CASE: OB-43 CONDENSED DATE: 11/12/04
Liberty Medical Group (Condensed)
Richard Townsend, MD, the newly appointed executive director and CEO of the Liberty Medical Foundation (LMF), was sitting in his Pittsburgh office reviewing materials for his presentation to the board of directors the next day. As his first official meeting with the board as CEO, it was a critical occasion. Townsend would be presenting the two strategic alternatives he saw as options for the struggling Liberty Medical Foundation. As CEO, Townsend was responsible for both the Liberty Medical Group (LMG), a large 3,000physician multi-specialty medical group and the Liberty Medical Plan (LMP), a nonprofit insurance ...view middle of the document...
The second option would be to raise rates and rely on a service, access, and quality strategy to attract members. THE LIBERTY STRATEGY From its inception shortly after World War II, Liberty had typically been the lowest-cost provider of comprehensive medical care in its markets. In contrast to physicians and hospitals that were reimbursed on a fee-for-service basis, Liberty received a fixed fee in advance for each
Davina Drabkin prepared this case under the supervision of Robert Pearl, MD, and Professors David Caldwell and Charles O'Reilly as the basis for class discussion rather than to illustrate either effective or ineffective handling of an
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The Liberty Medical Group OB-43 Condensed
plan member, rather than payment for specific services provided. As a result, Liberty focused not only on developing efficient methods of treating member-patients when they needed care, but also on minimizing the chances of illness and disease through various preventative measures. LMG physicians were based in large medical centers that included a wide range of functions such as a hospital, pharmacy, optical services, and specialized care. Within these medical centers, patients were seen in clinics that many people described as having a somewhat impersonal and utilitarian feel. Even so, many of Liberty’s original members were willing to forgo the personalized care they could receive from traditional fee-for-service providers in return for the benefits that Liberty provided. These included Liberty’s focus on prevention, extended hours of service, and predictable out-of-pocket costs for doctor visits or prescriptions (costs did not vary by type of doctor or drug). Liberty was unique in that it was an integrated health system. Between its health plan and medical group, Liberty ran its own health insurance plans and owned all of its hospitals and medical clinics. Liberty directly employed all of the physicians, nurses, and other professionals and staff at each of its facilities. It negotiated directly with the labor unions that represented its nurses, support and clerical workers, as well as its janitorial staff. Liberty’s integrated structure contributed to its historical competitive advantage—its ability to provide quality...