How that operations decision affects the service delivered and firm financial performance?
Since the beginning of HCG, its focus has been on leveraging the firm’s hubs and spoke model to manage capacity and vertically integrate its operation. Its hubs (leading hospitals) provide all three specialties for cancer: medical, radiation, and surgical oncology. Its spokes (smaller treatment facilities) provide essential services such as chemotherapy and follow-ups. These spokes are mainly based in smaller cities and towns to provide a closer service proposition to the cancer patient. The proximity of services is particularly important in this region as families often traveled together as one nuclear unit during the treatment process, placing significant burdens on families operating off of a single income. Therefore, by providing an option that allowed patients to remain within their local community, HCG appeals to the unique cultural constraints of the region.
Furthermore, when deciding which services each spoke would provide, HCG analyzed the availability of services through competitors and provided services that were lacking in the geographical area. In doing so, HCG focuses on providing the services that will have the most significant impact on the area, thus reducing unnecessary expenditures on services that could potentially be underutilized. It also leverages having spokes in bigger cities as HCG pulls some patients from competitor’s larger centers into its facilities.
HCG is vertically integrated by owning a chain of pharmacies. The pharmacy operation provides HCG the power of economies of scale when purchasing these drugs, allowing HCG to procure drugs at the lower, distributor price while still selling at retail price to non-HCG hospitals. This new revenue generation becomes useful in protecting its bottom line, as HCG also subsidized lower-income patients. By being able to access three different formularies of drugs (generic, brand name and imported) at two price points (distributor and retail), the pharmacies provide lower socioeconomic patients the distributor’s price for the appropriate drug instead of the high retail price. This is a huge advantage to patients as treatment drugs can be astronomically and sometimes restrictively priced. By not turning patients away or pricing patients out, patients experience better service delivery through flexible options.
Service variability in Spokes
HCG controlled for service quality through the centralization of roles and utilization of telemedicine. Radiation treatment planning and pathology were centralized functions that filtered up to highly trained physicians at the hubs. Centralization of roles allowed HCG to control both quality and cost by having a team of specialized doctors oversee all diagnosis and treatment planning, which filtered down into the spokes. Because spoke doctors communicated with the hub doctors in such a manner, the requirement of having such a highly specialized doctor at every physical location was unnecessary. This affected cost control by limiting the number of specialized doctors needed and also affected quality controls as every patient accessed a treatment plan from specialized doctors without having to travel to see a said doctor. Of course, this has implications on limiting capacity as the entire diagnosis system is dependent on the hub doctors reviewing patient charts and feeding the prognosis down to the spokes. Centralization also reduced capital expenditures on linear accelerator technology, as that equipment was found at centralized locations rather than at every spoke.
On the human resources front, HCG established strategic relationships, drawing both medical professionals and management professionals from universities. This relationship allowed HCG to access super-specialized candidates, primarily Ph.D.’s, for low costs, as student doctors were able to receive invaluable training for their degrees. Because HCG provided the opportunity to focus on cancer treatments, its pool for potential doctors differed from that of general hospitals, attracting specialized pathologists, oncologists, and physicists. Physicists, in particular, were drawn to HCG because of HCGs technological assets- namely the linear accelerators. Nurses, as well, benefited from the narrow focus of HCG, receiving training, and higher pay, as an “on-nurses”- nurses specially trained to treat cancer patients. This training helped shift HCGs dependence away from higher salaried doctors, and also increased the overall capacity as nurses were more adept at conducting patient treatment and care.
Other Alternatives to Cancer Care Models
In the Hubs and Spokes case, HCG is compared to other similar US-based cancer treatment operations. Although there are similarities, none of the US models are as vertically integrated as HCG. Take, for example, Cancer Treatment Centers of America (CTCA); although they are in the same line of business as HCG, the business model is very different. Various things differentiate these two firms. First, we can start by the population served. CTCA often caters to the the mostly affluent population since patient fees mostly finance it. This is not to say that CTCA does not do charity work. Each CTCA hospital has a cancer fund of $2.5 million dollars to be used in charity patients that can not cover the cost of treatment. Whereas at HCG, every patient is covered, regardless of their socioeconomic background. HCG’s business model is built in a way that the patient is charged with what is economically viable for their situation.
Another big difference between CTCA and HCG is their vertical integration. HCG’s vertically integrated model gave the firm the ability to ensure the quality of its services. CTCA’s lack of joint ventures and expansion has been in part due to the fear of not being able to control quality if it partners or expands operations. This is an are where HCG strives. HCG is able to control all aspects of its operational quality because of its vertical integration over the full spectrum of service that is provided to the cancer patient- from the visits to the hospital for major surgery, all the way to the prescription medicine, therapy and everything else that is part of the recovery process.
Should HCG go to Africa?
HCG’s African expansion plans goal is to establishing two hubs, one in East Africa and another one in the West, but initially establishing a presence in Uganda, Nigeria, and Tanzania. The company started making its mark in Africa with the opening of the Telemedicine Center in Lagos, Nigeria (although limited information can be found about the current status of its operations). A local Nigerian hospital was also in talks to partner with HCG and International Financial Corporation for further expansions in Nigeria. Nigeria is central to expansion as it is one of the biggest and fastest-growing African economies. HCG knows that Nigeria is a prime market to enter should it embark on expanding operations to the African continent. There are several other viable entry points that HCG is entertaining. One such example is a Kenyan company with a local outpatient clinic, operated by HCG support staff. The clinic has received expansion interest from doctors in Ghana and Ethiopia.
Hubs and Spokes Model expansion to Africa
According to our analysis, HCG should not go entirely into the Africa venture, at least not yet. This is based on two ideas: the general instability of African countries and the fact that it should solidify its current business model in India with a more technological approach. The countries that have a massive demand for HCG’s services in Africa are Uganda, Ethiopia, Tanzania, Kenya, Nigeria, and the Democratic Republic of Congo (DRC). The instability of these governments, in combination with local corruption, makes navigating these expansions extremely complicated, risky, and challenging. As outsiders to the countries’ judicial and regulatory processes, HCG would have to acquire a level of vast expertise in a different set of regulations which would most likely be different for each of those countries.
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Hi there! I’m a Full Stack Developer and Project Manager with experience in delivering creative and effective solutions across healthcare, higher education, nonprofits, and other industries. I’m very passionate about transforming operations with technology and challenging standard practices. My strategy tends to focus is on people interactions, how we learn, perform, and communicate.