As important as health care reform may be, the noise it has generated has diverted attention from a central reality. The health care industry was already in the throes of reform long before most people had ever heard of accountable care organizations. Two developments signaled that important changes were under way. One was the accelerating consolidation of private practice, and the other was the emergence of retail-oriented delivery alternatives, particularly convenience clinics.
With considerable justification, American medicine often has been described as a cottage industry. Although many group practices are as well-run as the best service providers in other industries, the quality of management falls off significantly as you move from larger groups to small practices, including solo practitioners. Management systems and anything resembling a retail mentality largely are absent. Physicians in these small practices are dependent on front-desk and back-office staff who might be trained inadequately and undersupervised. Even physicians with superb clinical skills are sabotaged by their own practice systems and personnel.
Although there are growing instances of large multispecialty and single-specialty clinics being acquired by hospitals, most deals involve small practices. For many of the acquiring hospitals, the light is beginning to click on as leaders realize they have become the proud owners and proprietors of, well, a cottage industry with all the inefficiencies and fragmentation that it implies. And for many hospital executives, the question being mumbled is: "Now what?"
The answer is: "Transform them." This is not a message that likely will be well-received among the growing number of physicians employed by hospitals with an expectation that little will change. But change is what's needed—most importantly among office staff, many of whom seem to be well-entrenched in a service ethos best exemplified by the Department of Motor Vehicles.
A Physician Practice Is a Retail Operation
For hospitals, the challenge will be one of transforming their recently acquired cottage industry into an efficient and differentiated retail operation. Make no mistake: A physician's practice is a retail operation from a patient perspective. Patients don't evaluate their experience on the basis of how it might be better than what they could get at the big public hospital downtown or what their mothers were willing to settle for. They evaluate it based on their experience at Starbucks and the Marriott.
And "they" increasingly are not the compliant care seekers of Tom Brokaw's "greatest generation." They are hyperactive, demanding, discerning baby boomers unlikely to be awed by a medical degree hanging on the wall. Don't get me wrong. I think it would be better if we were still a nation of World War II vets, but we're not.
When it comes to transforming practices, improving efficiency may be the easier challenge. The key to significant improvements in efficiency across multiple practice settings is the same as it is in the hospital—standardization. While differences in practice operations will vary based on specialty, there is much that can and should be standardized to accelerate efficiency, including billing, collections, employment standards, patient records and appointment scheduling, as well as information technology. All of these can be applied consistently in multiple practices regardless of specialty or size.
Standardization is also fundamental to clinical quality, but the percentage of clinical activities that can be standardized is smaller, because specialty differences are real and they matter. Despite this, there is likely a solid 20 percent of clinical care that can and should be standardized, whether the care is for cancer or congestive heart failure.
The bigger challenge in transforming physician practices will be creating a differentiated retail experience. Here, too, much can be standardized across all practices. All employees can wear consistent professional uniforms with a "system" logo well-displayed, look the patient in the eye and acknowledge his or her presence, inquire into the patient's experience, and ask if there are any unmet needs.
A differentiated retail experience is all about service quality. Quality of service is not the same as quality of a tangible product like an automobile or television. A tangible product can stand for itself. A service can't. Reliability and consistency are kings when it comes to service quality. Consumers evaluate the quality of a service based on whether their experience is reliably and consistently satisfying across time and space. In other words, "Do I get the same good service today that I got yesterday? Will I get the same service in your north office as I received in your south office?"
Much of the patient experience is wrapped up in interaction with front-office staff. In terms of time, the patient will interact much more with front-office staff than with patient care staff. Front-office staff behavior is reflected in phone calls, appointment scheduling and registration, as well as in the reception and waiting areas.
Key to transforming the patient's retail experience in the practice setting is transforming the front office. And key to transforming the front-office staff are training, combined with disciplined employee recruitment, and outplacement to replace those whose behavior is less than superior.
When it comes to building a robust retail orientation, hospitals should not delude themselves into thinking they have the internal capabilities to do the necessary training. Hospitals embody many strengths, but a retail mentality is not one of them. Experienced consultants and practice managers can help design and deliver training programs targeted to the unique needs of front-office staff.
The Patient Experience
What makes the challenge of transforming the patient experience more difficult than improving efficiency is that it requires a cultural shift. Cultural shifts are hard to pull off. Organizations that have achieved such shifts learned that it takes tough-minded resolve.
An important aspect of the long-term success of Southwest Airlines is its ability to design and maintain superior operating efficiencies. Other airlines eventually were able to match many of these operating advantages. What they have not been able to match are the attitudes of Southwest employees and the cultural advantages a spirit of hustle and responsiveness creates. Southwest trains but, more importantly, it hires people who match its cultural standards.
The patient experience extends beyond interaction. It includes physical facilities. Each Starbucks coffeehouse looks the same for a reason: reliability and consistency. Moving many practice operations into attractive new facilities will be cost-prohibitive in the short run. But there's much that can be done to create consistency in relatively variable physical spaces. Common colors, signs, art, furniture and careful attention to any areas where there are high levels of patient interaction can upgrade and standardize facilities.
Not before a differentiated patient experience is well in hand should attention be turned to building a brand and advertising the unique benefits of your patient experience versus that of your competitors.
Southwest was willing to give up one part of the market to obtain a tight grip on another part. Passengers who wanted first-class and advanced seat reservations found that Southwest's operating model didn't accommodate them. But for passengers interested in quick point-to-point flights at an affordable cost, the Southwest model worked just fine.
An important part of the Southwest story is its role as a disruptive competitor in what had become a staid industry. From humble beginnings in an abandoned hangar, Southwest grew to be the industry's most consistently profitable airline and one of its largest. There was a point when well-entrenched executives at major airlines thumbed their noses at the upstart. That changed.
The Rise of Convenience Clinics
A similarly disruptive situation potentially exists in health care with many hospitals and physicians discounting the proliferation of convenience clinics in their markets. Typically staffed only by a nurse practitioner or physician assistant, these clinics already have established tight operating models, and they've developed a retail orientation that delivers high levels of patient satisfaction. They are continuing to improve their operations and the experience they deliver.
MinuteClinic is expanding aggressively. It has grown to 500 locations in 26 states. It has achieved a 95 percent patient-satisfaction level from more than 8 million patient visits. The organization is owned by publicly traded CVS Caremark.
Those who think convenience clinics and retail medicine will remain trapped in storefronts and drugstores should check out Nason Medical Centers in Charleston, S.C. Located in beautiful and expansive facilities, these freestanding ER-urgent care centers consistently deliver a superior experience and communicate this message with frequent television and billboard advertising.
Nason Medical Centers are a solid example of what a disruptive competitor looks like once it begins to pick up speed. A visit to www.nasonmedical.com will provide a clearer picture of what hospitals might find themselves up against in the coming years (there are webcams showing live images of waiting rooms).
A critical thing to remember about convenience clinics and urgent care centers is that they all make referrals. For hospitals and specialists, it is good to think in terms of "referral share"—in other words, what percentage of the total referrals generated in your market are you getting? As the number of patients seen in retail clinics grows, so will the referral share they control. The lessons are straightforward. Make friends with retail clinics and carefully develop your own retail orientation in the practices you own or influence.
The Franchise Model
It will be important for hospital leaders to consider how the advantages of a superior patient experience delivered through differentiated physician practices can be extended to include independent physicians willing to be closely aligned with colleagues employed by the hospital. There is precedent for this in other industries. It's called a franchise. Franchise agreements are signed with independent entrepreneurs who commit to operating consistently according to franchise standards.
A fast food franchise is one example. The franchisee agrees to use consistent standards related to facilities, food production, advertising, uniforms and staff training as well as management. In return, the franchisee receives the advantage of a proven business model and the benefit of economies of scale related not only to purchasing, but also intellectual property, infrastructure and marketing.
Transforming physician practices into differentiated retail operations is something hospital leaders should consider undertaking in partnership with other hospitals. The overall costs will be high, but much of the necessary investment can be amortized across practices affiliated with multiple hospitals and health systems, because the same consistent methods, infrastructure and standards will be as relevant in one market as another. It also may be possible to share a common brand and advertising campaign.
Although the full impact of health reform remains uncertain, there are a couple implications for which there is general agreement. Reimbursement will decline, and results will need to be demonstrated. Increasing profitable market share will be a necessary pathway to offsetting declining reimbursement. And demonstrating results will require physicians and nonphysicians to work more closely with one another and, in many specialties, with hospitals.
Transforming rapidly consolidating physician practices from a cottage industry into an efficient and differentiated retail operation should be at the top of every hospital's list of strategic priorities.
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.