All organizational leaders fight a continuing battle to avoid getting lost in the details of daily operations. The beginning of a new year is a perfect opportunity to step back and assess the larger forces at work in your environment, the role your organization should play, and the tasks that need to be done to succeed.
For hospital leaders in 2016, a broad view is more important than ever. Stakeholder demands for low cost and high quality are intensifying. The basic business model is changing. And new competitors are targeting legacy provider vulnerabilities with laser-like focus. Nothing short of transformation will do if America’s hospitals are to remain relevant. Yet nothing is harder to achieve.
Following are five tasks that I believe are key to that transformation. These form the basis of the hospital playbook for 2016.
The emerging fee-for-value payment system demands changes in the most basic aspects of a hospital’s value proposition, structure, and process. The changes necessary to operate in this new model are fundamental. They require care management across the continuum, robust clinical networks, risk-based contracting, operational efficiency, advanced consumer engagement, and sophisticated clinical and business intelligence – all in service of a new business model and a new kind of interaction between provider organizations and their patients. Most hospitals are likely to need some kind of partners to achieve these capabilities, introducing yet another change to be managed.
Hospitals need to establish a long-term roadmap that identifies their role in the value-based system and a plan for developing and rolling out the necessary capabilities. Equally important, hospitals need a structured, disciplined transformation process. That process requires executive oversight and involvement, specific transformation teams with clear goals, and a results-management function dedicated to supporting, driving, and achieving the organization’s goals for transformation. It will require physician involvement, management of political sensitivities, and addressing the right amount of detail at the right time. Ultimately, the process should combine a top-down and bottom-up framework in which leadership identifies essential initiatives and transformation teams focus on functional areas.
Rigorous Cost Reduction
Hospitals will need to achieve a deeper and more rigorous level of cost reduction. Our nation continues to struggle under the heavy burden of a financially unsustainable health care system. As the most expensive component of the health care system, hospitals will feel escalating pressure from government, commercial payers, employers and consumers to deliver care at a lower price. In this environment, cost reduction must become part of each hospital’s DNA.
At the same time, the very nature of cost and cost reduction is changing. What used to be a source of revenue — an episode of care — is rapidly becoming a cost, and hospitals will need to set up coordinated, data-driven care management to avoid unnecessary care and to treat people in the least expensive, appropriate settings.
Hospitals also will need to take a hard look at their delivery networks — most of which have developed over time and contain numerous inefficiencies, such as similar services being provided in locations within close proximity, some of which do not have the volume to support high quality or efficiency.
Yet, as I travel the country talking with hospital executives, I continue to note a reluctance to address cost reduction head on. Some organizations avoid tackling cost when revenue and profitability are healthy. Some sidestep the issue of labor costs, concerned about the effect on staff morale. Some are reluctant to even address the topic of cost with staff, concerned about seeming to undercut the focus on quality. Few, if any, organizations have developed a road map to make the complex transition toward the new types of cost management demanded by value-based payment.
Cost reduction is hard work. It requires challenging data collection and analysis, politically sensitive decisions, complex process improvement and vigilance to ensure that costs don’t creep back in. Yet, cost reduction done in a systematic fashion with an eye toward overall improvement can result in a stronger, better-performing organization.
The macroeconomic forces at play in health care make cost reduction inevitable. The question is whether you make those reductions when your back is against a wall, or while you are still in a position of strength.
A few months ago, I received a flu shot at Walgreens. The next morning, I received an email thanking me for getting my vaccine at Walgreens, thanking me for supporting vaccines for children in developing countries and pointing me toward an online portal for managing family immunizations, refilling prescriptions and more.
This kind of email communication with consumers — its timeliness, sophisticated messaging and cross-promotion — is the expectation for all companies in the Internet economy. Organizations that cannot communicate with their customers in this manner will fall further and further behind.
Using technology for consumer engagement will be critical as payment rewards health maintenance and as consumers demand greater convenience. Email marketing is just the tip of the iceberg. Winning organizations will need 24/7 access via a unified portal, telehealth, mobile health, self-service scheduling, mobile monitoring, routine contact through email and texts, intervention tracking and patient/family contribution to care notes.
A venture capitalist was recently quoted as saying, “We believe the mobile guys are going to figure out retail before the retail guys figure out mobile.” A similar dynamic could occur in health care. Without a significant focus on the part of legacy health care organizations, high-tech companies skilled at consumer engagement could figure out health care services before traditional health care providers figure out high-tech consumer engagement.
New Consumer Relationships
For America’s hospitals, the new benchmarks for consumer relationships are Google and Amazon — not the hospital down the street.
Satisfying consumer needs and expectations is the purpose and preoccupation of successful companies in the Internet age. At its inception, Google set out “10 things we know to be true.” The first was “focus on the user and all else will follow.” Amazon, which holds the top position in customer satisfaction among all retailers, according to American Customer Satisfaction Index, is “customer obsessed,” says founder Jeff Bezos. “We start with what the customer needs and we work backwards.”
Meeting these high standards will require a fundamentally different relationship between providers and consumers. Traditional health care organizations will need to start by understanding their consumers at a much deeper level, including not only demographics, health status and treatment history, but also expectations and attitudes.
Like Amazon, hospitals will need to use this information as a basis to design the way services are provided, including the location and function of the outpatient network, the use of telehealth, the nature and frequency of communication, the ability for consumers to access certain services without going through a gatekeeper, the handling of such routine interactions as scheduling appointments and renewing prescriptions, and the flexibility for patients of different needs and expectations to access services in different ways.
Enhanced Patient Experience
To remain relevant, hospitals will need to achieve constant and consequential improvement in the patient experience.
The traditional approach to assessing patient satisfaction has focused on individual encounters between patients and caregivers along with the hospital environment. Did the caregiver communicate effectively with the patient? Was pain managed adequately? Was the hospital clean and quiet?
Although these factors are important, they do not encompass the full range of the patient experience. A caregiver may be attentive, but the patient can’t get follow-up questions answered via email. Pain may be well-managed, but the procedure may have started two hours late. The facility may be clean, but it may be inconveniently located and hard to navigate. If you read your hospital’s reviews on Yelp, you will see this dynamic prominently displayed.
Smart retailers know that the customer experience comprises “cumulative experiences across multiple touchpoints and in multiple channels over time,” according to “The Truth about Customer Experience,” in the September 2013 Harvard Business Review. One clinician who treats a person with respect and caring is good, but cannot make up for a system that involves repetitive paperwork, inconsistent coordination, limited means of communication and opaque pricing. This is especially true as health care consumers begin comparing their hospital experiences with their experiences at retail clinics, urgent care centers and virtual providers. And it is overwhelmingly true as consumers compare their hospital experiences with their experiences at Nordstrom and Amazon.
A Time for Transformation
Leadership is a constant struggle to balance the tug of daily operations with the need to envision and execute strategy. The rise of value-based payment, the emergence of activated consumers and the high standards for service of the Internet economy make it more important than ever for health care leaders to focus on transforming their organizations. Central to that effort will be a disciplined change process, rigorous cost reduction, enhanced communication tools, a new relationship with consumers and significant improvement in the patient experience.
These tasks are challenging, and success is not guaranteed. But they cannot be ignored. As long-time UCLA basketball coach John Wooden said, “Failure is not fatal, but failure to change might be.”
Kenneth Kaufman is chair of Kaufman, Hall & Associates LLC, in Skokie, Ill., and a member of Speakers Express.