Fertility Clinics Show How the Chain Model Can Improve Health Care

In a 2012 article in the New Yorker, Atul Gawande suggests that health care could benefit from the operational efficiency and management practices adopted by successful restaurant chains like the Cheesecake Factory. But given that the stakes are considerably higher in caring for patients than in serving the perfect burger or berry bliss cheesecake, there have concerns that the owners of chains in health care make profits a higher priority than patients’ best interests. For instance, recent research that has shown that chain ownership of nursing homes and dialysis clinics leads to worse quality care has lent weight to those fears. However, my research, which was just published by Management Science, provides a more optimistic view. My coauthor Julia Bodner and I found that the Cheesecake Factory model seems to be working in one health care sector: the market for in vitro fertilization (IVF). Using data on the universe of U.S. fertility clinics, we discovered that chain ownership increases both the volume and success of IVF treatment: IVF cycles increase by 27% and IVF live birth rates by nearly 14% when a clinic is acquired by a chain. An IVF cycle represents the full course of treatment, from patient egg retrieval to fertilization and transfer of the embryo into the uterus, and the live birth rate represents the percent of embryo transfers that result in a patient getting pregnant and delivering a healthy baby. These are life-changing effects. Nearly one in eight couples in the United States experience infertility, yet most patients are unable to afford IVF because of high treatment costs (one cycle of IVF costs $20,000 on average). Patients who can afford care often face long wait times and low IVF success rates — even patients under 35 have a less than a 50% chance of a live birth. While our findings show that chains can improve patient access and outcomes, that does not necessarily apply to all areas of health care. In this piece, we will discuss the conditions that need to exist for chain ownership to have a positive impact. How Fertility Chains Improved Outcomes Information collected from press releases, marketing materials, and interviews suggested two ways that chains increase volume and improve the success of IVF treatment, which we substantiated through empirical analyses. Growth Chains seemed to help clinics attract and retain new patients by providing financial resources, such as capital devoted to building more office locations, hiring more staff, and adding managerial resources, such as patient engagement and marketing services. We conducted an analysis to confirm that chains were expanding the IVF market and bringing in new patients, rather than “stealing” existing patients from other clinics. One way they may have achieved this growth is through marketing: We found chain-acquired clinics were nearly twice as likely to advertise IVF discounts than non-chain clinics, which may have helped attract patients by signaling more affordable care. We also found that the largest increase in the volume of IVF cycles occurred among fertility chains that received private equity (PE) funding, enabling them to expand capacity. (While there has been much debate about whether PE firms’ growing presence in health care has had a positive or negative impact on patients, that was not something we explored. Our focus was on the impact on IVF of chains, some of which happened to receive PE investments.) Quality Chains also seemed to improve quality of care (as measured by the increase in live birth rates) by standardizing best practices across clinics, providing training, and facilitating knowledge sharing between clinics through the creation of research committees and regular meetings to discuss complex cases. More specifically, we found that chains implemented standardized IVF processes and procedures that reduced higher-risk multiple births (like twins) while increasing singleton births. For example, these clinics transferred fewer embryos at a time and increased the use of preimplantation genetic testing, which can help physicians choose the highest-quality embryo to transfer. These changes are particularly beneficial for older patients: The chains achieved the largest increases in live births among women 38 and older, who represent more complicated cases. We also found that clinics acquired by high-performing chains experienced larger increases in their live birth rates than those acquired by lower-performing chains. Why Is the Impact of Chain Ownership on Fertility Clinics an Anomaly? Our findings run counter to much of the research on chain ownership in health care. We speculate that this is because fertility care in the United States shares more features with restaurant markets — like an emphasis on consumer choice and price and quality transparency — than traditional health care markets. As a result, we may expect different outcomes from corporate ownership in the fertility sector than in other settings such as hospitals, nursing homes, and dialysis clinics. Quality Transparency In most health care settings, patients struggle to determine provider quality when shopping for care. In contrast, clinics in the fertility sector are legally required to send their data to the government, which is reviewed and published as an online report card. This means that prospective patients can compare quality outcomes across clinics, which likely incentivizes fertility chains to invest in quality improvements to attract patients. Because quality is difficult to measure and observe in other specialties being acquired by chains, such as anesthesia, there may be less incentive to invest in quality. Price Transparency For many types of care, most patients do not know how much they will pay until months after treatment. In the fertility sector, however, patients typically pay for IVF treatment upfront and out of pocket because of limited insurance coverage. Fertility-clinic chains may therefore compete more on prices to attract new patients. This hypothesis is supported by research that found that patients chose lower-cost providers of medical-imaging procedures after the introduction of a price-transparency website. Patient Choice Many health care markets are highly concentrated, which limits patients’ choices and often has led to higher prices and lower quality. For example, two dialysis chains own over 60% of dialysis clinics. In contrast, the fertility sector is fairly competitive. That said, regulators should carefully monitor how the growth of fertility-clinic chains is impacting competition, patient choice, prices, and outcomes. Lessons for Managers of Chains Our findings have several implications for owners of chains in health care. Standardize where possible. Fertility clinic patients are much younger, healthier, and wealthier compared to, say, dialysis patients who tend to be older and have more health risks. Because fertility patients are more similar to one another than those in other areas of health care, it may be easier for a chain to create protocols for specific conditions and standardize care across clinics. However, even in settings with more complex patients or a more diverse mix of patients, chains can harness their data to observe which facilities are achieving better outcomes and then develop standard protocols for treating different patient segments across facilities. Focus on the patient experience. Providing a good patient experience has been a priority of fertility chains. They have strived to do so, for instance by creating mobile apps and redesigning websites that made it easy for patients to schedule appointments, contact nurses and physicians, and navigate their treatment journey. Therefore, rather than simply viewing physicians as the ones responsible for managing patient care and the chains as the ones responsible for managing business, managers of chains should consider how their services can help strengthen the patient-physician relationship and the patient experience in general. Align corporate and patient interests. Chains are often derided for putting profits before patients. However, we find that increasing quality can be a profitable strategy in the fertility sector. A study of three chains that acquired obstetric medical practices that I conducted supports this hypothesis: One chain provided clinical management services (i.e., created best practices and standardized care) and two chains provided financial management services (i.e., billing and claims processing). The former reduced low-risk cesarean sections (C-sections) by 22% and entered into several value-based payment agreements with insurers focused on childbirth outcomes. The chains focused on financial management increased C-sections by over 10%, which led to worse patient outcomes. Looking Forward In the years since Gawande’s article, acquisitions by retail giants such as Amazon and CVS Health and investors such as private equity firms have contributed to the growth of health care chains. While there are important concerns about such corporatization of medicine that suggest the need for careful oversight, my research shows that health care can learn from the chain business model to achieve Gawande’s vision of a more standardized health care system that produces better outcomes. This is especially true of consumer-oriented areas of health care such as dental care, physical therapy, dermatology, and cosmetic surgery that share features with the fertility sector. The challenge lies in ensuring that chains don’t just serve up efficiency and also deliver the quality of care that patients deserve. After all, in medicine, a well-managed system should mean better health, not just better profits.

Fertility Clinics Show How the Chain Model Can Improve Health Care

Summary.

Partner Center