The healthcare industry is unique in many ways, but that does not mean it is immune to macroeconomic shifts like the “fourth economy.” Although a significant share of the nation’s gross domestic product is attributable to healthcare, four out of every five dollars comes from some sector other than healthcare. Forces that affect the larger U.S. economy—such as the Great Resignation and the accompanying workforce crisis—also ripple through healthcare. These society-level trends and their implications on the workforce risk the viability of the entire healthcare industry, exacerbating the already dramatic and negative effects of the Covid-19 pandemic. As health systems grapple with severe workforce shortages and shift focus from recruiting new hires to the hard work of retaining existing employees, we contend that health system leaders must embrace qualities of the fourth economy to be competitive employers—especially coming out of the pandemic.
The fourth economy is a relatively new viewpoint on societal evolution, articulated by consultant and author Ron Davison, holding that Western civilization is amidst a transition from a knowledge-based economy to an entrepreneurial economy. This entrepreneurial fourth economy comes on the heels of the knowledge “third” economy of the 20th century, the industrial “second” economy of the 18th and 19th centuries, and the agricultural “first” economy dating back to the 14th century. The basic premise of the fourth economy is that the present-day West is seeing diminishing returns from investing in knowledge—the limiting resource in the third economy—and thus is shifting to value entrepreneurial experience over traditional knowledge represented by advanced degrees and certifications, for example.
What does the fourth economy look like in healthcare? We observe fourth economy trends being taken up differentially between health systems and health tech organizations, for example. In the health tech world, healthcare has become fertile ground for startups looking to improve care delivery at home, integrate artificial intelligence for routine diagnoses, or process complex laboratory tests in consumer-friendly ways. At the other end of the business spectrum, tech giants Amazon, Apple, Google, and Microsoft are examples of established technology corporations that are experimenting with innovative healthcare partnerships.
A critical reason why health system leaders should appreciate early signs of the fourth economy in their organizations is because of the fourth economy’s impact on healthcare’s workforce. Thanks to the outgoing knowledge-based third economy, workers in healthcare are impacted as much by trends from outside of healthcare as they are by trends from within the industry. The entrepreneurial spirit of a health tech startup may appear attractive to an early careerist who is deciding whether to begin their career in a nimble environment that rewards experimentation and trial-and-error or a large, bureaucratic organization that prioritizes perfection and an intolerance of errors. Without a refresh of health systems’ historical approach to the culture and expectations of work, tech giants could lure away workers with their willingness to offer flexible working conditions, encourage entrepreneurial thinking, and provide benefits that buck trends in traditional healthcare institutions.
Questions that health system leaders need to be asking include: What opportunities are we providing to enable entrepreneurial innovation? What can we learn from health tech startups, for example, about shifting from a bureaucratic, punitive organization to a more nimble, experimental environment? How are we helping clinical and administrative staff feel connected with the greater purpose of our mission and the impact we make on the communities we serve? How can we achieve both patient-centered care and a priority on employee well-being?
Health system leaders can embody fourth economy principles by incorporating them into their organization’s value system, culture, and strategy. For example, creating internal innovation centers that offer startup grants to existing employees—and that encourage a “fail fast and learn” mentality—could capture the interest of entrepreneurial minds in the organization. Investing in technology that allows different departments to share information securely yet seamlessly could foster an environment that embraces working from home, for those whose work is eligible. Leaders also need to consider offering compensation packages that rival what competitors are offering from beyond the traditional walls of healthcare.
Major shifts in economic trends like the fourth economy affect workers in healthcare as much as they affect workers in any industry. Without embracing the entrepreneurial spirit of the fourth economy, health system leaders risk falling behind in both the recruitment and retention of talented workers. The forces of the fourth economy offer enormous opportunities for leaders to implement creative solutions that embody entrepreneurship while preserving their organization’s mission and the uniqueness that historically has attracted workers to healthcare.
CFAR is a management consulting and executive coaching firm specializing in advising leaders on complex organizational issues where people and performance matter. Our mission is to help leaders activate organizations to achieve their highest aspirations—productively, meaningfully, profitably, and with impact.