Despite the need to factor consumer behavior into health system business models, hospitals’ current operating model remains provider-centric, with performance metrics focused on transactions rather than the strength and durability of consumer relationships. At the same time, many organizations are hesitant to make investments in consumer-focused solutions for which the ROI is unclear.
Through original research with consumers and healthcare leaders plus direct experience working with hospitals and health systems to optimize performance, experts at Kaufman Hall have been studying how the industry can make the pivot to a consumer-centric model. The first step is examining how hospitals and health systems are measuring performance.
Transaction-focused versus relationship-focused
Kaufman Hall’s research found that health systems are still focused on traditional, transaction-focused metrics — such as visit volume and revenue per volume unit — rather than patient-centric, relationship-focused metrics. The persistent use of transaction-focused metrics among systems reflects the fee-for-service, provider-centric environment that has long pervaded the healthcare industry.
While these metrics provide valuable insights, they don’t provide a rich enough picture. They can’t capture the “stickiness” of patient relationships or whether the organization will retain the patient for years and capture as many of their care touch points as possible along the care continuum.
Health systems that can become a one-stop shop — providing care options across the patient journey — stand to not only improve patient health but also grow their business. Tremendous opportunity exists to go beyond the initial visit, reduce friction and care fragmentation, and connect consumers to a suite of services. By contrast, consumer product or financial service companies, which also offer multiple products and services, go after share of wallet and lifetime value through integrated solutions. Adopting that model would give health systems a chance to build long-term relationships, retain more care and improve financial sustainability. Healthcare isn’t a one-and-done proposition. Every person has healthcare needs across the various stages of life.
It is not easy for healthcare executives to rethink metrics when they are already challenged with growing service lines, managing cost and margin, dealing with operational and staffing pressures and more. But what if a solution to financial performance were also the solution to the consumer imperative? Without measuring underlying consumer dynamics, health systems miss crucial opportunities to invest in impactful consumer-centric strategies that could solve many challenges. Health systems today capture only a fraction of a consumer’s lifetime value.
5 benefits of a consumer-centric, relationship-driven model
- Better alignment with the health system mission
- Opportunity to enhance growth and loyalty across patient markets and segments
- Market-relevant and efficient resource allocation
- Recognition of providers’ and team members’ central importance in the consumer experience
- Improved ability to compete with potential disruptors
Measuring the value or strength of relationships with consumers creates opportunities to better understand and influence consumer decisions about where, how and when to receive healthcare services.
Measuring what matters fuels growth
Using patient-centric metrics like patient retention, share of wallet and potential longitudinal spend, health systems can perform granular assessments in each market and service line to understand consumer behaviors. The results provide insight into the relationship with consumers that traditional metrics like inpatient market share and visit volume can’t generate. These new insights, in turn, can inform strategies that drive business model transformation.
For example, systems can launch care models based on consumer demand in that market or develop strategic pricing for shoppable services and offer price transparency.
Health systems that have begun the shift toward patient-centric metrics predominantly use them to increase patient access, improve patient satisfaction and enhance marketing — all strategies that can help them attract and retain patients.
The proof is in ROI — transitioning to consumer-centric metrics also needs to go hand in hand with an additional assessment that addresses the question of whether these metrics are in fact providing an ROI and enabling growth. If the answer is no, the system should adapt its approach.
Transformation can be hard, but yields long-term benefits
The benefits of adopting consumer-centric metrics are clear, but the transition is not necessarily easy. Kaufman Hall’s research found that most healthcare executives cited the lack of available data or technology as the biggest barriers.
Hospitals and health systems have to acquire data from different sources — such as the universe of payers they work with — and manage the complexity of integrating data.
State agencies typically focus on inpatient data, but most hospitals and health systems have significant outpatient utilization. Claims data is required because it provides a full picture of an individual’s healthcare utilization across different provider organizations. This will need to be combined with any internal data sets the organization collects, as well as tailored reimbursement information to provide a picture of utilization and spend.
Lack of dedicated staff and uncertainty about how to define and prioritize consumer-centric metrics also are barriers to adopting new metrics. Consumer-centric transformation requires a new set of organizational skills, and health systems will need to build an organizational infrastructure and invest in staff and resources to fill the capability gap.
Investment in data, capabilities and change management can be significant at the outset, but health systems must make the investment if they are going to outpace current performance trends. Traditional means of growth are no longer yielding enough results to overcome cost inflation, and a new understanding of the business model gained via consumer-centric metrics would help attract and retain consumers.
By adopting a suite of patient-centered, relationship-focused metrics, health system executives will gain insight into how much of the patient’s spending and loyalty their organization captures. Those insights will lead to questions about why patients make the choices they make and how to influence their behavior. The answers will fuel investments in new strategies aimed at meeting patients’ needs and demands, in essence transforming the organization into a consumer-centric operation. The investment also offers a financial benefit by enabling health systems to capture more of the consumer’s lifetime value of healthcare services, thus building top-line revenue.
Consumers vote with their feet and their wallets. Health systems that track consumer-centric, relationship-focused metrics and use the resulting insights to transform their businesses will be in the best position to capture their loyalty and the high lifetime healthcare spend of each individual consumer.
For more information on Kaufman Hall’s 2023 State of the Healthcare Consumer Report: Measuring What Matters, visit www.kaufmanhall.com/insights/research-report/2023-state-healthcare-consumer-report