Techniques for Negotiating & Marketing Successful Cross Border Strategic Relationships for Health Care Payors and ProvidersDecember 4, 2001
The health care industry is a global industry. There is a universal need for payors, providers and manufacturers to address the increasing requirements of the patient/consumer populations. While these contributors to the health care "industry" are universal in concept, they do have different sponsorship between public and private parties.
For many years, the United States stood out as the aberration. Much of its health care industry was and remains dominated by the private sector, although the public sector, especially the federal government, through entitlement programs, is the largest purchaser of health care goods and services. In contrast, most of the world was dominated by the public sector, not only as purchaser, but also as provider of the health care services and benefits. This has been changing in many areas of the world.
Also, in contrast to payors and providers, pharmaceutical manufacturers and medical device manufacturers have long recognized that what benefits a patient in one country is likely to benefit a patient in another country. That is why the manufacturing sector of the global health care industry is much more mature in its cross border relationships when compared with the payor and provider sectors of the global health care industry.
However, more health care payors and providers are realizing the benefits of the global health care marketplace. New technologies now facilitate global communication, such as the Internet. There is an increasing role and acceptance of telehealth mechanisms. Moreover, more patients are willing to travel and pay for "better" health care services.
Health care payors and providers throughout the world should not shy away from cross border relationships and business opportunities as they consider ways to grow and prosper. These cross border relationships can come in a wide variety of formats. They can be with similarly situated providers and payors. They can involve the creation of a new provider or payor. They also can even be in the form of direct marketing to the prospective patients/customers who are willing to travel.
The following are ten points we have developed which describe best practices or techniques for health care payors and providers to negotiate and market successful cross border strategic relationships. Health care senior executives may wish to consider these techniques as they develop their strategic initiatives designed to take full advantage of the expanding global health care industry:
- Consider the domestic health care market first. A discussion about expanding one's business begins with an initial focus on domestic opportunities. What are the provider/payor growth opportunities within the current geographic marketplace being served and where are the growth opportunities within the country? You should consider horizontal opportunities (same industry/same product lines) and related constraints as well as vertical opportunities with related or compatible industry/product lines. Beware of "fads" which often involve a lot of business risk with little rewards.
- Always include a discussion of the global health care market. You may be remiss if you do not also consider whether there are global opportunities for your payor/provider firm. This may be riskier but also may provide the greatest opportunity for growth. An otherwise developed country also may be an untapped or developing country in relation to the health care industry. In any event, even if you are not interested in having a payor or provider business operating abroad, you also need to consider whether there is at least the opportunity to market your health care services or products to the mobile patient across the border.
- There are more formats than one. You do not always need to build a new provider in order to expand your health care business across a border. There is the buy-build-market decision-making process. How you proceed will depend upon a number of factors such as local market characteristics from both a business and a regulatory perspective. There also is the partner versus do-it-yourself decision-making that needs to take place as you decide how to proceed.
- Do your homework. There is a tremendous amount of readily available market information about the global health care industry. And, as the health care industry is unique, we recommend that you arrange for an international development team of health care experts and advisors to help with the global part of the strategic planning process.
- Know the "anatomy" for closing the deal. When executing a strategic "buy" decision for cross border expansion, always keep in mind the "anatomy" of the deal. You will need a "buy" vehicle such as a corporation or joint venture agreement. You will need to consider having a letter of intent so that certain basic commitments are made before a significant amount of time and effort is expended by either party. The due diligence is a good way to consider the risks and rewards that may be involved in this business venture. Additionally, there is the document phase for the creation and negotiation of the relevant legal documents that will finalize the "buy". There also are likely to be regulatory approvals for a deal involving the acquisition or sale of a health care provider or payor.
- Be prepared early for a "build" decision. When executing a strategic "build" decision, the process is similar but there needs to be more emphasis at the beginning on staffing of the development team and regulatory approval requirements before a significant amount of time and resources are committed to the "build" strategy.
- Mere marketing may be regulated. When executing a strategic "market" decision, do not be surprised if the marketing of health care services is highly regulated. Learn the regulatory scheme and seek out domestic advisors to demonstrate how the marketing of such health care services should be done so as to be perceived as desirable to the domestic population. Be sensitive to local customs.
- Critical success factors. Critical success factors for cross border health care business opportunities include the following: (1) strong business relationships; (2) clear legal documents; (3) frequency of communications both before, during and after any possible transaction has taken place; (4) the communication of both good and bad news; (5) avoiding surprises by understanding country and regional differences.
- Get your return on investment. Know how you will make money on the particular global health care growth strategy you pursue. It is not always the case that the investment returns will flow easily back to the location of origin.
- Invest in compliance programs. Protect your investment through the establishment and operation of effective compliance programs. A compliance program formalizes how the organization is to stay compliant with the various regulatory obligations imposed on its operations. It includes periodic reporting mechanisms and training to assure compliance and serves as an excellent risk management tool for the operations.
Health care payors and providers may be remiss if they fail to consider the global health care industry as they decide how their firms will grow and prosper in the coming years. Our ten points are designed to help guide this strategic decision-making process.