Hitt 13e Case Teaching Notes
Case 4: An Examination of the Long-Term Healthcare Industry in the USA
Case Synopsis
The latest statistical projections from the U.S. Census Bureau show that from now until 2060,
the percentage of people over age 65 will increase dramatically due to longer life spans. This
suggests that the demand for healthcare services for the elderly will also increase significantly.
Already, the healthcare and social assistance sector is expected to be the largest employer in
the United States over the next decade.
The federal government is a major source of revenue for organizations in the healthcare
industry. Approximately 70% of revenues comes from the two major government-sponsored
insurance programs, Medicare (for people over 65 and the disabled) and Medicaid (for low-
Learning Objectives
• Define and describe the general environment and the industry environment. (Chapter 2)
• Discuss the four parts of the external environmental analysis process. (Chapter 2)
• Name and describe the general environment’s seven segments. (Chapter 2)
• Identify the five competitive forces and explain how they determine an industry’s
profitability potential. (Chapter 2)
• Discuss the relationship between customers and business-level strategies in terms of
5)
• Explain competitive dynamics in slow-cycle, fast-cycle, and standard-cycle markets.
(Chapter 5)
Strategic Issues and Suggested Discussion Questions & Answers
1. Use the seven segments of the external environment to identify threats and
opportunities in the elderly healthcare industry’s external environment. Which of
these threats might cause you the greatest concern if you owned a healthcare service
firm for the elderly?
Demographic: U.S. Census Bureau statistics show that the elderly make up the fastest growing
segment of the American population (Exhibit 1) due to increasing life expectancy (Exhibit 2).
Economic: While the U.S. economy is currently strong, the threat of an economic downturn is
ongoing. Since the elderly are often on fixed incomes, an economic slump means they would
have even less disposable income and would find it more challenging to pay out–of–pocket
expenses for healthcare and health insurance. Economic uncertainty poses a threat to firms in
this segment of the industry.
Sociocultural: Overall, American culture values health and a high quality of life, so there is
general agreement that the elderly need and deserve the best healthcare possible, both for
preventative care and for post-acute care after an illness or injury, as well as for end-of-life
care. There is a market for healthcare services and facilities at all price points, so this segment
represents opportunities for all types of providers.
Sustainable physical: Changes in the physical environment may impact the health of the elderly,
but generally speaking, it does not have much of an effect on the healthcare industry. Thus, this
segment is neither an opportunity nor a threat.
2. The Ensign Group uses a differentiation strategy. What are some of its value-creating
activities as described in the text? What risks does the firm face with this strategy?
In support of its differentiation strategy, The Ensign Group has been an effective money
manager by making investments in underperforming facilities and then turning them into state-
Among the risks associated with the differentiation strategy, The Ensign Group faces fierce
competition from numerous rivals with the additional threat of potential new entrants into the
3. Based on what you’ve learned about the competitive dynamics among three major
players in the healthcare industry, would you say they are operating in a slow-cycle
market, a fast-cycle market, or a standard-cycle market? Explain your answer.
Based on the information provided in the case, students should be able to ascertain that the
4. The Ensign Group, a publicly traded company, was accused of boosting revenues by
filing false claims with Medicare and providing rehabilitative services that patients did
not need. What does this unethical behavior suggest about the function of corporate
governance within this organization? Explain your answer.
Corporate governance mechanisms are designed to hold top-level managers accountable for
the firm’s decisions and actions, including holding company employees to a high standard of
Additional Resources
Franchise Help published additional statistics on the healthcare industry for the elderly in 2018:
William Haseltine writing for Forbes in 2018 explained how aging populations are a global
challenge for healthcare providers: