Strategic coherence is an earmark of a competitively sustainable organization. By strategic coherence, we mean organizationwide collaboration, coordination and allocation of resources to create unique, valuable and sustainable advantages. Groups with strategic coherence move with efficiency toward a place worth going. They accomplish as a group things not possible for individuals to accomplish alone.
Given the dramatic increase in the number of physicians employed by hospitals, one might expect growing strategic coherence among groups comprising these physicians. But such coherence has been slow in coming. Among the possible explanations for this lag may be a presumption among hospital leaders that all that needs to be done has been done. After all, physician employment has been secured with contracts and noncompete agreements, compensation plans have been put in place, and electronic health records slowly are being adopted.
Another explanation for the apparent lag may be that even those who sense the job is not done lack clarity on the important things that remain to be done. Absent such clarity, physician employment by hospitals too often continues to be what it started out as — a defensive move to buy and protect market share and revenues the hospital already had.
Today, many hospitals would be hard pressed to demonstrate that the physicians they employ are generating more value as a group than they were when they were independent. To be sure, achieving strategic coherence is a complex undertaking in every organization and likely will be an even bigger challenge when an organization has been cobbled together from a variety of formerly independent pieces, as have most of the physician groups owned by hospitals today.
Strategic coherence begs two questions: "Coherent toward what end?" and "Coherent along what path?" Answering these questions involves strategy. At the heart of strategy is differentiation that generates value. Harvard's Michael Porter has been a tireless advocate for differentiation. Indeed, he has encouraged organizations to avoid competing to be the best — to compete to be different instead. And he has emphasized that all differentiation ultimately derives from a unique chain of activities an organization pursues to create value.
Absent differentiation, goods and services as well as organizations and individuals become commodities. Commodities generate thin margins and are always subject to the demands of buyers whose only interest is the lowest price.
Interestingly enough, many physicians long have understood the importance of differentiation. William Osler once suggested that success in practice depends on "availability, affability, and ability, in that order." Osler, considered by many to be the father of American medicine, was a wise man. His wisdom provided much of the foundation upon which the international standing of Johns Hopkins would be built. And it is no coincidence that when the Mayos were designing their clinic they took many of their founding principles from Osler and his colleagues at Hopkins. So, too, did the architects of Duke Medical Center as well as many of America's second wave of premier academic medical centers.
The success of institutions like Hopkins, Mayo and Duke was not derived from their clinical and research accomplishments alone. Embodied in "availability, affability and ability" was their instinct for differentiation based on value. It is an instinct still echoed many decades later by Fred Loop, M.D., former CEO of the Cleveland Clinic: "Over time, if someone is taking your market share overall, or in a particular specialty … You'll find there is always a good reason. Most likely it is your poor service, your bad results, or delayed access."
The Five A's
Perhaps if Osler were alive today, he might be persuaded to add "affordability" and "accountability" to his keys to success, resulting in what we would describe as the "five A's."
While the five A's offer a framework for physician differentiation that appears disarmingly simple, it is worth remembering the sage advice of Oliver Wendell Holmes Jr. who said, "I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity." The five A's represent the kind of simplicity Holmes alluded to.
Availability describes the extent to which physicians make themselves available. How quickly can a patient get an appointment? How long does the patient wait in the office? How much time does the physician spend with the patient? How quickly does a specialist get back to a referring primary care physician? Ready follow-up by phone and email or a secure patient portal can be a significant differentiator. Front office staff, including receptionists and medical assistants, can have a huge impact on physician availability because they can act as facilitators or barriers.
Research by Harris Interactive indicates that time spent in the waiting room is considered "very" or "extremely" important by more than 60 percent of patients. Physicians must ensure that they are available at convenient times and in convenient locations. Most consumers in relatively urbanized markets resist driving more than 15 minutes to see a primary care physician, although they will travel farther to a specialist.
Physicians whose offices are buried in large medical complexes with traffic, parking and navigation challenges likely will have their availability suffer. Physicians in close proximity to a variety of specialists benefit from enhanced availability because proximity facilitates quicker, more comprehensive and more responsive consultation. Health plans have responded to the power of availability by favoring networks of physicians that are well-distributed geographically, able to provide ready access to their enrollees. The Cleveland Clinic upped the ante on the availability of its physicians by offering next-day appointments, which were promoted in a national ad campaign.
Atlanta-based Emory Healthcare has focused on availability as it has developed its primary care network. It used disciplined analysis to identify ZIP codes where it can expand access to its primary care network. It also identified independent primary care physicians for inclusion in a clinically integrated network, acquired and started primary care practices, and grew capacity among existing practices by adding midlevel providers and extending hours.
Affability speaks to the physician's interpersonal skills, including his or her ability to engage a patient in a way the patient experiences as empathetic and responsive. Physicians who demonstrate an interest in the patient beyond the history, physical and diagnosis are likely to be regarded as more affable. Physicians who keep their hand on the doorknob are likely to be regarded as less so. Office staff and nurses who are aloof color patient perspectives of a physician's affability, and this is true in the practice setting as well as in the inpatient environment.
Affability extends beyond interaction with patients; it includes how the physician relates with colleagues. A specialist disinterested in the quality of interaction with referring physicians can be a liability. Physicians obviously relate beyond the bounds of their professional responsibilities at soccer games and community events, for example. Here, too, it pays to be likable.
Charles Mayo, M.D., captured the essence of conveying affability: "When I am your doctor, I try to imagine the kind of doctor I'd like if I were you. Then I try to be that kind of doctor." Mayo Clinic has reinforced its tradition of patientcentered affability through disciplined staff selection processes as well as training programs that emphasize behaviors like acknowledging patients, giving them undivided attention, expressing compassion and restating key information.
Ability is represented by the physician's experience, training, outcomes and reputation. A physician's performance related to the outcomes he produces is becoming increasingly transparent. In the future, any claims related to physician ability will need to stand the test of demonstrated quality and safety.
Ability may be more important for specialists than for primary care physicians because it reflects procedural capabilities as well as the capacity to bring advanced technology to bear. Some physicians have differentiated themselves by promoting their ability to deliver on leading-edge capabilities. Demonstrating ability is arguably more complex for a primary care physician because it includes serving as a diagnostician and coordinator of care as well as a point of access to subspecialty care.
Research by McKinsey in 2007 found that 42 percent of patients indicated they had requested that a physician send them to a specific hospital. The reputational aura of the hospital or group practice with which a physician is affiliated can have a significant impact on perceptions of that physician's ability. For example, consider the perceptual influence of a physician's affiliation with the national and international reputations of Mayo Clinic or Johns Hopkins.
On a regional and local basis a hospital or group practice also may have a significant edge relative to the aura its reputation can convey to perceptions of a physician's ability. Typically, academic medical centers generate the strongest aura on a regional level and they are usually followed in this regard by larger tertiary community hospitals. Some hospitals have differentiated themselves and the physicians on their medical staffs by affiliating with academic medical centers like Duke.
The Medical University of South Carolina has enhanced its reputational aura through a multifaceted marketing campaign embodied in the slogan "Changing What's Possible." The campaign positions its faculty physicians as delivering care that's at the leading edge. It has reinforced this positioning by building subspecialty outpatient facilities throughout its market to make its advanced subspecialty capabilities more available, and by extending its brand to community physicians and their hospitals.
Affordability. The real price of care delivered by physicians remains obscured and fragmented. A patient who has received care in a physician's office often will be required to make a co-payment. Added to this are the separate fees billed by consulting physicians, including radiologists and ancillary providers like labs. These costs are on top of the cost of the insurance that might have been purchased. This fragmentation increases further when a patient incurs hospital charges.
For at least three generations, health care consumers have been insulated against the realities of price. This has given rise to seemingly irrational and wasteful behavior such as receiving routine primary care in a hospital emergency department. Such behavior is beginning to change, however, as employers, insurers and the government increase consumer sensitivity to the price of their care through rising copays and deductibles. This eventually will cause patients to consider more affordable methods and settings. They also will demand pricing information on which to base their purchasing decisions. Already, we are seeing more transparency on physician pricing.
The Cleveland Clinic has been aggressive in positioning its physicians as affordable by pursuing contracts for heart care with major employers in distant markets. These contracts feature allinclusive bundling that encompasses a fixed procedure price as well as the cost of travel and accommodations.
Accountability. Accountability involves more than measured performance. It includes a willingness to be held responsible for that performance. Accountability is not a foreign concept in medicine. The Hippocratic Oath is, first and foremost, a statement of accountability, both to patients and to physician colleagues. But a new kind of accountability is flooding into health care. It includes accountability for the value of care delivered — the combination of outcomes and cost.
Until recently there simply hasn't been much meaningful comparative data against which to judge value. This is changing as various organizations, governmental and nongovernmental, accelerate efforts to accumulate and report results. The Affordable Care Act now ties Medicare reimbursement to survey data that indicate how often patients wait more than 15 minutes to see a physician.
And there is another kind of accountability new to many physicians. As a member of a hospitalsponsored group practice or a network, a physician also must demonstrate accountability to its mission, values and vision. Indeed, it is this accountability that underpins strategic coherence and makes differentiation of a physician group possible.
There can be no accountability absent transparency. At the Cleveland Clinic, CEO Toby Cosgrove, M.D., has hammered home what transparency means when it is operationalized. Upon becoming CEO, he required every department at the clinic to publish booklets detailing outcomes. Every year, more than 40,000 copies are printed for public consumption. They are also mailed to referring physicians. In a 2013 article for Forbes, David Whelan concluded that "there is something reassuring about the swagger with which Cleveland Clinic pulls back the curtain on the quality of its care. Maybe other health systems will someday be just as bold."
As hospitals and health systems consider how to build sustainable success, they will find that Osler's wisdom provides a powerful way forward. That wisdom can be distilled into what might properly be called Osler's circle [see diagram below]. Osler's circle embodies the essence of strategy, which is to be different in a way that's meaningful and valuable. This requires focus. It requires deciding not only what to emphasize but, just as importantly, what not to emphasize.
The diagram incorporates a vector for each of the five A's. Physicians individually or as a group can be arrayed on each vector. This represents the physician's "strategic positioning." To be minimally competitive, a physician or group should be scored outside the inner circle on every vector. To be well-differentiated and, therefore, sustainable, a physician or group practice should have at least one vector on which they are outside the second circle.
A physician can be assessed qualitatively to generate a score of 1 to 10 on each vector. A variation of 360-degree evaluation can provide qualitative scoring input needed to determine where a physician or group should be arrayed. This should be done in a way that physicians will experience as nonthreatening. It should incorporate the input of the physicians being evaluated as well as that of their physician colleagues and other caregivers.
Increasingly, as more comparative data become available, quantitative measures can be used to validate, revise and sharpen qualitative assessments. Some vectors may be judged to be more important than others and can be depicted to give them more graphic emphasis in the diagram (a thicker line, for example).
The five vectors are interrelated. Impacting one can affect one or more of the others. For example, a physician whose eyes are fixed on a computer screen rather than on a patient is likely to be judged as not particularly "affable" but also as not "available." And, of course, a physician who is not sufficiently available may never get a chance to demonstrate "affability" or "ability."
A physician cannot be assessed outside his or her practice setting. Physician partners, nurses, office staff, as well as a practice's physical design and décor, all influence an individual physician's position on the vectors. Similarly, a surgeon cannot be separated from a patient's experience in the operating room, recovery room or nursing floor.
Although physicians have a significant impact on the performance of a hospital, they are not, except for a very few instances, in control of it. So, if nursing is subpar or administration weak, physician performance can suffer. A physician who uses a hospital with low patient satisfaction risks his or her affability, while a physician who uses a hospital with a poor reputation for quality compromises perceptions of his or her ability.
Similarly, you cannot separate a hospital or a group practice from the underlying performance of the individual physicians with which they are affiliated. Physicians who don't deliver acceptable outcomes not only compromise their patients and themselves, but they also compromise their physician community, including the colleagues who put their reputations on the line by referring to them. Likewise, physicians unable to schedule a referral patient in a timely fashion can create backlogs, frustration and dissatisfaction for patients and referring physicians that undermine the competitiveness of organizations with which they are associated.
The Role of the Hospital
Because they have much to gain, hospitals should consider seriously the many opportunities they have to support improvement of physician performance around the Osler circle. Pools of nurse practitioners and physician assistants can be employed by hospitals and deployed to enhance physician availability and affordability. Liaisons can facilitate the availability and expertise of physician colleagues. Service excellence training can be used to improve the affability of physicians and office staff. Hospitals can hire consultants to help physicians design their practice facilities to reflect contemporary retail settings that enhance the patient's overall experience.
Rather than focusing advertising campaigns on the institution, hospitals can put a human face on their marketing by promoting physicians and their capabilities. They can provide market analysis to identify ZIP codes and patient clusters that are demographically attractive for locating and expanding practices. They can supply consulting support to help physicians transition toward patientcentered medical homes and population health.
Hospitals can help physicians transition to EHRs while ensuring that their information systems deliver maximum benefit at the point of care. They can aggregate and report the data necessary to demonstrate the outcomes that growing physician accountability will require. And they can employ process re-engineering at the practice level to reduce costs and wait times while improving outcomes.
Differentiation of Independent Physicians
Together, the employed and independent physicians who are closely aligned with a hospital comprise its physician enterprise. Strategic coherence and differentiation should extend beyond those physicians employed by the hospital to include the independent physicians on staff. It is, after all, independent physicians who continue to drive the preponderance of utilization and market share for many hospitals and health systems.
Furthermore, Federal Trade Commission-compliant clinically integrated networks now make it possible for independent physicians to generate significant differentiation by acting in concert with one another and with their physician colleagues employed by hospitals. The standardization, collaboration, information systems and demonstrated results required to achieve FTC compliance result in meaningful integration among the participating physicians, which translates into demonstrably higher value for patients and payers. This can serve as a powerful point of differentiation that can be branded and marketed.
Also, adding independent physicians to a differentiated network doesn't add the carrying costs that employment does. It may also allow the physician enterprise to grow faster and more expansive than an employment model can.
No hospital asset is as valuable as physician differentiation — not buildings, not technology, not other hospitals in a multihospital chain. For hospitals and health systems, differentiation of physicians should be one of their most pressing strategic challenges.
Only by addressing the question of how physicians will create unique value will the investments of time, energy and dollars allocated to a physician enterprise provide sustainable returns for hospitals, physicians and, most importantly, for patients. But physician differentiation is an asset that will require continued attention and investment to build and use. Osler's circle can help to define where to focus that attention and investment.
Dan Beckham is the president of The Beckham Company, a strategic consulting firm based in Bluffton, S.C. He is also a regular contributor to H&HN Daily. Christopher Beckham is a senior manager for health care consulting at PYA in Atlanta.