industries waited for perfect information to develop and execute strategic initiatives, and most of those industries were not in negative-sum scenarios.
Companies in other industries do anything they can to understand their consumers, both actual and prospective. Instead of focusing on showing up at meetings with a chart that has a percentage that is completely meaningless, they try to understand how much business the competition has, and where the competition gets their customers, and whether those customers are valuable, and how to take those customers away from the competition. Companies in other industries assume that they do not have all of the business of their customers, and they reach out to them consistently and programmatically based on scientific approaches. More importantly, for those companies in negative sum industries know that the measure of success is not whether they do more but whether the competition does less.
Does your definition of market share have you on the road to ruin? Do you really know whether your customers are loyal? Or valuable?