For SmartZena only
sboceh
8__value.docx8 Value-Adding Service Delivery Strategies
“Strategy is like trying to ride a bicycle while you're inventing it.”
— IGOR ANSOFF
Introductory Incident
Using Dashboards to Improve Service
Dashboards in health care have been described as “a wave everybody is jumping on.” Dashboards aggregate information from a variety of sources to provide a tool to detect performance trends and solve small problems before they become big problems.
The Hartford Hospital uses a dashboard developed by CarePx. Information from the hospital's electronic medical record and its financial system are combined and used as a management tool. Executives use the dashboard to track data in three key areas. These are:
• Patient data including length of stay and percentage of early morning discharges.
• Bed availability including the types of beds open and the percentage of beds not available for patients, which includes those being cleaned and those in a room occupied by a patient in isolation.
• Readmission rate for patients brought back to the hospital in less than 30 days from discharge.
These data are then broken down by individual groups of physicians quarterly to show the group's length of stay and readmission rates. The goal is to take the high-performing groups, see what is working for them, and model their behavior to others. Nursing managers receive the same information so they can see how each unit is performing relative to the others.
Health First, a four-hospital system in Rockledge, Florida uses a dashboard from McKesson to aggregate data from the clinical, financial, and administrative systems. The dashboard has aided in monitoring registration activities and upfront collections from patients for copays and deductibles. One routine task is a registration audit which monitors the performance of 100 staff handling patient registration. One of the primary goals of the audit is to encourage collecting as much as possible before the service is actually rendered. This is no easy task, since most patients prefer to be billed for what they owe. Delaying collection, unfortunately, increases the likelihood that the bill will end up in bad debts. The system is working well. From 2009 to 2010, Health First increased its point-of-service collections by 22 percent or about $1.1 million.
One of the major challenges of monitoring the revenue cycle in health care is the number of payers. Legacy Health, a five-hospital system in Portland, Oregon works with more than 600 payers. Legacy uses a dashboard, developed by Huron Consulting, to help track the primary payers and show the cash flow for 24 key payers including Medicare, Medicaid, and larger commercial contracts. One time the dashboard revealed a drop in payments from a Blues plan. The issue was raised in a meeting with the payer. It was noted that the reason for the delay involved staffing issues. A similar problem with Medicaid was caused by a system conversion. In each case the dashboard was instrumental in resolving the issues. Legacy was able to present the payers with objective data to illustrate the problems and secure faster resolutions.
A dashboard used at Concord (New Hampshire) Hospital has been effective in speeding up the resolution of claim denials. The dashboard aggregates the claims status from 14 payers that constitute the majority of Concord's claims. Since implementation of the dashboard, Concord has significantly decreased its billing write-offs that originated with missing or inaccurate information.
In Arlington, Texas, Northstar Anesthesia contracts with 42 hospitals in six states. Northstar uses a dashboard to monitor the productivity and quality performance of the 460 physicians and nurses it dispatches for assignments. Excel Eye Center in Provo, Utah uses a dashboard that displays data on the total number of claims submitted, rejections, claims pending, and claims paid. Since switching to the dashboard, Excel Eye Center has reduced its average days in accounts receivable from 45 to 29. Other health care organizations, such as the Seattle Children's Hospital, have successfully used the dashboard as a tool to improve productivity and performance.
Source: Gary Baldwin, “Dashboards in Action,” Health Data Management 19, no. 10 (2011), pp. 34–38.
Learning Objectives
After completing the chapter you will be able to:
1. Understand the decision logic for developing implementation strategies.
2. Understand that the service delivery portion of the value chain is key in the implementation of strategy.
3. Link the results of internal analysis and the development of service delivery implementation strategies.
4. Understand how the pre-service, point-of-service, and after-service strategies of an organization are the means to achieve directional, adaptive, market entry, and competitive strategies.
5. Understand that competitive advantage may be created inside the organization through implementation of the service delivery strategies.
6. Understand that through service delivery strategies the organization itself is changed, strengthening competitive advantages and improving competitive disadvantages.
7. Create service delivery strategies that carry out the directional, adaptive, market entry, and competitive strategies.
Implementation Strategies
Once the directional, adaptive, market entry, and competitive strategies have been planned, planning for implementation strategies commences. Further strategic thinking is required to determine how to achieve the decisions previously made in strategy formulation. A leader can announce a strategy but that strategy will only be realized if it is in line with the pattern of resource allocation decisions made at every level of the organization.1 As introduced in Chapter 1 (refer to Exhibit 1–1), the implementation strategies include two different sets of value-adding strategies – value-adding service delivery strategies and value-adding support strategies. In addition, planning strategy implementation includes the setting of organizational unit objectives, development of plans, and agreement on budgets that in concert, translate the organization's overall strategy into specific action plans.
Strategies Based on the Value Chain
Chapter 4 presented strategic thinking maps for evaluating the strengths and weaknesses of the organization. This approach focused on evaluating those components of the organization that create value and, ultimately, competitive advantage – the value chain (see Exhibit 8–1). Recall that the upper portion of the value chain focuses explicitly on the primary activities of the organization – the delivery of services. The lower portion of the value chain contains the value-adding support activities that include the organization's culture, structure, and strategic resources. The components depicted in the value chain are the principal means of creating value for the organization and developing competitive advantages.2 These activities are major elements of strategy implementation and are shaped by strategic thinking and strategic planning.
EXHIBIT 8–1 The Value Chain
Source: Adapted from Michael E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1985), p. 37.
Remember that service delivery strategies and support strategies are not separate but, rather, interact and complement each other. The organization's culture, structure, and strategic resources are in reality an inherent part of the pre- service, point-of-service, and after-service activities. Thus, a change in the culture of the organization – human competencies – is reflected in service delivery. Further, an enhanced information system – a resource – can benefit all aspects of service delivery as well as other strategic resources.
Planning Logic for Implementation Strategies
As with strategy formulation, there is a planning logic for developing implementation strategies, as illustrated in Exhibit 8–2. The value-adding strategies (service delivery and support) must be developed first, followed by unit action plans. The value-adding strategies are planned first because they are the broadest of the implementation strategies, establishing the processes and context for accomplishing the mission and achieving the vision and goals.
EXHIBIT 8–2 Planning Logic for the Value-Adding Strategies
The value-adding service delivery strategies specify the pre-service activities, point-of-service configurations and processes, and after-service activities required by the strategies developed during strategy formulation. These strategies must be coordinated and consistent. The value-adding support strategies create and shape the working environment and behavioral norms, reporting relationships and structure, as well as information flows, financial needs, and human resource requirements for carrying out the selected strategies. Organizations that do not have the appropriate culture, structure, or strategic resources cannot implement effective plans. Finally, for the organizational units, specific objectives may be developed, activities necessary to accomplish the objectives established, and financial resources committed to the activities. The culture, structure, and strategic resources must be shaped and provided direction by strategic managers developing the overall strategic plans of the organization.
As with the strategy formulation phase, implementation strategies form an ends–means relationship. The value-adding strategies must accomplish the directional, adaptive, market entry, and competitive strategies and the action plans must accomplish the value-adding strategies. The action plans link the individual organizational units to the overall strategy. Units are typically functional, such as operations (e.g., surgical units, Alzheimer's units, well-baby care), marketing, finance, human resources, and so on. Operations and marketing are the primary work of the organization – the value-adding service delivery activities – because providing a product/service and delivering it to customers are the central activities of organizations. The major emphasis of human resources, finance, facilities management, and information systems typically will be directed toward achieving the support strategies. These functions support the accomplishment of the primary work of the organization.
Developing Value-Adding Strategies
Each area of the value chain was evaluated during internal analysis as part of situational analysis (Chapter 4) and the conclusions used as inputs to strategy formulation. Each of the strategic decisions (directional, adaptive, market entry, and competitive) made to this point moves the organization closer to accomplishing its mission and vision and at the same time makes special demands on the organization that require explicit action. The requirements of directional, adaptive, market entry, and competitive strategies have been discussed in Chapters 5 through 7. Based on the results of the comparison of the current situation and what strategic managers want the organization to be, value chain components may need to be maintained or changed to carry out the strategy.
The logic of developing specific strategies for each component of the value chain is illustrated in the strategic thinking map in Exhibit 8–3. The resulting decision matrix is shown in Exhibit 8–4. As suggested by the decision matrix, for each component of the value chain, a strategic decision must be made (maintain or change) and general direction provided to the organizational units as to how that decision is to be accomplished. Later, more specific organizational unit strategies (action plans) that carry out the value-adding strategies will be developed.
Implementation of a strategy is often the most difficult part of strategic management. New strategies may call for changes in service delivery, marketing, organizational structure, or strategic resources. Such changes typically require new systems and new ways of doing things. Therefore, successful change in the value-adding strategies requires leaders to establish a sense of urgency for change and to clearly articulate the connections between the new ways of doing things and success of the selected strategies.3 However, as pointed out in Perspective 8–1, there still may be some resistance to change. This chapter discusses the organizational requirements for the value-adding service delivery strategies. Value-adding support strategies will be discussed in Chapter 9 and the translation of the value-adding strategies into specific organizational objectives, action plans, and budgets will be discussed in Chapter 10.
EXHIBIT 8–3 The Process of Developing Value-Adding Strategies
EXHIBIT 8–4 Strategic Thinking Map for Developing Value-Adding Strategies
PERSPECTIVE 8–1 Stages of Resistance to Change
Often people do not like change and their first reaction may be to resist any changes management may wish to make. When instituting changes in an organization, whether it is initiating the strategic planning process, changing the strategy, or attempting to change the culture, managers find people in various stages of resistance. It is often necessary to “pull” people through these stages if the change is to be successful.
STAGE ONE: RESISTANCE
Often the first reaction to something new is to resist the change. Because organizations have frequent changes and in many instances management has tried several techniques before, employees may see a new program or management effort as another fad that will soon go away (as have the others). Therefore they openly resist (or even sabotage) the proposed change. Managers often hear such comments as “Here we go again, new manager, new program, new technique” or “This will never work” and “We tried this ten years ago.”
STAGE TWO: PASSIVENESS
In stage two, employees are not resistant; they simply do not want to get involved. These people do not like change and believe that if they “bury their heads in the sand” (go about their usual work), the change will just go away. In many cases these people do not understand the vision for the future, or they have never been told about it or how they fit into it. In this stage, managers often hear such comments as “This is just a job” or “I put in my eight hours” or “I'll be here when they're gone.”
STAGE THREE: CONVINCE ME
Some people in organizations are ready to change and will work hard if they believe it will really improve the organization; however, they have been “let down” by the organization before. Perhaps programs were started or promises were made but management neither completed the programs nor fulfilled the promises. These people will give it their best if management can show them that the result will be worth their effort. In this stage, managers often hear such comments as “Show me that we can improve the way we work and I'll be your biggest supporter” or “Give me some indication that this can be an interesting and challenging place to work, and I'll give it a shot.”
STAGE FOUR: HOPE
Many people, especially when they start their careers, want to be a part of something important – to make a difference. They have hope that they can make the organization better and be a part of something significant. These people are usually willing to try anything and want to be a part of meaningful change. However, the managers should follow through because if previously proposed changes have not occurred, these people will be difficult to convince the next time management wants to change something. In this stage, managers often hear such comments as “I don't know if we can succeed but look at the possibilities if we do” or “Wouldn't it be great if we actually pulled it off?”
STAGE FIVE: INVOLVEMENT
In this stage, people typically understand that the organization must change and continually renew itself if it is to succeed. They are willing to get involved and be a part of any change that will keep the organization viable. They understand that some new things do not work very well and therefore other change agents must be tried. In this stage, managers often hear such comments as “I don't know if this will work, but we have to try something” or “The world is changing and we have to change with it.”
STAGE SIX: ADVOCACY
People in this stage believe not only that change is vital in a changing world but that this program can really make an important difference. They are ready for a long-term commitment to the program or process and will lead and be responsible for its implementation and progress. These people will convince others to be a part of the change and will keep the process on track. In this stage, managers often hear such comments as “This is our chance for real long-term success” or “I'm a believer; this can work if we stay committed over the long term.”
Value-Adding Service Delivery Strategies
The value-adding service delivery strategies include pre-service, point-of-service, and after-service strategies. Value-adding service activities are critical to the success of the organization because they are the principal methods for creating value. Therefore, explicit strategies must be developed for each. The components must be coordinated and work in concert. It is the role of strategic managers responsible for developing and managing the strategic plan to ensure the compatibility of pre-service, point-of-service, and after-service strategies.
Pre-Service Activities
Pre-service entails the planning and activities that enable the organization to determine its customers and the services that will be offered to them as they enter the system. Marketing is central in developing pre-service strategies. Pre-service marketing entails market and marketing research that enables the organization to determine the appropriate customer (target market), design services that will satisfy that customer, identify the service through branding, price the service at a level that is acceptable to the customer while allowing the organization to survive, and offer the service where the customer wants it or is able to obtain it.
Market and Marketing Research
Market research is any data gathering about the market itself – potential customers, their wants, needs, and habits in terms of health care, and the services an organization could provide that would satisfy those wants and needs. Market research aids in identifying the target market but must be done in conjunction with identifying the services the organization will deliver.4 For example, a group of physicians in a medical clinic has internal resources, competencies, and capabilities to provide care. If all the physicians are board certified in plastic surgery, the group could decide to provide comprehensive care including reconstructive and cosmetic surgery, or the physicians could decide to focus only on cosmetic surgery “to the stars” with extreme confidentiality in a remote but very comfortable location. The target market has to want or need the services and the organization must have the resources, competencies, and capabilities to provide the services.5
Beyond information concerning potential customers, marketing research provides information concerning desired attributes of the product or service, appropriate price, the most convenient place to obtain the product or service, and type of promotional activity to best inform potential customers (the four Ps of marketing: product, price, place, and promotion). Therefore, once the internal assessment has highlighted the organization's competitive relevant strengths and weaknesses, the external analysis has identified the issues in the marketplace, and the organization has identified the strategies it wants to pursue, pre-service strategies attempt to identify the specific target market and define the services to be offered.6
Identifying the Health Care Customer – Target Market
One of the difficulties with health care marketing is that there are many, very diverse customers to satisfy – physicians, health care consumers (patients) and their friends and families, other health care organizations, third-party payers, and so on. In addition, there are multiple services categories – long-term care, emergency medicine, oncology, dermatology, and so on – that determine who the customer will be.7 Furthermore, within these specializations are customers with varying needs, wants, and desires.
Segmentation is the process of identifying recognizable groups that make up the market and then selecting a group as the target market. Several groups may be targeted, but each one requires different marketing activities to achieve customer satisfaction. Exhibit 8–5 illustrates the many customers for a hospital and the segments a physician (one of the hospital's customers) may consider. The process of segmentation for a general medical practice service category would be more challenging than for an oncology (cancer) practice, which is more specialized. However, many segments can be identified among cancer patients – those with leukemia, skin cancer, lung cancer, and so on. Specialization of the hospital, nursing home, or physician's practice would be a first step in the segmentation process, but other demographic, psychographic, geographic, and benefits factors must be considered as well.
Physicians, Patients, and Third-Party Payers as Customers
Physicians are a major target for marketing efforts because they recommend other health care providers for their patients. Estimates are that physicians control 80 percent of health care costs, as they prescribe pharmaceuticals and medical equipment, and determine hospitalization, diagnostic, and surgical procedures. Physicians are an important customer base for hospitals because almost all patients are admitted by physicians who have staff privileges at the hospital. If physicians choose not to admit patients to a given hospital, the hospital will have no patients.
EXHIBIT 8–5 Determining the Health Care Customer
The patients themselves are customers. However, the buyer–seller relationship of traditional exchange processes has to be modified in much of health care because the patient has a professional dependency on the doctor. Most people have no knowledge of medical terminology, or the complexity of medical diagnosis or care, and cannot accurately evaluate the medical care provided.
At one time, patients would never have questioned their doctor's choice of a hospital. Today, a patient whose physician does not have privileges at the hospital of the patient's choice may change physicians. In a national study by Professional Research Consultants and American Hospital Publishing, Inc., more than 42 percent of the participants said they would change physicians to be admitted to the hospital they preferred.8 When considering maternity care, 58 percent of pregnant women select a hospital before choosing a physician.9
Third-party payers (insurance companies and employers) are also customers. These companies must be satisfied that the health care provider is efficiently treating patients or they will use their substantial financial influence to dictate that patients go elsewhere. Considerable insight concerning third-party payers can be gained through quality monitoring organizations.
The National Committee for Quality Assurance (NCQA) is an independent, not-for-profit organization started by a number of large employers in 1991 with a mission to “improve health care quality everywhere.” NCQA uses three different methods to assess quality: (1) voluntary accreditation (currently about 50 percent of HMOs are accredited); (2) Healthplan and Employer Data and Information Set (HEDIS), a tool used to measure performance in key areas such as immunizations and mammograms; and (3) a comprehensive member satisfaction survey. NCQA maintains an up-to-date website available to consumers and employers to determine whether they want to use a specific plan. Because of NCQA's success in the private sector it has expanded to the public sector as well – Medicaid HEDIS is being used in various states.10 The rate of change in health care is rapid and, therefore, health care employees must stand ready to adopt new ways of doing things even if they feel threatened by the change. Often changing conditions and ways of doing things require that value and quality have to be viewed in entirely new ways.11
To Brand or Not to Brand Services
A brand represents three things: what an organization offers to the market, what an organization does, and what an organization is.12 All three are critically important for health care organizations because the brand is intangible – it is simply a set of promises. It implies trust, consistency, and a defined set of expectations. The strongest brands have a unique position in the mind of the buyers and can usually be articulated. Mayo Clinic and Johns Hopkins are examples of brands that have value for customers. Every person who has contact with a patient at these clinics represents that brand as illustrated in Perspective 8–2. If housekeeping is poorly performed, it hurts the brand; if admitting is poorly done, it hurts the brand; if clinical care is done less well than customers expect, it hurts the brand. Thus, it is critical that every member of the organization realizes that the brand is owned and should be managed by every employee. Another way to define brand is that it is every touch point the organization has with its ultimate customer.13
To develop a good branding strategy, answers to three questions have to be understood:
1. How do consumers choose one brand over another?
2. How does your brand stack up against competition?
3. What possibilities exist for potential brand growth and expansion?
A brand is everything a service organization stands for but it does not have any merit if customers do not value it. Customers evaluate every service experience by dividing quality by price to arrive at a sense of value. It may not be a perfect method, or very accurate, but it is real as far as that consumer is concerned. For services the brand is more important than for tangible products, especially because if performance falls short, the service brand's image and positioning deteriorate rapidly.14
PERSPECTIVE 8–2 Branding Begins at Home
How patients perceive a medical practice, hospital, or long-term care facility involves focus, hard work, and lots of employee support. Brand identity can be of considerable value to a health care organization. For example, the Millward Brown consulting company stated that Apple, Inc. has the world's most valuable brand. It estimated that the Apple brand was worth more than $153 million. Many would argue that building a brand for a company with a product is less complex than building a brand identity for a service such as health care. Arguably the greatest impact in any service organization, particularly health care organizations, comes through interactions that patients and their families have with the staff.
Building a successful brand involves more than a logo, website, or printed materials. One branding consultant states that “For a brand to endure it must be easily understood, internalized, and acted on by employees at all levels. Words must be matched with deeds. Employees at all levels must walk the walk.”
In health care organizations it is important to assist the staff to understand what the brand represents in concrete terms. If the medical practice says that extraordinary care is its key brand attribute, what does that mean in terms of day-to-day behavior? Employees have a critical brand – ambassador role as they interact with people who come to the health care organization. The chair of the Public Relations Society of America defines a brand ambassador as “employees or customers who advocate for the company and its products or services.”
The Chairman and CEO of Private Health Management, a network of physician-led medical doctors, points out five areas where primary care practices can positively or negatively affect the brand perception of their practices. These are:
1. Create a culture of service. Help callers avoid voice mail by providing real people when a patient calls.
2. Check in on sick patients. It is important for doctors to stay updated on a patient's progress.
3. Provide more information on specialists to whom you refer patients. Preparing an information sheet on the specialists with biographical information, picture, and a map to their office can greatly reduce the anxiety patients often feel when referred to another doctor.
4. If you haven't already done so, convert to an electronic medical record. This greatly streamlines the experience of the patient.
5. Consider evolving the practice to become a patient-centered medical home. It is valuable to be the medical practice people seek to coordinate all their medical care.
Once the brand identity has been established, the leader must ensure that every employee who interacts with patients reinforces the brand image. Even employee appearance can influence the brand image. One brand consultant jokingly asked, “Would you go to a dentist if the receptionist had two front teeth missing?”
Training and education are important in ensuring employees effectively serve as brand ambassadors. Employees must be provided with the tools they need. Now is a particularly good time for health care organizations to explore and strengthen their brand images. Thinking about the desired brand image and how it can be supported by employees is an essential consideration for every medical practice.
Source: Lin Grensing-Pophal, “Practice Branding Starts from Inside,” Medical Economics 88, no. 14 (2011), pp. 36–38.
Much branding activity in health care has centered on promoting and creating identities for health care systems. However, customers are not interested in abstract systems, but rather the physician and nurses who care for them in a hospital that they have been aware of and perhaps preferred for decades. Although preference for a new brand can be built over time, in most cases it is less expensive and more effective to leverage and extend the existing brand name. HCA – HCA Holdings, Inc. – has used this strategy effectively.
Pre-Service Pricing Decisions
Pricing health care is extremely difficult because it is a service that consumers would rather not have to purchase. Consumer perceptions of “high price equals high quality and low price means low quality” and “you get what you pay for” operate in health care, yet most consumers do not have the ability to judge quality. In addition, consumers rarely know upfront pricing and payments must be met regardless of outcomes making price and quality comparisons difficult. Further, in many instances third-party payers separate consumers from the actual costs of care. Finally, health care providers have a great deal of difficulty determining their costs and then deciding on a price. Competitive negotiations with third-party payers looking for lower prices have led some health care providers to prices that are too low, thereby threatening the provider's long-term viability. Government reductions for Medicare and Medicaid patients have resulted in reimbursements that are frequently below the cost of providing care. Thus, some providers have opted not to serve Medicare or Medicaid patients.
In health care, low-price strategies must be selected carefully because few people want to think that they are receiving “cheap” (poor-quality) care. Although cost leadership strategies are generally associated with having low costs that can be translated into low prices, a high-price strategy can effectively position an organization as a high-quality health care provider; however, the consumer must perceive that the benefits (esthetically pleasing surroundings, attentive care, latest technology, and so on) are worth the high price.
Based on the services offered, the ability of the consumer to pay, and the cost to deliver the service, the health care organization determines a price. No magic formulas exist to determine prices and some government mandates about serving every patient that shows up at the emergency room door regardless of the ability to pay, for example, make pricing an even more challenging task.
Pre-Service Distribution/Logistics
The location of the health care provider will impact the number of people who seek its services. A location that is attractive because of its proximity to patients' homes and work is a valuable asset, especially if other health care providers cannot duplicate the location. Because people do not want to travel great distances for most health care, demographic studies of population are an important part of choosing a location for a facility. Satellite offices and hospital branches have become increasingly important as busy patients value convenience. Although satellite offices/hospitals do not typically cut costs for the organization, they do cut costs for the patient, which can lead to an increased market share and improved efficiency for the health care provider.
Some hospitals are finding it worthwhile to establish education centers in shopping malls. Other health care organizations have established limited primary care facilities in grocery stores. Furthermore, many hospitals have established urgent care centers in multiple locations throughout a city; extended hours and a known “brand” name from the local hospital are appealing to consumers. Urgent care facilities have been used to draw people away from using the hospital emergency room, a costly place to deliver primary care. In Louisville, Kentucky, for example, FastCare (now The Little Clinic) began operating medical kiosks offering basic services in two Kroger grocery stores. According to the vice president for diagnostic services, “The convenience factor is what really drives people in.”15
Mobile units are another method of achieving the optimum in health care delivery. Long practiced by the Red Cross to gain more blood donations, other institutions are using movable diagnostic equipment to be closer to patients. Numerous mobile mammography units are in operation in the United States to increase women's use of this excellent but expensive tool.16
Pre-Service Promotion
Promotion includes: advertising; public relations events (baby birthday parties, health fairs, cancer survivor celebrations, and so on); personal selling; sales promotion (contests, participation in trade shows, and so on); and direct marketing (internet, direct mail, and so on.) The promotional elements work in combination to be able to communicate a message to various consumers and stakeholders of health care organizations. For example, hospitals have learned that increased amounts of advertising alone will not fill more beds and that great advertising might set customer expectations higher than the organization could deliver. Advertising works best when there is an identified product or service that meets consumers' needs. Branding helps consumers to know the service to seek and reminds them where they can obtain health care when they have a need for it.
Personal selling has been used more extensively in health care as various organizations compete to be the provider of choice in managed care plans. In addition, personal selling has come into play as health care providers compete for employees that are in short supply. Direct marketing through social media (Facebook, Twitter, LinkedIn, Pinterest, blogs, and so on) provides another touch point for consumers to interact with a health care provider and each other, to share experiences – good and bad. Many potential consumers will check for “reviews” and find them a credible tool for information.
Matching Pre-Service to the Strategy
It is important that service characteristics and the target market are appropriate for the selected strategy. In addition, the price, brand, promotional activities, and logistics for services must contribute to the accomplishment of the directional, adaptive, market entry, and competitive strategies. The services delivery activities were assessed and classified as competitive advantages or competitive disadvantages in the internal analysis phase of situational analysis. As shown earlier in Exhibit 8–3, the attributes of the current pre-service activities must be compared with the service characteristics, target market, price, brand, promotional activities, and services logistics that are required by the strategy. Results of this assessment will determine whether the strategic managers need to create implementation strategies to maintain or change the pre-service activities.
Maintaining Pre-Service Activities
When the requirements of the strategy match the current pre-service strengths and needs of the customers, then strategic managers should focus on maintaining those strengths, giving particular attention to those areas that have created competitive advantage. For example, if during internal environmental analysis, a brand name was evaluated as a strength having high value (H), was rare (Y), was difficult to imitate (D), and was sustainable (Y), resulting in HYDY, maintaining the effectiveness of the brand name is particularly important. Allowing such a strength to weaken may lead to the loss of an important competitive advantage. Similarly, maintaining a strong brand name would be important when strong brand names are common (not rare) among competitors (HNDY). In this situation, strong brands have likely become a minimum condition for success. Therefore, in maintaining pre-service activities, strategic managers should:
• Engage in periodic customer focus groups and market research to understand the wants, needs, and desires of the organization's target markets and whether they are or are not being satisfied.
• Monitor the demographic, psychographic, and health status characteristics of the service area (with particular attention to trends in the target markets).
• Continually communicate to physicians, patients, third-party payers, and others concerning the type and range of services offered, pricing, and branding.
• Monitor promotional effectiveness.
• Monitor customer ease of system entry (logistics).
Changing the Pre-Service Activities
Pre-service activity changes can be difficult and may require considerable market research as well as promotion. In internal environmental analysis, where the requirements of the strategy call for different services, a different or additional target market, changes in pricing, branding, or promotional activities, change strategies should be initiated. In addition, where significant competitive disadvantages have resulted because of ineffective pre-service activities, it is likely that change strategies will have to be initiated. For example, where the promotional strategy was viewed in internal analysis as a weakness, of high value, the weakness is common among competitors, difficult to correct, and competitors can sustain their advantage (HYDY), change strategies should be initiated particularly where competitors may act to develop an effective promotional strategy and achieve a significant competitive advantage. Similarly, where an organization has a weak promotional strategy and other organizations have effective promotions that are difficult to imitate and can be sustained (HNDY), strategic managers will need to initiate change. Strategic managers who want to change pre-service activities should:
• Change the services attributes to better match the expectations of the target market.
• Train employees to better provide the new services.
• Redefine the target market to match the changing demographic, psychographic, and health status characteristics of the service area.
• Provide price discounts or price classes among members of the target market.
• Change the balance among advertising, personal selling, and direct marketing (one-to-one marketing).
• Brand individual products (as opposed to the organization's name as the brand).
• Redesign accommodations, dining experience, parking lots and signage.
Point-of-Service Activities
Point-of-service is a transformational process that incorporates an organization's resources, competencies, and capabilities – its assets – into value-adding service delivery. Health care was a cottage industry for centuries. Specialization, cost pressures, and the actual work being done have taken health care from being totally customized for the individual patient in his or her home to an attempt to treat patients more similarly so as to develop economies of scale. Placing people in hospitals, outcomes measures, formularies, and so on, focus on treating patients more alike – the industrialization of health care. Most Americans and their physicians do not like it. Moreover, the system has become so complex and technical that it is difficult for providers to communicate effectively with patients, as illustrated in Perspective 8–3. The best service delivery differs for each organization depending on their strategies developed during strategy formulation.
PERSPECTIVE 8–3 Do Patients Really Understand What You Are Saying?
When researchers at Boston University Medical Center (BUMC) redesigned their discharge process, they wanted to be absolutely sure every detail in the written materials was clear to everyone – patients with limited literacy skills to technically oriented clinicians. To ensure this, they convened focus groups to vet the paperwork for medical jargon and unclear instructions. The researchers learned not to assume anything. One staff person related that after observing several focus groups he was horrified when one participant stated “I really like this stuff and I think it's nice and understandable. But what part of the body is this discharge coming from?” Now the discharge paperwork that patients receive has a new title: After Hospital Care Plan.
The project director says this story illustrates the sometimes hidden comprehension gaps that can hamper optimal medical care. The federal government estimates that 80 million Americans navigate the complexities of the health care system without sufficient literacy skills.
BUMC and numerous other hospitals are assisting patients to navigate the complex health care system removing jargon from informational materials as well as revamping signs in the hospital. Clinicians are also being encouraged to develop bilingual skills. Increasingly, research is showing a relationship between health literacy and an individual's health. Poor literacy skills are associated with difficulty taking medications and overuse of emergency departments.
Experts emphasize that communication is more than written and oral language. Skillful clinicians look beneath apparent issues and watch for non-verbal cues and unasked questions. Unfortunately, some literacy programs can be expensive, especially if they involve numerous signs and written materials. Despite of the potential costs, a number of health care organizations have developed programs to address the literacy problem. Some examples include:
• Twin Rivers Regional Medical Center in Missouri launched an initiative to assist patients in understanding medical instructions when they are sent home.
• At Coney Island Hospital in Brooklyn, New York clinicians are encouraged to wear “Ask Me 3” buttons, which is a program developed by the National Patient Safety Foundation. This program encourages patients to ask doctors and nurses three important questions. (1) What is my main problem? (2) What do I need to do? (3) Why is it important to do what you suggest?
Health care organizations cannot afford to ignore the potential cost of confused patients. In the future, Medicare's focus on readmissions may convince even more hospitals, medical practices, and long-term care organizations to devise ways to increase the literacy skills of their patients.
Source: Charlotte Huff, “Does Your Patient Really Understand?” Hospitals & Health Networks 85, no. 10 (2011), pp. 35–38.
Point-of-Service – Clinical Operations
The appropriate model of health care delivery is based to a great degree on the care required. If health care were divided into three sectors – acute illnesses with quick recovery, significant illnesses (chronic but manageable), and catastrophic illnesses (AIDS, cancer, and so on) – each accounts for approximately one-third of the health care dollar in America. However, the latter two represent 10 percent of the population. In other words, 90 percent of the population represents short-term treatable illnesses where the volume is high, but costs are low per episode and copayments and deductibles have a measurable impact. Technology can improve efficiencies in this sector. For significant and catastrophic illnesses, health care providers can increase efficiencies through understanding the choice of processes and selecting the one most suitable for patients' care (mass customization).17
Mass Customization
Mass customization may be the way to capture the customer-friendly benefits of long-term physician–patient relationships plus the cost-careful benefits of capitation – for survival in today's health care market. Mass customization can be accomplished by a “series of modular approaches to prevention and care, highly articulated and well supported by information technology” (Exhibit 8–6). Clinical pathways represent an example of mass customization. Pathways represent the best known way to treat the patient; however, the path still has to be applied on the basis of the individual patient's background, medical history, health status, and so on.18 Recognizing that people are different, this “synchronization of the implementation of the modules” or co-configuration, must be determined by the providers.19
EXHIBIT 8–6 Increasing Quality through Mass Customization
Source: Reprinted from C. P. McLaughlin and A. D. Kaluzny, Defining Quality Improvement, Continuous Quality Improvement in Health Care, 2nd edn (Sudbury, MA: Jones and Bartlett Publishers, 1999), p. 15. Reprinted with permission www.jbpub.com.
Mass customization requires that a sufficient number of people have the same disease or diagnosis. For example, Medco Health Solutions has effectively created mass customization through segmentation based on diagnosis. The mass customization “digs down” another level to differentiate clinical needs among people in a single disease category (diabetes) that is large enough to warrant separate contact but not too small to present an administrative burden. In these cases true customization is not cost justified, but “one-size” fits all programs standardized or mass programs are not effective either. Mass customization falls somewhere in between and prevents therapy gaps within categories, such as the gap between diabetics who have only a few health problems and diabetics who require frequent medical attention.20
Quality of Operations
The trust in the health care system has diminished because of reports in the media over managed care's failures as well as the Institute of Medicine's study indicating that as many as 98,000 deaths per year are because of medical errors. The greatest opportunity a health care organization has is the day-to-day interaction between caregivers and patients.21 Every person in a health care organization has some responsibility for its image.
Historically, hospitals have concentrated on meeting the expectations of physicians, and then more recently physicians and third-party payers. The structure of the health care industry has enabled it to circumvent a customer orientation that most other segments in the services industry have had to adopt.22 Various environmental changes are creating the need for health care to be more responsive to the wants, needs, expectations, and requirements of patients for information, convenience, and personal control.23 Recently, attempts have been made to rank health care organizations on the basis of clinical quality. However, as suggested in Perspective 8–4, rankings are difficult because there is a lack of agreement over the assumptions underlying the ranking attributes and some of the implications may be misleading.
PERSPECTIVE 8–4 To Err is Human – But in the Hospital!
Hospitals are great places to be when you are ill. Unfortunately, they are also plagued by daily errors and mistakes. For example, it is estimated that surgeons in the United States operate on the wrong person or body part 40 times a week. In 1999 the Institute of Medicine issued a report with the startling finding that each year as almost 100,000 Americans die in hospitals from preventable medical mistakes. And, there is no reason to expect that the situation has improved much over the past decade. A report released on Medicare patients found that hospital staff did not report 86 percent of the mistakes that adversely affected patients. Even more alarming is a report by Health and Human Services stating that one in every seven Medicare patients suffered serious or long-term injury or died as a result of hospital care. Mistakes take many forms – surgeons cut healthy blood vessels, nurses mistakenly administer a toxic dose of medicine, or staff fail to disinfect a room. As a result, the number of patients who die each year from preventable hospital errors is equal to four full jumbo jets crashing each week!
Many of the problems arise from the complexity of modern medicine. Some experts suggest that medical practitioners could learn from the aviation industry's use of simple checklists.
This is not to suggest that no progress is being made. For years it was thought that bloodstream infections resulting from the insertion of a tube into a large vein near the heart to deliver medications were largely unavoidable. As a result, 30,000 deaths annually resulted from these infections. However, a program initiated in 2004 at more than 100 Michigan intensive care units managed to reduce these infections by two-thirds and save 1,500 lives in just 18 months. Major improvements were accomplished by using a short checklist for handling catheters and getting all staff on board.
Challenges remain. Only about half the hospital workers follow hand-washing guidelines despite of intensive training and generous availability of hand sanitizer dispensers. Other measures for reducing problems have been more effective.
For example, public reporting of hospital performance was unheard of a decade ago. Twenty-nine states now require public reporting of hospital infection rates and 28 require some information on medical errors. The Health and Human Services agency has added a key catheter infection rate reporting. The debate continues on what data should be reported. In 2008, Medicare began restricting payments to hospitals with extra costs associated with 10 hospital-acquired conditions and it will provide extra money to hospitals that score the highest on a set of standards linked to better patient outcomes.
It remains a difficult task to compare the safety records of hospitals. Existing data does not allow patients to be sure they selected the safest hospital. Even within hospitals it is difficult if not impossible to compare the safety record of one unit with another. Because one unit is excellent with regard to patient safety does not mean all units are equally safe.
Source: Katharine Greider, “The Worst Place to Be If You're Sick,” AARP Bulletin 53, no. 2 (2011), pp. 10–14.
The National Committee for Quality Assurance (NCQA) developed by large employers provides the Healthplan Employer Data Information Set (HEDIS) to compare individual managed care health plans. The intent was to create a database that the participants (consumers or employers) could use to compare the performance of their health plans against other health plans on a consistently measured and reported set of criteria.
Neither the Joint Commission (JCAHO) nor the HEDIS data can be correlated with Consumer Report satisfaction studies. The fact that mammograms are done (a HEDIS measure) does not mean women are happy with the way they are done (a measure of patient satisfaction). Health care providers are more responsive to patients, at Lakeland Regional Medical Center, a large multiservice facility in Florida. Lakeland Regional discovered during a planning retreat that the time allocated to coordination and scheduling of procedures was almost the same as the time spent in providing services. Red tape and increasingly specialized jobs made relatively simple procedures seem overly complex to the patients. In addition, customers had to repeat the same information to a variety of staff. A patient might come into contact with as many as 60 different employees.24 The quality of clinical care received by patients was not perceived to be as good as it actually was because of the way care was delivered (see Exhibit 8–7).
Labor-intensive services are difficult to automate, but not impossible. Blood pressure checks have been automated. Additionally, a finger stick for routine blood work could be done by a machine; but would the public accept a machine instead of a nurse? In a different but important service industry, many bankers held on to their beliefs that consumers would want to talk to a real person when cashing checks or depositing money. Those banks that were the first to automate with teller machines have been very profitable. Similar results may be achieved in health care.
Clinical Process Innovation
Clinical process innovation (or CPI) is defined as “the generation, acceptance, and implementation of new ideas, tools, and/or support systems aimed at improving clinical processes and, ultimately, patient care.”25 It differs from continuous quality improvement (CQI) in that CQI focuses on improving existing clinical processes for performance improvement. CPI is a contextual and critical appraisal of current clinical processes to identify opportunities for more effectively providing care. As Michael Hammer explains, “Operational innovation should not be confused with operational improvement or operational excellence. Those terms refer to achieving high performance via existing modes of operation… Operational innovation means coming up with entirely new ways of filling orders, developing products, providing customer service, or doing any other activity that an enterprise performs.”26 In recent years a considerable amount of interest has developed in operational innovation in the clinical setting. Research has looked at the relationship between innovation and quality, improvements related to information technology innovations, and a variety of other areas.27
EXHIBIT 8–7 Key Questions for Determining Patient- and Family-Oriented Care
Source: Institute for Family-Centered Care, Bethesda, Maryland.
Through the first decade of the 21st century, providers need to realize that consumers who want more control over their health care will have it through consumer advocacy groups, increased competition, and unprecedented access to information. If customers do not receive the care they want, they will change to another provider. Physicians have to be willing to listen to patients talk about other treatments and how alternative therapies might blend with more traditional medicine to improve health.28 Consumers who use alternative therapies are middle- to upper-class, well-educated people with good jobs and money to spend on whatever they believe to be important for their health care.29
Point-of-Service – Marketing
Physicians are an integral part of the health care system. As such, hospitals and health systems have tried a variety of models to incorporate physicians into the new systems. Thus far, none of the models (as depicted in Exhibit 8–8) has really worked. Perhaps that is because none of these models focuses on the physician–patient relationship. “A renewed patient focus is not only the best way to serve our customers and patients, it is also a business imperative for any organization that wishes to survive into the next era of health care.”30 Some strategies in which physicians and health systems can work together to achieve patient goals include redesigning service lines around enhancing the patient experience rather than around financial aspects of delivery of care, multispecialty physician care teams based on consumers' needs, physician outreach programs to determine ways that physicians believe patient care can better be delivered, increasing physician–patient communications since physicians are frustrated by the lack of time they can spend with patients, and agreeing on measurements for success.
Health care providers must understand their current situation in the market. How well are they satisfying the various customers they currently serve? Are competitors better meeting customer needs? What new needs will occur in the near future that should be in the planning stages today? Frequently, the necessary information is not available, and marketing research must be conducted to understand patient satisfaction, medical staff satisfaction, competitive offerings, and so on. Often it is important to collect data from patients and staff who do not use (or occasionally use) the facility as well as current users.
Matching Point-of-Service to the Strategy
Each strategic alternative selected by an organization may affect the point-of- service delivery strategy. However, as discussed previously, central to point-of-service delivery are issues such as quality, efficiency/speed, innovation, and flexibility (mass customization) of the service. Most organizations are constantly trying to improve point-of-service delivery – employing an adaptive/enhancement strategy.
EXHIBIT 8–8 A Partnership Model Scorecard
Source: The New Playbook: Transforming Health System–Physician Relationships. © 1999 VHA/Tiber Group.
Maintaining Point-of-Service Activities
When the requirements of the selected strategy match the characteristics of the current point-of-service delivery, the strategic managers should develop strategies to maintain the current strengths of the organization's resources, competencies, and capabilities. As with the pre-service activities, particular attention should be given to those point-of-service delivery areas that have created competitive advantage. In maintaining point-of-service delivery activities strategic managers should:
• Monitor service quality through asking customers (physicians, patients, payers, other) if there is a way the experience could be improved – as they are the ones receiving the service.
• Monitor clinical (patient) and organizational (financial) outcomes.
• Institute quality programs in key service areas.
• Benchmark other organizations' processes.
• Measure the organization's efficiency (personnel, assets, costs) against peer organizations and industry standards.
• Revise rules and regulations that limit process innovation.
• Continue to communicate and emphasize the individuality of customers.
Changing Point-of-Service Activities
If the requirements of the strategy indicate that the present point-of-service delivery processes should be changed, then explicit strategies must be implemented. In addition, where internal environmental analysis indicates that the point-of-service delivery process is a weakness (resulting in competitive disadvantages) or the requirements of the strategy call for new standards of quality, efficiency, or innovation, change strategies should be initiated. Strategic managers who want to change clinical point-of-service activities should consider involving a team of appropriate leadership across disciplines to:
• Institute a quality improvement program for service delivery,
• Re-engineer critical service delivery activities,
• Provide quality enhancement training for service delivery personnel,
• Institute a cost-cutting program,
• Provide incentives for efficiency suggestions,
• Reduce dramatically rules and regulations that limit innovation, and
• Provide savings or revenue sharing with employees to encourage innovations.
To change marketing point-of-service activities, strategic managers should:
• Target unserved consumers,
• Increase market penetration activities,
• Serve new markets with existing products (market development),
• Offer new products for current consumers (product development), and
• Improve differentiation among services offered.
After-Service Activities
After-service includes follow-up (both clinical and marketing), billing, and follow-on activities. They are sometimes referred to as “back-office strategies” and are often the final impression (contact) that a customer has with the health care organization.
Follow-Up Activities
Follow-up – calling to inquire after the health of a child who was seen in the ER – would spotlight a pediatrician as “caring and concerned” and endear him or her to any mother. Calling after outpatient surgery to ask if everything is going as expected or whether additional prescriptions are needed is simply good clinical follow-up (and can save pain, complications, and an unscheduled office visit). Follow-up calls say to customers “we care” and may avoid unnecessary anxiety.
Marketing follow-up activities include patient satisfaction studies to determine from a patient's perspective how he or she was treated. All health care providers should be doing follow-up studies with their customers. The studies offer greater insight if they are conducted several days after the health care encounter as bias may occur with on-site collection of data.
With the assistance of Press Ganey, a health care consulting firm, Hospitals & Health Networks conducted a survey to determine the use of patient satisfaction studies. Of the 783 respondents, 95 percent said their organization measured patient satisfaction and over 99 percent said there were many opportunities to improve patient satisfaction. However, less than 40 percent said they were doing a better job of it than 10 years ago.31
Health care purchasing decisions are often made through a third-party payer with little or no consumer input eventually distancing the relationship between the provider and the consumer of health care. In 2012 consumers were spending more out-of-pocket for copays and a higher percentage of the cost of care, yet are not aware of how their money was being used. Pressed for time, they become frustrated if they feel their time is being wasted, as when they have an appointment and sit for an hour waiting for an X-ray or to see a physician. Today, consumers have the knowledge to take their business elsewhere.
Studies of patient satisfaction cannot be merely looked at, plotted as to movement up or down, and put on a shelf. They need to be analyzed to learn what customers expect, what the organization is able or willing to do to meet the expectations (its capabilities), and manage those they are not willing or able to meet.32 For example, it may not be possible to shorten the time for test results because of the time it takes to do the test properly. However, patient expectations can be managed by explaining the length of time it takes to do the test and making the information available as soon as possible on a secure Internet website – if the patient wants the information this way – or an immediate call from the physician's office, or at a minimum providing a consumer hot line to call.
Although many health care organizations are undertaking customer satisfaction surveys, they may not be performing them in a rigorous enough manner. Despite all the studies that have been done, quality improvement has not lived up to expectations. To achieve satisfaction, customers must be satisfied throughout the value chain from pre-service activities to after-service activities. The problem has been that the studies were not designed with minimal standards of conceptual or methodological rigor; nor were they designed to facilitate quality improvement.33 Regional coalitions are being used to more rigorously collect data. In Massachusetts, a partnership of health care, business, and government leaders recognized the need for better information and collected data from 24,200 patients discharged from over 50 hospitals. The participants agreed not to use the data for “best” and “worst” lists but to educate and inform hospitals and consumers and to focus and facilitate quality improvement efforts.
Billing Activities
There is more to the patient's determination of the value and quality of the total health care experience than the success or failure of the medical procedure or clinical service itself. Richard L. Clarke, HFMA (Health Financial Management Association) former CEO and president has stated: “The best care, and great customer service provided during the patient's hospital encounter can be destroyed quickly by confusing, complicated, or incorrect billing afterwards.”34 Hospital bill features that irritate customers most include:
1. Confusion about what the patient's insurance company has paid.
2. Confusion about the balance the patient owes the hospital once the insurance company pays its share.
3. Use of medical terminology that the patient does not understand.
4. Sending a bill to the patient before the insurance company has processed the patient's claims.
5. Inability to determine exactly what services the hospital has provided and what the patient is being charged for a service.35
Greenwich Hospital's convoluted billing statement was reported in the New York Times when a freelance writer tried to figure out what he owed the hospital. His very public discussion of the problems with billing began a major change for the hospital. Having undergone the process, Greenwich recommends that when a health care organization realizes that its billing statement needs revision, the task should not be delegated to staff. Rather, a task force of actual customers, physicians, information systems personnel, clinical employees, and billing personnel should be charged with making the bill understandable. Greenwich followed this format and the redesigned billing process reduced consumer complaints from about 30 per week to 5 per week and, interestingly, there was a reduction in accounts receivable and bad debt because people understood their bill and paid it.36
When customers call in with questions about their bill, how are the calls handled? More than likely someone has to stop with data entry or analysis of data input to answer a patient's question. See Perspective 8–5. If answering customers' questions is not a priority, customers will know; moreover costs are associated with doing things incorrectly. Consider a hospital or nursing home billing statement that contains errors. Not only is there the cost of finding the error, addressing the complaint, and redoing the statement, but there is an additional cost of losing a positive consumer attitude – and, perhaps, a patient who decides to go elsewhere.
Follow-On Activities
It is almost always preferable to have services recovery occur during services delivery rather than waiting to institute services recovery at a later time. However, health care managers are not always aware of the failure until follow-on activities are undertaken.
After a patient has been seen by a physician or is leaving the hospital after surgery, there is a likely need for further services: a child with an ear infection has to return in 10 days for another check-up to make sure the infection is no longer present; after hip surgery a patient may need to be relocated to a rehabilitation facility to learn to walk again. These additional services are called follow-on value-adding service activities. A new mother with a child's first ear infection has no idea about returning. An unexpected broken hip, surgery, and then the need for additional care is not something most families research until it happens. If the health care provider has thought through the follow-on care and provides literature, assistance with placement in another facility, and so on, consumers will leave with a more favorable attitude about the experience.
PERSPECTIVE 8–5 Consistent Care Really Works
In one year a patient with uncontrolled diabetes visited 52 different emergency departments including 42 visits to the emergency department (ED) at Providence St. Peter Hospital in Olympia, Washington. After being placed in the “Consistent Care” program at the hospital and assigned a primary care provider, the patient's ED visits dropped from 42 to eight after two years and zero the following year.
Providence St. Peter Hospital initiated Consistent Care in 2003 to address a problem that all EDs have – patients with chronic or severe health problems or substance abuse issues over using the ED. Consistent Care is designed to guide treatment decisions for repeat ED patients. It involves community health clinics, mental health providers, private physicians, and other partners in an effort to reduce inappropriate use of the ED, improve patient health, and enhance the capacity and integration of the community's limited health care resources.
Consistent Care is an interdisciplinary approach that provides members of the community with resources to assist in addressing health care needs of those who over use the ED. In 2011, the program received a NOVA award from the American Hospital Association in recognition of its hospital-led partnership to improve community health.
The program identifies patients who visit the ED at least twice in one month or four times in six months and then examines their cases for narcotic dependency, mental health issues, and other factors. A team of ED staff, primary care physicians, mental health professionals, and case managers meet to identify appropriate patients and develop individual care plans. The care team attempts to coordinate the medical needs and improve communication between the different professionals caring for the patient.
Consistent Care has already served more than 600 people. About 90 percent of the patients have mental health illness or substance abuse problems. The hospital has seen ED visits for the group cut in half. A study of the program indicated that Consistent Care saves the hospital more than $9,000 per patient, with the overall savings amounting to about $5.4 million in ED-related charges. Further, the program has reduced waiting time in the ED for other patients.
Consistent Choice has been expanded to four other hospitals. Soon a new web-based repository will be introduced to allow the immediate identification of frequent users of ED services at participating hospitals. This information can be shared by appropriate individuals and ensure better-coordinated care.
Source: Pete Davis, “Consistent Care Curbs Inappropriate ED Use,” AHA News 47, no. 17 (2011), p. 5.
Positioning strategy: Differentiation based on quality, upscale image.
After a doctor's visit, can the patient easily find the appointment desk? Is the employee that handles follow-on appointments knowledgeable concerning the length of time it will take for a patient's next visit? Do these employees know that they represent the entire organization to the patient? Customer capital is the value of customer relationships and the contribution this value makes to future growth prospects. Customer capital includes an organization's customer base, customer relationships, customer potential, and brand recognition. Although the specifics vary by industry, it has long been understood that it costs more to gain a new customer than it takes to retain a customer. Given that this is true, it is logical to assume that the customer franchise is an asset of real worth. Establishing lifetime relationships with customers is the focus of the smart 21st-century organization because it leads to competitive advantage.37 Follow-on activities can cement or destroy a good customer relationship.
To achieve high levels of patient satisfaction, Baptist Hospital in Pensacola, Florida felt that it needed to become the employer of choice.38 It monitors employee satisfaction as well as customer satisfaction. Managers' performance is measured in five areas – customer service, quality (length of stay), expense management, employee turnover, and growth – and compensation is linked to accomplishing objectives.
Matching After-Service to the Strategy
As with pre-service and point-of-service activities, after-service activities must contribute to the accomplishment of the selected strategy. These operations and marketing activities may be quite important in an effective strategy. Follow-up, billing, and follow-on activities humanize the services, reduce hassles and frustration, and provide for continued care. Such activities often make the difference between a positive and negative health care experience and can differentiate the service and create competitive advantage. Effective after-service activities are typically of high value, often rare, fairly easy to develop, and are sustainable. These activities can be the source of at least short-term competitive advantage. However, these areas are often ignored by many health care organizations and thus those organizations that do them well may create a long-term advantage.39 Therefore, careful attention should be given to understanding the after-service requirements of the selected strategy. Strategic managers must decide if the activities should be maintained or changed.
Maintaining After-Service Activities
When the requirements of the selected strategy match the characteristics of the current after-service activities, the manager should develop strategies to maintain the current after-service strengths of the organization through its resources, competencies, and capabilities. Likewise, those after-service activities that have resulted in a competitive advantage should be protected and maintained. In maintaining after-service activities, strategic managers should continue to:
• Emphasize and train employees on telephone and email communication and etiquette.
• Emphasize patient satisfaction.
• Improve the “readability” of billing statements.
• Stress the importance of correct billing statements and ensure their accuracy.
• Develop relationships in the referral network to facilitate follow-on activities.
Changing After-Service Activities
If the requirements of the strategy indicate that the present after-service activities should be changed, then explicit strategies must be implemented. In addition, where internal environmental analysis has indicated that follow-up, billing, or follow-on is a weakness resulting in competitive disadvantage, change strategies should be developed. Strategic managers who want to change after-service activities should:
• Make follow-up an explicit part of patient (customer) care.
• Keep a log of patient follow-up as a part of the patient/customer record.
• Train employees on telephone and email communication and etiquette.
• Emphasize customer satisfaction at staff meetings.
• Redesign the billing statement with the assistance of a variety of stakeholders, including patients and define complicated medical terms.
• Inform customers about billing procedures.
• Clear any confusion about billing charges and which charges are to be paid by insurance.
• Continue to improve relationships with payers.
• Develop more and better relationships with referral organizations.
• Develop a list of options for patients who need follow-on referral, explaining the characteristics and pricing of each.
Extending the Strategic Thinking Map
Value-adding service delivery strategies translate the directional, adaptive, market entry, and competitive strategies into action. As a critical component of the value chain, value-adding service delivery strategies, coupled with value-adding support strategies, set the stage for maintaining strategic momentum through the action plans and control of the strategies.
No position of leadership lasts forever. Every health care organization that succeeds at differentiation serves as a model for new competitors.40 The dynamic health care market and ever-changing technology mean that no competitive advantage can be sustained in the long run without a great deal of thought and effort. To further complicate the strategic process, the long run itself is becoming shorter as the rate of change becomes increasingly rapid.
In conjunction with external environmental analysis, service area competitor analysis, and internal analysis, value-adding service delivery strategies attempt to reposition the health care organization in its environment to create new competitive advantages. Although there are maps for developing value-adding service delivery strategies (see Exhibit 8–9 for an example), using a compass to creatively develop new strategies for pre-service, point-of-service, and after-service delivery can rejuvenate competitive advantage.
EXHIBIT 8–9 Strategic Thinking Map for Value-Adding Support Strategies for a Long-Term Care Organization
Managing Strategic Momentum – Service Delivery Strategies
Just as the success of the directional, adaptive, market entry, and competitive strategies of the organization must be evaluated as an ongoing part of managing the strategy, the service delivery strategies often must be adjusted as managers learn by doing. This type of change represents an evolutionary alteration or a strategic adjustment. Lorange, Morton, and Ghoshal referred to this as managing the strategic momentum and explained, “The basic continuity of the business is still credible, and one can hence speak of an extrapolation of the given strategy, even though a lot of operational changes may be taking place. The challenge here is to manage the buffeting of the given strategy and to maintain the strategy on course.”41
In the end it is implementation that has to be effective and efficient. Changes in the “way we do things” represent evolutionary change. Each of the value-adding strategies – service delivery and support – should be examined separately to determine whether management has correctly defined the role of these strategies in supporting the organization's overall strategy. Strategic managers must determine whether the service delivery, support strategies, and action plans are well integrated and support one another. The questions presented in Exhibit 8–10 provide an evaluation of the effectiveness of the service delivery strategies.
EXHIBIT 8–10 Strategic Thinking Map for Evaluating Service Delivery Strategies
The logic underlying these questions is that the organization's strategy is fundamentally sound but the organization's performance in carrying out service delivery may not be as effective or efficient as it could be. Adding value is an ongoing process and requires the value-adding support strategies to be in concert with the value-adding service delivery strategies. The value-adding support strategies are discussed in Chapter 9.
Lessons for Health Care Managers
Because of the competition and complexity in the market, health care providers must add value to survive. The value chain consists of value-adding service delivery strategies that are primarily operations (clinical) and marketing oriented as well as value-adding support strategies that include organizational culture, organizational structure, and strategic resources.
The directional, adaptive, market entry, and positioning strategies are implemented through value-adding service delivery, including pre-service, point-of-service, and after-service strategies. Pre-service activities include market research to understand the customer and marketing research to understand the customer's reactions to the organization's marketing efforts. A variety of health care customers – including physicians, patients, third-party payers, volunteers, employees, and so on must be considered. Patients have to be admitted to a hospital by a physician; third-party payers influence physician choice, length of stay, and so on; volunteers and employees may also be patients; government entities interpret the need for additional health care subsidies from the public. In addition, pre-service includes segmentation to select the target market and determination of the services that will satisfy the target market. Further, decisions have to be made concerning branding as well as pricing, promotion, and distribution/logistics.
Point-of-service delivery is oriented around patient care and delivery – clinical and marketing activities. Marketers study the customer and market to suggest the manner of care delivery, while clinical personnel deliver care. Properly implemented mass customization is a way to deliver efficient and effective care.
After-service activities include both clinical (next appointments, further services) and marketing (determining how to satisfy customers through new products/services that are needed) follow-up activities. Staff could make clinical calls to inquire how the patient is doing and whether additional medication is needed. Marketing follow-up is generally in the form of patient satisfaction studies. Billing is another important after-service activity, as it is the time when the consumer decides if value has been received. Follow-on activities include nursing home care arrangements after hospitalization, arranging home care, and other similar activities. Chapter 9 examines implementation strategies for the lower half of the value chain – the value-adding support strategies.
Health Care Manager's Bookshelf
James C. Collins, Good to Great: Why Some Companies Make the Leap … and Others Don't (New York: Harper Collins, 2001)
Good to Great is an innovative study of 1,435 companies, 11 of which were deemed to be great by the author. The 11 great companies produced cumulative stock returns at or below the general stock market for 15 years, then punctuated by a transition point, had cumulative returns of at least three times the market over the next 15 years. Actually, the companies averaged cumulative stock returns of 6.9 times that of the general stock market.1 An important aspect of Collins' research is that he did not “study success” but rather the contrast between highly successful and less highly successful organizations. The organizations that failed to achieve greatness were studied as well as those that did achieve phenomenal outcomes.2 Collins' study provided a new and unique angle to much of strategy research.
There were several factors behind the transformations from good to great, however a “Level 5” leader was often the key. This individual has a paradoxical mix of traits – extreme personal humility and intense professional will. Level 5 leaders do not begin with vision and strategy but with an attention to people. They confront the darkest situation with the absolute faith that they can prevail in the end. This strategy is called the Stockdale Paradox, named after Vietnam prisoner of war Admiral James Stockdale.
Other factors involved in the transformation were getting the right people on the bus (in the right jobs) and the wrong people off, and creating a culture of discipline. In addition, good-to-great transformations take time. They begin slow and gain momentum, and require an understanding of three related concepts – what the organization can be best at in the world, how its economics work, and what ignites the passions of its people. At the same time, the book offers a challenging caution. Most people can do remarkable things, but almost no one can do all things remarkably.3
Good-to-great research was initiated in health care organizations ranging in size from 15 to 854 beds.4 In addition, 226 health-related organizations were analyzed relative to their cost per case mix-adjusted discharge. Organizations in the 75th percentile or higher were labeled quantum improvers. Quantum improvers consistently set non-negotiable goals, focused on their key businesses, and used a “tight–loose–tight” approach. Finally, quantum improvers maintained a culture of accountability but were not driven by threats.
Other executives have asked whether it is possible to go from good to great in health care. Collins is clear in his answer – YES. The distinction is not between business and health care but rather between great and good.5 However, the standards are different for business and health care. In business, greatness is about returns to investors where as in health care, greatness is about delivering on the mission and making a distinct impact in view of organizational resources. Collins believes there are probably more Level 5 leaders in health care than in business because in health care there are many people passionate about the “cause” of the organization and for the improvement of patient lives.
REFERENCES
1. James C. Collins, Good to Great: Why Some Companies Make the Leap … and Others Don't (New York: Harper Collins, 2001).
2. Matthew Boyle, “Questions for Jim Collins,” Fortune 155, no. 3 (2007), p. 19.
3. John Coné, “Built to Be Great,” T + D 56, no. 8 (2002), pp. 22–28.
4. Shannon K. Pieper, “Good to Great in Healthcare: How Some Organizations Are Elevating Their Performance,” Healthcare Executive 19, no. 3 (2004), pp. 20–26.
5. Dave Carpenter, “Reaching New Heights,” Hospitals & Health Networks 80, no. 5 (2006), pp. 88–41.
KEY TERMS AND CONCEPTS IN STRATEGIC MANAGEMENT
After-Service Strategy
Follow-On
Follow-Up
Market/Marketing Research
Marketing Research
Mass Customization
Point-of-Service Strategy
Pre-Service Strategy
Target Market
Value-Adding Service Delivery Strategies
Questions for Class Discussion
1. Explain the linkage between internal environmental analysis and the value-adding service delivery and support strategies. How are the value-adding strategies linked with action plans?
2. Explain the difference between pre-service, point-of-service, and after-service activities. What elements are central to each? Provide an example of how an organization might create a competitive advantage in each of these areas.
3. For a health care organization, explain why pre-service, point-of-service, and after-service activities are fundamentally marketing and clinical in nature.
4. Pre-service, point-of-service, and after-service are different for health care than for producing and distributing a tangible product. Explain some of these differences.
5. Discuss the various ways that health care providers can define the market they want to serve.
6. What role does marketing play in the implementation of adaptive strategies for expansion? Is marketing ever involved in contraction?
7. Does marketing have a role to play in the market entry strategies? Explain your answer.
8. What is mass customization? In what circumstance does mass customization become useful?
9. What is “evolutionary” strategic change?
Notes
1. Joseph L. Bower and Clark G. Gilbert, “How Managers' Everyday Decisions Create or Destroy Your Company's Strategy,” Harvard Business Review 85, no. 2 (February 2007), p. 76.
2. Richard L. Clarke, “The Drive for Value in Health Care,” Healthcare Financial Management 65, no. 1 (2011), pp. 124–125.
3. John P. Kotter, “Leading Change: Why Transformation Efforts Fail,” Harvard Business Review 85, no. 1 (January 2007), pp. 96–103.
4. Sharon Ponsonby and Emily Boyle, “The ‘Value of Marketing' and ‘The Marketing of Value' in Contemporary Times – A Literature Review and Research Agenda,” Journal of Marketing Management 20, no. 3/4 (2004), pp. 342–356.
5. John Callahan and Eylan Lasry, “The Importance of Customer Input in the Development of Very New Products,” R&D Management 34, no. 2 (2004), pp. 107–121.
6. Jacquelyn S. Thomas, Robert C. Blattberg, and Edward J. Fox, “Recapturing Lost Customers,” Journal of Marketing Research 41, no. 1 (2004), pp. 31–40; Cheryl L. Stavins, “Developing Employee Participation in the Patient-Satisfaction Process,” Journal of Healthcare Management 49, no. 2 (2004), pp. 135–140.
7. Ed Finkel, “A Well-Oiled ER: Streamlined Emergency Room Procedures Improve Everyone's Satisfaction,” Modern Healthcare 33, no. 50 (December 15, 2003), pp. 26–27; Koichiro Otani and Richard S. Kurz, “The Impact of Nursing Care and Other Healthcare Attributes on Hospitalized Patient Satisfaction and Behavioral Intentions,” Journal of Healthcare Management 49, no. 3 (2004), pp. 181–198; H. K. Kassean and D. Vythilingum, “Managing Change: Enhancing Nurses' Competency for Nutritional Care of Elderly Patients,” Journal of Health Management 7, no. 1 (2005), pp. 129–139.
8. “Smart Consumers Present a Marketing Challenge,” Hospitals (August 20, 1990), pp. 42–47. See also Sunil Gupta, Donald R. Lehmann, and Jennifer Ames Stuart, “Valuing Customers,” Journal of Marketing Research 41, no. 1 (2004), pp. 7–14.
9. “It's a Woman's Market …,” Hospitals and Health Networks 67, no. 18 (September 20, 1993), p. 30.
10. http://www.ncqa.org/Pages/about/overview3.htm
11. Timothy Hoff, “Deskilling and Adaptation Among Primary Care Physicians Using Two Work Innovations,” Health Care Management Review 36, no. 4 (2011), pp. 338–345.
12. Scott M. Davis, “The Power of the Brand,” Strategy & Leadership 28, no. 4 (2000), pp. 4–9; M. Tolga Akcura, Fusun F. Gonul, and Elina Petrove, “Consumer Learning and Brand Evaluation: An Application on Over-the-Counter Drugs,” Marketing Science 23, no. 1 (2004), pp. 156–170; Timothy Dewhirst and Brad Davis, “Brand Strategy and Integrated Marketing Communications (IMC),” Journal of Advertising 34, no. 4 (2005), pp. 81–92.
13. Ibid.
14. Kevin Clark and Mary McNeilly, “Case Study: IBM's Think Strategy – Melding Strategy and Branding,” Strategy & Leadership 32, no. 2 (2004), pp. 44–49; J. Daniel Beckham, “Marketing vs. Branding,” Health Forum Journal 43, no. 2 (March–April 2000), pp. 64–68.
15. Jennifer Gordon, “Medical Kiosks at Kroger Stores Add Laboratory Services,” Business First 20, no. 29 (February 20, 2004), pp. 6–7.
16. Mary Wagner, “Mobile Mammography Tries to Enhance Its Image; Revenue Through Strategic Ties,” Modern Healthcare (January 8, 1990), pp. 78, 286.
17. Curtis P. McLaughlin and Arnold D. Kaluzny, “Building Client Centered Systems of Care: Choosing a Process Direction for the Next Century,” Health Care Management Review 25, no. 1 (winter 2000), pp. 73–82. See also Richard G. Best, Sylvia J. Hysong, Jacquelyn A. Pugh, Suvro Ghosh, and Frank I. Moore, “Task Overlap among Primary Care Team Members: An Opportunity for System Redesign,” Journal of Healthcare Management 51, no. 5 (2006), pp. 295–307.
18. Tomoyoshi Yamazaki, Mitsuru Ikeda, and Katsuhiro Umemoto, “Enhancement of Healthcare Quality Using Clinical-Pathways Activities,” VINE 41, no. 1 (2011), pp. 63–70.
19. McLaughlin and Kaluzny, op cit.
20. Julie Miller, “Mass Customization Suits Varied Needs of Large Employers: Not Too Big and Not Too Small, Disease Subcategories Reduce Administrative Burdens of Disease Management,” Managed Healthcare Executive 13, no. 9 (September 2003), pp. 46–48.
21. Julie T. Chyna, “Enhancing Your Public Image,” Healthcare Executive 16, no. 1 (January–February 2001), pp. 7–11.
22. Robert C. Ford and Myron D. Fottler, “Creating Customer-Focused Health Care Organizations,” Health Care Management Review 25, no. 4 (fall 2000), pp. 18–33; John P. Conbere and Sharon K. Gibson, “Transforming Perspectives on Health Care: Outcomes of a Management Education Program for Physicians,” Journal of the American Academy of Business 10, no. 2 (2007), pp. 263–268.
23. Ingo Bobel and Amirita Martis, “Value Creation in Health Care: The Case of the Centre Hospitalier Princess Grace (CHPG) in Monaco,” Journal of Strategic Management Education 6, no. 2 (2010), pp. 1–36.
24. Ellen G. Lanser, “Ensuring a Customer-Focused Experience: Two Success Stories,” Healthcare Executive 15, no. 1 (January–February 2000), pp. 8–23.
25. Lucy A. Savitz, Arnold D. Kaluzny, and Diane L. Kelly, “A Life Cycle Model of Continuous Clinical Process Innovation,” Journal of Healthcare Management 45, no. 5 (September–October 2000), p. 308.
26. Michael Hammer, “Deep Change: How Operational Innovation Can Transform Your Company,” Harvard Business Review 82, no. 4 (2004), p. 86.
27. See Ingrid M. Nembhard, Jeffery A. Alexander, Timothy J. Hoff, and Rangaraj Ramanujam, “Why Does the Quality of Health Care Continue to Lag? Insights from Management Research,” Academy of Management Perspectives 23, no. 1 (2009), pp. 24–42; Pouyan Esmaeitzadeh, “How to Manage Innovation and Flourish in Hospitals' Clinical IT,” Academy of Health Care Management 7, no. 2 (2011), pp. 60–89.
28. Ulrike Urkhardt, Astrid Erbsen, and Marjam Rudiger-Sturchier, “The Hospitalist as Coordinator: An Observational Study,” Journal of Health Organization and Management 24, no. 1 (2010), pp. 22–29.
29. Jill L. Sharer, “The New Medical Team: Clinicians, Technicians, and Patients?” Healthcare Executive 15, no. 1 (January–February 2000), pp. 12–17.
30. Julie T. Chyna, “Physician–Health System Partnerships: Strategies for Finding Common Ground,” Healthcare Executive 15, no. 2 (March–April 2000), pp. 12–17.
31. “Patient Satisfaction Survey,” Trustee 53, no. 9 (October 2000), p. 24.
32. Julie T. Chyna, “The Consumer Revolution: An Age of Changing Expectations,” Healthcare Executive 15, no. 1 (January–February 2000), pp. 7–10.
33. Paul D. Cleary, “The Increasing Importance of Patient Surveys: Now that Sound Methods Exist, Patient Surveys Can Facilitate Improvement,” British Medical Journal 319 (September 18, 1999), pp. 720–721.
34. “Anxious to Please Patients, Hospitals Should Remember that Bills Anger Customers Most,” Health Care Strategic Management 18, no. 11 (November 2000), p. 12.
35. Ibid., p. 14.
36. Ibid.
37. Jan Duffy, “Measuring Customer Capital,” Strategy & Leadership 28, no. 5 (2000), p. 11.
38. Ed Egger, “Inspiring Patient, Employee Satisfaction Turns Florida Hospital into Top Performer,” Health Care Strategic Management 17, no. 6 (June 1999), p. 13.
39. Jayne Greening, “How Can We Improve the Effective Engagement of Doctors in Clinical Leadership?” Leadership in Health Services 25, no. 1 (2012), pp. 20–30.
40. George S. Day, Market Driven Strategy, Process for Creating Value (New York: Free Press, 1990), p. 163; Vaidyanathan Jayaraman and Yadong Luo, “Creating Competitive Advantage through New Value Creation: A Reverse Logistics Perspective,” Academy of Management Perspectives 21, no. 2 (2007), pp. 56–73.
41. Peter Lorange, Michael F. Scott Morton, and Sumantra Ghoshal, Strategic Control (St. Paul, MN: West Publishing, 1986), p. 11.
(Ginter 307)
Ginter, Peter M. The Strategic Management of Health Care Organizations, 7th Edition. John Wiley & Sons UK, 2013-03-11. VitalBook file.
