Patients are issuing RFPs for healthcare services

The following is my latest post for healthsystem CIO.com.

If a patient fell in the woods and nobody heard him, so what?

I’ve spent a lot of time trying to understand what a patient is worth to a hospital over a period of let us say five to ten years. Simply put, what is the ROI of a patient?  Apparently, no one has answered this question. If they have, the answer is well hidden.

Why are hospital marketing departments continuously searching for new patients when they already have access to a ready supply of past and current patients?  It will always be much cheaper to retain those patients, than to try to acquire new ones.

Patients are both customers and consumers. Unless the patient is in the back of an ambulance being driven to the nearest hospital, as I was the night I had my heart attack, the patient can choose which hospital to purchase services from.

Choice. If I wish to “hire” a healthcare procedure, how might I go about doing so?  This concept of a customer hiring a product or service comes from Harvard’s Clayton Crhistensen.  It flies in the face of how businesses, hospitals included, normally view their business.  It employs a pull model, driven by patients (customers), rather than pushing services down to the customers.

The entire healthcare provider model is being turned on its head and the only people who do not acknowledge it are those running the hospitals.

Hospitals replicate each other’s services instead of making themselves unique.  They sacrifice and outsource their highly sought, low margin services to other organizations that are able to quickly raise the profitability of those same services.

Let us examine this notion of hiring a service from a more easily understood example.  If I want to “hire” a large HDMI flat-screen television I issue an RFP (Request for Proposal) to the market.  I do not walk into Best Buy and see what they have to offer and repeat this process across several chain stores.  I go to the web, input my hiring criteria, obtain information, and evaluate my options. Through social networking, I force vendors to submit their RFP responses to me.

For some reason the large provider business model continues to operate under the premise that healthcare can treat people who research options before making a purchase as an anomaly.  They approach patient acquisition as though they still have the keys to the car, having their chief marketing officer authorize the installation of billboards touting their urology expertise, believing incorrectly that this type of direct marketing will offset patients’ ability to choose their own provider.  Look at your numbers.  Does that approach appear to be working?

Of course not.

Patients want to hire healthcare services the same way they want to purchase breakfast cereal. Patients want to own the hiring decision.

When I had my heart attack eight years ago, I wasn’t able to choose among hospitals. I could not tell the ambulance driver, “My insurance does not cover this hospital.” I could not tell him, “I’ve heard good things about the cardiology department at hospital ABC.”

After being treated, I issued an RFP for cardiovascular services.  I did considerable research and decided to hire my cardio services from Penn Medicine.  I now hire all of my cardio services from Penn, and my decision had nothing to do with which organization was covered by my insurer.

The large provider business model is being disrupted. It is being disrupted by prospective patients—consumers of healthcare and customers.  Providers will be faced with patients who hire their services under two new models; “pay as you go” and “pay for performance.”

When you have a few minutes, Google your name-brand hospital. You’ll get thousands of responses. Almost all of them have been initiated by current and prior patients.  Many of the responses will not convey a positive message.

The healthcare market is changing to a patient-driven model. But nothing the C-suite is doing acknowledges that shift. Large providers fail to recognize the fact that patients are doing the hiring, that patients are issuing RFPs. No hospitals take a business approach to maximizing the life time value of a patient. In fact, no hospitals can even tell you the lifetime value of a patient.  Yet the lifetime value of an individual patient is probably seven figures.

Instead, the business strategy of most hospitals is to replicate the business strategies of their competitors.  Few hospitals appear to operate strategically.  They operate against budgets because that is how their boards measure them. If the hospital next door buys a machine that goes “ping,” hospitals feel the need to purchase the machine that goes “ping,” even though it adds no value to their bottom line.

Whether or not hospitals acknowledge it, patients are now driving the business model. Each patient, or prospective patient, is an asset—not the MRI and not the machine that goes “ping.” Each patient/asset may be worth more than a million dollars.

Hospitals need to get beyond the magnificence of their own credentials. Prospective patients do not care about marketing or billboards. Patients, especially informed patients, are narcissistic; they care about themselves, not how providers market their services.

There is one thing, and only one thing, about patient experience management that the C-suite needs to understand. Patients are learning to hire healthcare from among a range of options. If you want them to hire you, you have got to give them a reason to buy. Being like the hospital next door is not enough.

I am convinced IT can play a substantial role in providing former and prospective patients the information they need to drive the hiring process to their organization.  It is a combination of churn management and patient experience management, and the experience which has to be managed starts before the patient hires its provider.

 

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