Dan Neuwirth
Chief Operating Officer, Agility Healthcare Solutions

Economists are saying that the U.S. is already in a recession – and blaming the federal government for waiting too late to issue an economic stimulus package. In order to ward off the wave of foreclosures, this needed to happen at the end of 2007, not this spring. Similarly, presidential hopeful John McCain recently criticized the government’s failure to prioritize and repair the Minneapolis bridge to prevent its collapse in 2007.

There is a price for putting things off. Yet everyone does it, dealing with the crisis at hand and ignoring the one looming on the horizon. As hospitals are confronted with numerous challenges, they could stand to learn from the government’s delayed reactions.

While the health care industry is often said to be “recession-proof,” it also has a reputation for being slow to change. Unfortunately, with the Centers for Medicare & Medicaid Services (CMS) reimbursement changes going to into effect in less than six months, there is no more time to wait. CMS is looking to add more changes in 2009, so now, with the bottom line at stake, hospitals need to take greater strides in improving clinical quality.

As CMS expands quality reporting requirements and eliminates reimbursement for an increasing number of “never events,” hospitals must eliminate the process issues that lead to clinical errors and poor quality of care. Hospitals will need to make technology investments to enable the process improvements necessary to minimize errors and improve patient flow. When overcrowded emergency departments are the norm, oversights occur more often. In surgical services departments, poor patient flow visibility and process bottlenecks negatively impact clinical outcomes.

Many problems can be diminished when organizations have a comprehensive view of the situation. Hospitals are a lot like bridges – postponing improvements and repairs can have life or death consequences.

David A. Williams CPA, FHFMA
Partner, HORNE LLP, Jackson, Miss.

The status of today’s American healthcare system can best be described as dysfunctional. The healthcare payment and pricing systems are based on illogical systems that are grossly unfair, creating problems for all Americans. The budgetary constraints of federal and state governments have caused hospitals and primary healthcare delivery systems to experience payment shortfalls.  An emerging payment shortfall is being created by the growing number of uninsured Americans who do not have the ability to pay for health care (charity patients) or who are unwilling to pay for health care (bad debt patients). Although health systems continue to institute cost-control measures, they cannot make up the payment shortfalls. As such, the costs of shortfalls are generally passed through to commercial payers and consumers. In some instances more than one-third of the costs are shifted to commercial payers and consumers who pay for their services at healthcare providers. In an election year and with a new president in 2009, it will be difficult to determine whether or not this issue will be addressed, but let’s take a look at four drivers that will impact our healthcare system over the next three to five years: patient volumes, costs of care, pricing and payments, and cost of capital.

Patient volumes: Additional services will be needed by the aging baby-boom generation. This growing demand will overheat the current delivery system and require that some new and innovative approaches be developed. Consumers will see non-traditional settings for health care such as a clinic located at a local super center. Consolidation will occur as many small rural hospitals will become triage and treatment type centers supporting the larger regional centers. The safety net hospitals will experience additional financial stress with increased patient loads coming through the emergency rooms.

Costs of care: The most significant components of healthcare costs are labor and supplies. Five issues that will impact future costs include:

1. Accelerating regulatory requirements – the costs of meeting accreditation and quality measures
2. Labor costs – driven by nursing and other professional care worker shortages in addition to escalation of retirement and other benefits
3. Increased cost of supplies – physician preference items, new treatment items and impact of Medicare drug program
4. Ineffective tools impacting productivity
5. Slow development and resistance to pay for performance initiatives

Pricing and payments: It is important to recognize the difference between pricing and payments. Many consumers focus on the prices or charges that health care organizations bill for their services, but fail to recognize that on average 50 to 60 percent of the charge is written off as an adjustment. The result is that in many instances the payment rate is less than half of what was expected or billed. Stagnant Medicare payment rates, with payment increases barely covering healthcare inflation, will cause further financial stress in just about every health care organization. In addition, the Mississippi state health care program (MS Medicaid) is 100 percent at risk at the current time due to a looming deficit of approximately $150 million. This is due in part to the erosion of federal matching funds, where the Centers for Medicare and Medicaid Services mandated changes to restrict the funding mechanisms such as the Upper Payment Limit and Disproportionate Share Hospital programs. Finally, as health care consumers become savvier with their spending there is an indication of a movement towards package pricing. The result of the package pricing may be good for the consumer in the short run, but look for other areas to see corresponding increases as a result.

Costs of capital: Continued aging of facilities, rapid development of new technology, increased consumerism, and a national focus on patient safety are the primary drivers of the capital spending boom today. The following factors will influence health systems access to capital over the next three to five years:

• Cost of capital - operating margin slippage and quality indicators for debt issues will drive up the cost of borrowing
• The increasing threat to health care providers' tax-exempt status resulting from scrutiny over charity care and community benefit
• Increased private equity investments in health care will force up the costs of capital overall as investors seek to participate in profitable service lines
• Surplus in bed capacity in some markets will require conversion of excess bed space to areas of other patient care activities. This renovation cost will be in addition to the routine capital improvements health care organizations are required to make to keep pace with rapid technological and medical practice changes.

The future of the American healthcare system can be impacted most by the consumers. Today, we often take for granted the associated cost of the services we receive. In many organizations, the costs are borne by the employer, and those unable to afford health insurance either qualifies for government or charity programs while a segment of users simply won’t pay for care. We must ask ourselves is health care a right or privilege? Secondly, if it is a right, how much are you willing to pay for the care of others? Once we as consumers resolve those questions, we might be able to positively influence the future of health care.

Reprinted with permission from Mississippi Medical News.

Scott Downing
Group Senior Vice President of Supply Chain Services, VHA Inc.

If Magellan had seen a satellite view of the earth, sailing around the world wouldn’t have been so scary. Okay, it still would have been a challenge, but at least he would have felt confident that he wouldn’t fall off the edge of the earth. With the right approach, you don’t have to fear uncharted territory in the complex world of health care logistics.

We’ve seen what happens when hospitals go it alone. Billions of dollars are wasted each year because hospitals overpay for supplies, haven't standardized expensive physician preference items, allow some supplies to expire, or pay more in rush charges because they don't know what's on their shelves. Industry collaboration is the solution — and it’s going to save everyone a lot of money.

Supply costs are a hospital’s second-largest expense, representing more than 30 percent of its annual budget. However, research shows that wasted supplies cost U.S. hospitals $11 billion annually. How much is yours?

Hospitals’ analytics experts have been trying to chip away at this amount. While individual health care companies each own a piece of the complex supply chain puzzle, no one can solve it alone. It would be foolish to keep your piece to yourself because you would never be able to see the bigger picture.

Key industry players are collaborating to explore cost-saving supply chain solutions and create measurable changes in healthcare logistics. VHA Inc. has joined forces with Wal-Mart, Proctor & Gamble and Blue Cross Blue Shield of Arkansas, Alabama and Illinois to become part of the University of Arkansas’ Center for Innovation in Healthcare Logistics. This partnership’s goal is to increase the health care supply chain's efficiency to ensure that the right materials are in the right hands where and when medical professionals need them.

Scott MacStravic, PhD

Employers in general, at least those who see their workforce as a key asset and source of great actual plus potential value, have come a long way in terms of measuring and managing that value. While most lack a formal system for measuring workforce productivity, they have widespread and strong confidence that improving worker health will improve their productivity as well. It has become common for employers and the suppliers they hire for the purpose to label their efforts “Health & Productivity Management,” which is already the title of a journal devoted to this subject, and an organization devoted to the cause.

But in healthcare, productivity is neither the sole nor main focus of efforts to get more out of employees – performance is far more important. For example, a recent study found that medical residents who are depressed are about six times more likely to make medications errors than those who are not depressed. [“Depression in Young Doctors Tied to Medication Errors” WashingtonPost.com Feb 8, 2008] Making errors or any risk to patient safety is properly a far greater concern than pure output – among physicians, nurses, technicians, and professionals of all kinds in the HCO workforce.

Performance is also meaningful when it is explicitly measured, and publicly reported – by the HCO, itself, or by a wide range of private and public organizations that feel publishing HCO performance information is essential to creating an informed public, and thereby improving healthcare. Generally speaking, it is the workforce that most immediately affects the HCO’s performance, which can make large differences in HCO revenue, and ultimately survival.

The direct effects may include significant amounts of revenue, depending on which and how many pay-for-performance (P4P) programs the HCO participates in, and how generous the payers involved are in their performance-based bonuses. The indirect effects may be even greater, when published performance comparisons affect which HCOs insurers, employers, and consumers choose to do business with. While such comparisons have not had dramatic effects as yet, there are signs they will in future.

In many ways, measuring performance is no more difficult, though not much easier either, than measuring productivity. In HCOs, however, especially those that operate 24/7/365, it may be quite difficult to gauge the performance of individuals. If the only systems in place to do so are annual performance reviews, where individual employees are rated on some standard verbal or numerical scale, these metrics rarely serve well for managing performance or for measuring the financial impact of health & performance management efforts.

On the other hand, measuring workforce performance – at individual or perhaps shift, team, or unit levels, can lead to a number of benefits for the HCO, as well as for its workforce. The most obvious is that if it isn’t measured well, how can it be managed optimally? Next is the vast potential for P4P systems to be used directly with employees, not merely physicians, but all whose performance is worth measuring, can be significantly improved through P4P.

Considering the dramatic improvements in productivity achieved merely through paying directly for performance (a 44% increase for a 10% increase in pay, in one case), the potential for improving performance is likely to be at least as great. Moreover, paying for performance is known to help retain more high-performers, while encouraging low performers to go elsewhere.

When paying for performance can lead to explicit improvements in the very performance dimensions that the HCO received bonus payments for, the financial benefits of P4P or HPM can both be measured fairly easily, once performance is reliably and credibly measured. Once workforce performance is measured, it is both easier to manage, and can easily be linked to one of the most effective ways of improving it, namely paying for it. This synergy is too good to ignore. And HPM will be dramatically facilitated if managers have both performance data and performance pay to work with.

Performance measures may very well include productivity metrics, particularly where these are known to link directly to revenue, costs, or other financial value – e.g. productivity-based payment for employed physicians in hospitals or medical groups. Depending on the job of each person whose performance is measured, output metrics may be an important component, or relatively modest in importance compared to clinical quality, patient safety, customer satisfaction, market share gains, and similar measures that depend more on performance quality.

Each HCO can choose the kinds of performance measures that make the most sense for the organization and personnel involved. But the merits in measuring as well as managing performance, and in measuring and managing employees’ health as one of the mechanisms found useful and a wise investment, are too great to be ignored.

David Hammer, FHFMA, CHFP
Vice President–Revenue Cycle Solutions, McKesson Provider Technologies

This message is to celebrate the life and note the recent death of Alan Crowell, FHFMA. Alan, the long-time CFO of HealthCentral in Ocoee, Florida, died on February 25, 2008, at age 56, after a courageous struggle with cancer. Alan is survived by his wife, Denise, and daughters, Andi (12), Emily (10), and Kate (8).

Alan was an exemplary man as well as an outstanding healthcare finance professional. In his career he held positions as an internal auditor, vice president of revenue cycle, and chief financial officer. A member of the Florida Chapter of HFMA, he was certified as an FHFMA and served in several chapter leadership positions.

Alan’s character was beyond reproach. In all his dealings, professional and personal, public and private, Alan could be counted on to do the right thing and lead by example. His kindness, courage, and wonderful sense of humor were well known and highly respected.

He was one of the first people in Florida and perhaps the nation to hold the position we now refer to as Chief Revenue Officer. He was named assistant vice president for business operations at St. Vincent’s Medical Center in 1980. This was at a time when very few if any organizations had an executive level position responsible for revenue cycle functions.

On a personal, note, Alan was a mentor to me and many other aspiring healthcare finance professionals. He could always be counted on for honest and effective advice or for a credible reference. May of us in the Florida Chapter, as well as his colleagues at HealthCentral, in ACHE, and around the country will miss him greatly.  We extend our deepest sympathy to his family.

Scott MacStravic, PhD

The traditional path to protecting not-for-profit tax exemption has been to demonstrate the “community benefit” expenditures, “charity care,” free services, etc. that the hospital has donated each year. There are always arguments about what should be counted, e.g. whether donated care means losses measured against charges, which are typically highly overblown, or against costs. And with growing pressures from all payers, especially Medicare and Medicaid with respect to paying enough to cover costs, hospitals’ ability to spend or lose money in community benefit is increasingly threatened.

There is another purpose for community benefit reports, however--the community relations, reputation and image of the hospital, which is something even for-profit hospitals want to cultivate and maintain. Of course, when the definition of community benefit includes only free care or losses incurred serving the un- or underinsured, this may mean relatively little to the rest of the community. In the tradition of “What’s In It for Me? (the WIIFE challenge in marketing), hospitals might also work on reporting what they have done for the rest.

One common PR approach being used by hospitals is to focus on local businesses, since good relations with employers can promote the hospital’s being included in more provider networks, or otherwise being better supported by employers. And the usual strategy recommended for this is to offer employers ways to protect and promote their workers’ health and productivity.

The trouble with promoting health, of course, is that it tends to reduce the need and demand for sickness care services that hospitals depend on for their livelihood. In spite of this internal conflict, however, hundreds of hospitals are engaged in promoting employee health, with their own workforces, those of local employers, or both. This will normally fit perfectly into their mission statements, and may yield more positive PR than reports of the economic impact that hospitals have (which is based on how much of the community’s resources hospitals spend in delivering care, after all) or its services to the poor.

The most important impact that hospitals’ efforts in employee health can have is easily that of improving the productivity and performance of the workforce. And unlike early employee wellness or disease management programs, when efforts focus on the factors that cause the most impairment in productivity/performance, and can yield the greatest improvement in both, they will not usually be factors that lead to significant sickness care need and use.

In the first place, productivity and performance are impaired or limited by a host of factors unrelated to employee health. Employees’ motivation levels, capabilities/talent levels, and the effects of management policies and support systems on enabling employees to recall the right thing to do at the right time can have far more impact than health factors, for example. [W. Lynch & H. Gardner “Employee Health Problems Are Not the Greatest Threat to Worker Productivity” Health as Human Capital Foundation May 20, 2007 (hhcf.blogspot.com)]

Even when health-related impairment factors are identified, they often involve behaviors and conditions that are not major sources of sickness care revenue for hospitals. These include smoking, which impairs productivity and performance due to frequent smoke breaks away from employees workstation, far more than through long-run risks of lung cancer and other diseases. Sleeping problems, obesity, poor nutrition and physical inactivity, along with a number of emotional/behavioral disorders, such as stress, depressed and anxious feelings, etc. are immediate and significant impairment factors long before they turn into need for sickness care of the kind most hospitals offer.

It would be wise, and may even be essential, for hospitals to master the art and science of productivity/performance management in its fullest context. Otherwise, they may never succeed in carrying out the missions, visions, and values they espouse in light of labor shortages and ungenerous payment. They have the added motivation of wanting to optimize workforce performance in order to maximize their revenue from pay-for-performance systems offered by an increasing percentage of payers.

Hospitals that master productivity/performance management--through comprehensive applications of motivational talent-boosting, and systems support--not merely health management, will be in a strong position to both manage their own costs and promote good relations with local employers. The success they have with employees, through both improving their health and enhancing their wealth, thanks to the compensation, incentives, and career advantages of good health, will even promote generally good consumer relations, at least among employees and their dependents.

At a minimum, hospitals should recognize the limited potential they have to behave as charitable institutions. Engaging in successful productivity and performance improvement relationships with local employers, should also drive totally new and different revenue to hospitals, unhindered by the parsimonious attitudes and practices that payers adopt relative to sickness care. When hospitals can save employers and employees money, improve their financial situations, and quality of life, and for far larger numbers of people than those whose lives are saved through sickness care, they will have a wholly new basis for generating truly profitable revenue, as well.

Robert Fromberg
Editor-in-Chief, HFMA

At a recent event, I found myself sitting next to the CFO of a nearby hospital. I asked her what I always ask healthcare CFOs: “Why are you in healthcare finance rather than in some saner industry?”

She told me that she used to be in banking. Then one day she was visiting a friend in the hospital, watching a man sweeping the floor. She told me, "I thought, he’s providing more community benefit than I am." She realized she wanted to do more for the community. And the place she knew she could do that was in a hospital.

As this story shows, community benefit is at the heart of why financial managers choose to work in health care.

Yet having a desire to benefit the community is not enough. Not-for-profit organizations have to quantify and report that benefit—a complex undertaking with high risk in an uncertain regulatory environment.

Recently, I was listening to HFMA President and CEO Dick Clarke speak at HFMA’s Executive Summit about the regulatory burden that hospital financial leaders cope with—primarily the Medicare payment system. He said that HFMA members tell him that they don’t so much mind complex systems that they have to implement, as long as they are able to understand the logic and purpose of the system and as long as it is administered fairly.

In the March issue of hfm, the cover story, “Community Benefit: How Much Is Enough” by Howard A. Levenson, explains--as far as possible--the logic and purpose of the federal government’s desire to quantify community benefit. He describes the path that led to enhanced scrutiny of not-for-profit hospitals’ levels of charity care, and what Form 990 tells us about “government’s mood.” And the feature story “Schedule H: What Hospitals Should Do to Prepare” by Jeni Williams takes us through the specific actions needed to improve data collection and reporting related to community benefit.

The bad news is that in health care, the path to community benefit has enough twists and turns and pitfalls to challenge even the most dedicated professional. The good news is that the professional strength of financial managers is the capability to cope with—even thrive on—complexity. For the former banking executive, the path started in a hospital waiting room. And that path winds through Schedule H of Form 990. But the path truly leads to improving lives in our communities.

Scott MacStravic, PhD

It is common practice for hospitals that are increasingly investing in employee health management (EHM) for their own workforces to operate their own programs. On the other hand, it is often the case that it is both less expensive and more effective for them to outsource one or more elements of the EHM strategy, which include:

1. Initial employee health/medical expenditure/productivity-performance assessments, which may involve analysis of claims, risk screenings results, health risk assessment (HRA) and productivity impairment surveys
2. Efforts to enroll employees (perhaps dependents or retirees as well) in particular EHM interventions aimed at specific health problems or risk/impairment factors
3. Conducting specific EHM interventions while retaining as many participants therein as possible for the duration of the intervention, and engaging them as much as possible in making positive health behavior changes
4. Evaluating results of separate interventions, as well as the overall EHM strategy, in whatever dimensions are of interest to employers and suppliers

If they outsource any or all of these elements, however, hospitals and other healthcare organizations (HCOs) that invest in EHM must still be active and enthusiastic partners in the effort, rather than passive customers waiting for the results and economic gains to emerge. Moreover, for hospitals that have taken EHM one step further, by offering their own programs as a revenue-generating service line, will want their employer clients to be enthusiastic partners as well, since only enthusiastic partnerships will achieve and learn about the full economic benefits and ROI from EHM investments.

For example, unless the hospital (or the employer client in that application) cooperates fully in the assessment process, chances are that a far less complete and accurate analysis of the workforce health status, risk behaviors and conditions, chronic diseases, and impairment in productivity/performance related to these as well as other impairment factors will result.  Usually an incentive, of at least $50 to $100 must be offered to all employees and paid to all participants in the assessment process in order to achieve even majority participation. And any employee who does not participate will be an “undiscovered land” when it comes to planning and targeting employees for participation in specific EHM interventions.

Moreover, any employees not included in the baseline assessment cannot be included meaningfully in the EHM evaluation, since there will be no baseline data available as the basis for determining results. And any who participate in the baseline assessment but not repetitions used for evaluation, will be absent from the results analysis. While “non-repeaters” may be assumed to achieve anywhere from no improvement to the same degree of improvement as those who take both baseline and repeat surveys, there is no way to validate either assumption, unless there are no or minimal non-repeaters.

Enrolling and retaining employees in EHM initiatives based on their assessments is an equally important partnership challenge. Employers normally invest in both promotional efforts and incentives for participation in order to achieve high levels thereof. Full and enthusiastic participation by employees may require significantly greater incentives than are adequate to get high participation in assessments, since the assessments take only minutes of employees’ time, while participation in initiatives can take many hours and even days of time for best results. Supporting EHM initiatives by offering healthy food in cafeteria and vending machines, or discounted/free gym memberships, classes and activities onsite is another way hospitals and other employers can be effective partners.

Many employers conduct “team contests” to stimulate peer support as well as competitive motivation among EHM participants, with rewards for best teams to add to incentives or even substitute for individual ones. Creating websites that team members can use, or web pages for individual participants, can help maintain motivation and participation, while “group support” websites or other “healthy community” support can also help. Contests for individuals are also effective, though may disappoint the “losers” and fail to have the best total economic impact, which includes employee retention effects.

Partnering in the measurement process is one of the most essential, yet least common practices among employers. For example, a recent report indicated that only 38% of employers surveyed even measured the ROI they achieved for their EHM investments, though this was up from only 23% in 2006. [“Wellness: Saving Lives and Money” 2007 Willis Survey (Willis Americas Employee Benefits – North America) (request: willisebsurvey@willis.com)] Only 55% even compared costs after vs. before their EHM strategy was implemented.

Measurement can be an expensive and risky business investment. It may require repeated contacts with employees that risks angering them, for example. Unless assessment surveys are used to estimate productivity/performance impairment, the costs of measuring these sources of the majority of EHM economic impact may threaten ROI therefrom. Moreover, basing “discriminatory” incentives on some elements evaluated may risk federal government or union displeasure and negative responses thereby.

For example, federal regulations effective in 2008 appear to prohibit paying smokers for quitting, unless employees who already do not smoke get similar incentives for their abstinence. Paying employees for weight loss may be deemed discriminating against employees who are “disabled” by their “eating disorder”. Even collecting and analyzing information about employee health may be deemed a violation of HIPAA rules. Hospitals will have to be extremely careful what they pay employees for, in addition to incurring the financial costs of paying incentives in the first place.

There is a way around both problems, of course. Since it has long been perfectly legal and an accepted business practice to pay employees more if they produce more and perform better, using an internal “pay-for-performance” (P4P) program can minimize both risks and costs. There should be no risk in paying more to employees whose improvement in their own health risks or impairment factors has yielded measured improvements in their output or other performance dimensions. Moreover, this could mean that no incentives need be paid for participation in EHM initiatives, since P4P bonuses or awards would only be paid to employees who succeed.

In addition, the amount paid can be made to precisely match the degree of improvement achieved by each individual EHM participant, rather than the same large amount for all participants, or all who “succeed” in enrolling, actively participating, or completing the EHM initiative. It would substitute for incentives that pay for changes in behavior, or even for improvements in health status, since both are problematic. Moreover, P4P systems in general have been shown to stimulate increases in productivity and other performance measures, by themselves.

Hospitals have the added interests in devising and adopting P4P systems because of the various systems that are being used to determine their revenue. Once such systems are in place, they will enjoy far greater potential for accurately and reliably measuring the improvements achieved through EHM investments. This will also tend to prevent employee “enthusiasm” or “over-optimism” in reporting their upfront impairment or degree of improvement when incentives are offered for such improvement.

In any case, the more hospitals behave as enthusiastic and effective partners in EHM efforts, as clients of EHM suppliers – or get their employer clients to do so when the hospital is the supplier – the greater is the likelihood for achieving and accurately/reliably measuring the total economic impact of EHM investments. And the more accurately and reliably such impact is measured, the more likely it is that hospitals and their clients will continue to invest in EHM, and enjoy continuing and usually increasing benefit therefrom over time.

Dan DeLay
Senior Vice President, Supply Chain Analytics, VHA Inc.

Although I stared at my cards intensely for several seconds, I couldn't seem to change the 6 of clubs into the ace of hearts. So I rolled the dice--well, not literally, since I was playing blackjack--and stayed on 16. Dealer busted and I doubled my $10 bet. Ok, so I'm not a high roller, but does the casino know that? Short answer, yes.

What happens in Vegas does indeed stay in Vegas--for a lot longer than most people realize. An article in the Washington Post caught my eye; it provided insight into the operations behind the scenes of the world's most prestigious casinos. The eye in the sky is always at work, with experts behind closed doors analyzing information about players and employees. In fact, not only do they share data with other casinos (even using facial recognition software), but they track players' wagers as well as wins and losses, so they know who is a high roller and should get special treatment.

Should the approach to health care be different? Except instead of applying analytics to tracking people/players, it's using technology, data and expertise to track products/supplies. The goal is to learn as much about the product as possible to ensure that it is correctly utilized throughout the supply chain. From evaluation to purchase to receiving to utilization–-it’s important to keep tabs on your operational efficiency because it has a tremendous impact to your bottom line. 

Once you have this practice in place, you can determine important information such as if your purchases are on contract and if you qualify for the right tier. Or if purchases are being influenced by factors outside of the materials department. Bottom line, the more information you have about your supply chain, the more you take the gambling out of making strategic business decisions. Insight into your supply chain is important as ever and thanks to technology, data and expertise, it is more possible today, than ever before. So don't roll the dice when it comes to making decisions about the health care supply chain, because using an analytical approach to understanding how it operates is as good as betting on a sure thing.

Scott MacStravic, PhD

When I began my career in health care marketing thirty-five years ago, almost no hospital, physician practice, or other healthcare provider was doing anything that could be called marketing. Advertising had been condemned by the American Medical Association, and was not covered as a “legitimate” expense by Medicare. And many providers operated in as non-marketing a fashion as can be imagined.

The hospital associated with the university where I was teaching at the time, for example, offered two appointment times for its outpatient services – one at 8:00 AM, the other at 1:00 PM. Everyone needing care got one or the other, meaning that the lucky and savvy patients who arrived an hour or more before their appointments might have to wait as little as an hour for care, while those who didn’t understand the “system” waited for as long as four hours.

My first marketing consulting engagement involved a hospital-sponsored primary care practice which had opened in a beautiful and technologically superior facility in a small community about fifteen miles out of the city. Despite its highly qualified staff (with privileges at the academic medical center hospital) and a location on a main highway with convenient parking, it was seeing only a small number of patients. As any first-year marketing student could probably have done, I made a few modest recommendations, which were followed, and the practice became a virtually immediate success, and the first of a series of successful practices throughout the hospital’s market area.

For example, the physician who staffed the practice was supposed to show up at noon every day, so appointments were set beginning at that time. But he actually showed up at closer to 1:30 PM, meaning that patients had to wait at least an hour and a half if they had a noon appointment. And the staff all parked around the back of the facility, leaving the spaces in front for patients, but making it look as if the facility was closed to any passers by unless there happened to be a patient parked in the front.

By changing the hours when a physician was present to begin at 8:00 AM, and having the physician present at that time, plus having one or two employees always park their cars in front every day, and a modest amount of advertising, we managed to bring in enough new and repeat patients to ensure the practice’s success. After all, patients could drive down to the city, be seen by a physician there, and get back home in less time than they had been waiting for care before the changes, so by merely making the practice competitive with that option, success could be achieved.

Since that time, things have improved a lot, though often more in the extent of advertising use than in the adoption of truly “customer-centered” service philosophy and behaviors. I was struck by how far we have come, based on a personal experience I recently had with an urgent care center. The medical quality was fine, as far as I could tell, for a simple challenge of removing a number of stitches put in a week before during minor surgery. But the personal service was truly outstanding, from my experience, at least.

A week later, rather than drive the long distance and take a ferry ride to the where I had the surgery, I went to the Madrona Hill Urgent Care Center in Port Townsend, Washington for that minor procedure. I had earlier phoned the practice where I had the surgery to make sure that was okay, and after leaving my message and phone number with them, got a call back giving me approval to get the stitches out a day early since that way I could avoid a special trip to the urgent care center, twenty miles away, as I was going to be in the area anyway.

Having been to the center before, check-in was prompt, and I was in the treatment room in five minutes. The RN, Alice, a customer service gem, explained that she had to get an okay from the practice where I had the surgery, and would call to get it immediately. She came back a few minutes later to explain that they had not yet sent the fax okay, and apologized for the wait. She returned again a few more minutes later, saying that she still had not received the fax. She asked me if the woman she noticed in the waiting room was my wife, and getting a confirmation of that fact, went out to her to explain to her why there had been such a long (15 minute) wait.

She soon returned, and efficiently/painlessly removed the stitches, putting on a couple of butterfly bandages to ensure the incision continued healing, and applying a larger bandage to cover it. She had been smiling and pleasant throughout, and I cannot even imagine a better customer experience in terms of the elements she could control. Only the inability of the surgery practice to get a fax sent in less than twenty minutes extended my service experience, and I brought a book to that one as well.

It is impossible to generalize from this experience whether service quality in medical care has improved in general, nor even if everyone who goes to the Madrona Hill Urgent Care Center gets such superior service. But it makes me happy that I played a role in, or at least was able to observe the dramatic improvements that I know have happened over the past 35 years in health care.