HFMA VIEWS

Scott MacStravic, PhD

There are three main elements and goals in customer relationship management (CRM) – 1) acquiring customers who promise and deliver the optimum benefit for their cost to the firm; 2) retaining them for as long as possible, or at least as long as they continue to deliver at least a decent ROC (“return on customer); and 3) developing them over their “customer lifetime”, so that they increase their benefit to the firm, while not threatening their longevity.

As a career marketer, I have always been interested in all three purposes of CRM and their impacts on ROC. But as a compulsive meddler, I have also been interested in the adaptation of the CRM/ROC concepts and techniques to other sets of “customers” with respect to healthcare organizations. In my last position before retiring, as Vice President for Strategy and Marketing for a multi-hospital system in Denver, I was explicitly responsible, at least for a while, for physician relationships, including a program I inherited from the CEO involving “sales reps” who regularly visited physicians in order to boost their referrals to medical staff physicians, and admissions to our hospitals, and were paid bonuses based on their success.

I was also involved in employee relations, at least to the extent of devising and implementing annual employee surveys, and advising on recruitment and retention issues. But the potential for “Employee Relationship Management” and “Return on Employee”, based on the CRM/ROC counterparts eluded me during my career. Nobody really thought of marketing or marketers as experts in human resources management, though I was involved in employee satisfaction surveys at the last two positions I held, both in multi-hospital systems, for a total of fifteen years.

And the most promising, yet untapped application of these two concepts, at least to my mind, appears to be in employee development, though this obviously includes both recruitment and retention of the best possible performers in the first place. And the two best, yet to be fully exploited opportunities for improving ERM and ROE seem to be in the synergistic areas of employee health management (EHM) and pay for performance (P4P).

EHM offers opportunities for significant, even dramatic reductions in labor costs, which typically represent something like 75% of total operating costs in HCOs, where cost cutting is paramount wherever possible. Hospitals have proven success in reducing their employees sickness care costs (Providence Everett in Washington is an example) and even their WC costs, absences and turnover as well (Fairview Health Services in Minneapolis). Moreover, other employers have reported added performance benefits such as improved customer satisfaction and new customer revenue resulting from healthier employees (Standard Life Healthcare in the UK).

On the other hand, my personal preference is that EHM be labeled “employee” or “personal” health development when it is presented and marketed to employee prospects. This will make clear that EHD is part of the HCO’s overall staff development strategy, and promote EHD’s being integrated with other developmental efforts. Moreover, it is at least likely that employees will prefer being “developed” to being “managed”, as all employees move more toward independence and autonomy in the best performing organizations. And being “developed” offers a far better foundation for improving employee retention than does being “managed”.

P4P fits well with EHM by offering what may be an additional extrinsic reward for employees who become and/or remain healthy and good performers. Many employers pay directly for employees who participate in EHM programs, for example, while since healthier employees perform better, they could also gain P4P bonuses for their better performance. And like EHM, P4P tends to improve employee retention, particularly among good-performers, since poor-performers tend to go where they are not paid on a P4P basis, while good performers tend to remain where they are.

The combination of EHM and P4P offers a new basis for recruiting good performers, since most employee prospects like at least the idea of having an employer concerned about and invested in employee health, while good performers are likely to be attracted to employers who pay them extra for being good performers. It is likely to be equally effective in retaining good employees, since both the experience of gaining health and financial benefit combinations from both, and the anticipation of gaining even more such benefits in future are sure to promote retention of precisely the kinds of employees that HCOs want to retain.

Moreover, both EHM and P4P should at least be instrumental in supporting other HCO efforts to develop employees, via training, education, mentoring, succession planning, work-life balance programs, etc. And like these programs, both have been shown to improve the quality and quantity of employee performance and thereby of the HCO’s performance as well. The CRM/ROC models fit themselves almost perfectly to those HCOs that aspire to be “high-performing” organizations, and to make the most of whatever P4P opportunities they are already taking advantage of or await them. [L. Redd & R. Champion “Fit for the Future: A Road Map to High Performance in US Health Care” Accenture.com 2006]