Author: Clarke, Richard L
Date published: April 1, 2012
Management teams in all sectors of the economy struggle with that question, because it drives not only branding, but also management focus and strategy, and investments in process, technology, and people. Some firms want to be known for low cost, others for exceptional product quality; still others want to be recognized for great customer service, while some want to be viewed as having the latest technology and innovation.
Most firms brand themselves with one of those four categories. For example, Southwest Airlines is known for low costs, Lexus for high product quality, Nordstrom for customer service, and Apple for technology and innovation. Of course, these firms don't just focus on one thing. For example, Nordstrom focuses on customer service, but it must offer high-quality products as well. Likewise, Apple is known for innovative and high-tech gadgets, but product quality also is important. Southwest offers low fares, but also focuses on high levels of customer satisfaction.
As part of HFMA's Value Project, we recently asked HFMA members what reputation they wanted their organizations to have in the market. Overwhelmingly, the respondents wanted their organizations to be perceived as a high-quality provider. That is not surprising, given the mission of health care, the current focus on reducing harm, and the response to payment incentives that are based on the quality of processes and outcomes. After quality, respondents ranked patient satisfaction the next highest. Few respondents wanted their organizations to be known for low cost or technology and innovation. These results are in contrast with comparable segments of the economy, where cost (price to the purchaser) is a key driver.
This focus will need to change. With increasing availability of quality and efficiency data (cost as well as intensity), purchasers are beginning to demand more attention to the denominator of the value equation- the cost of services to the purchaser.
There are several reasons for this. First, evidence suggests that there is little relationship between high quality and high cost. Actually, higher cost often indicates lower quality due to overtreatment. Second, the creation of insurance exchanges as part of the healthcare reform law will produce a more transparent, open market of insurance products for consumers. This market will make available better and more understandable quality data, and very clearly identify the cost of various networks. Research suggests that consumers will be sensitive to price. Finally, government and private purchasers are increasingly trying to cap their healthcare expenditures. For example, Medicaid programs in most states have moved to 100 percent managed care for their populations, and large employers may increasingly shift to defined-contribution health plans (paying a flat amount for the purchase of a policy), which will enhance the focus on cost.
Although a focus on quality and customer service is important, healthcare leaders should not shy away from a focus and branding on cost efficiency. Regardless of the outcome of the Supreme Court's decision on the healthcare reform law, a focus on cost will be a winning strategy.
Richard L. Clarke, DHA, FHFMA
President and CEO, HFMA