Problem
Diversification by Joint Venture As of 2013 the University of Pittsburgh Medical Center (UPMC) had international operations in seven countries. It operates cancer centers and a full-service hospital in Ireland; transplantation, radiotherapy, and biotechnology centers in Italy; information technology and cancer centers in the United Kingdom; cancer center consults in Kazakhstan; transplantation in Singapore; pathology consulting in China; and educational training in primary care in Japan. UPMC is exploring expansion in Cyprus and Qatar. Most of these represent joint ventures with local partners (UPMC 2013).In addition to its international operations, UPMC launched a domestic joint venture in 2011 with the Advisory Board, a consulting firm (Kliff 2013). Each partner invested $20 million in Evolent Health, which provides consulting services to other healthcare organizations. In addition, the Advisory Board brought consulting experience and a list of potential customers. UPMC brought years of experience in operating its own insurance plan, clinical expertise, and the infra-structure to coordinate care. Evolent Health supports the development strategies to reduce readmissions, to start medical homes, to create accountable care organizations, and even to form HMOs.UPMC is headquartered in Pittsburgh, where it has a commanding presence. The largest employer in western Pennsylvania, with more than 50,000 employees and nearly $8 billion in revenue, UPMC owns 20 hospitals, 400 outpatient sites, a large insurance plan, and a number of other healthcare ventures (UPMC 2013).
a) Why is expansion outside the United States an attractive form of diversification?
b) What are the pitfalls of international expansion?
c) What are the potential pitfalls of other diversification efforts?
d) What are the main risks that UPMC faces in its Pittsburgh operations?
Economics for Healthcare Managers, Third Edition, chapter 4.3 case study.