Blueprint for Growth 2020 - Advisory · ©2014 The Advisory Board Company • advisory.com...

©2014 The Advisory Board Company • advisory.com

Blueprint for Growth 2020 Product, Pricing, and Sales Strategies for a Retail Market for Health Care

Health Care Advisory Board EXCERPT

©2014 The Advisory Board Company 29918 advisory.com 2

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Table of Contents

Source: Health Care Advisory Board interviews and analysis.

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Essay: The Customer-Focus Mandate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consumer-Oriented Product Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. Maintain realistic perspective on differentiation opportunities . . . . . . . . . . . . . . . . . . . . . . .

2. Ensure that access networks meet diverse patient demands . . . . . . . . . . . . . . . . . . . . . . .

3. Design offerings to address concrete purchaser needs . . . . . . . . . . . . . . . . . . . . . . . . . . .

Competitive Pricing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4. Target discounts to price-elastic services, price-sensitive patients . . . . . . . . . . . . . . . . . .

5. Reorient bundled payments to support purchaser-driven growth . . . . . . . . . . . . . . . . . . . .

6. Create new, stable revenue streams with subscription models . . . . . . . . . . . . . . . . . . . . .

Retail Sales Tactics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7. Deliver timely, accurate price estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8. Communicate to employers in dollar-denominated terms . . . . . . . . . . . . . . . . . . . . . . . . .

9. Signal credibility with performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10. Build loyalty through free trials, platform sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The full Blueprint for Growth 2020 study features product, pricing, and sales strategies for a retail health care marketplace. This excerpt includes

an essay on The Customer-Focus Mandate, and steps to maintain realistic perspective on differentiation opportunities.

For more information on any of the topics mentioned in this excerpt, please contact Ellie Barlow at [email protected] or 202-568-7954.

mailto:[email protected]


Executive Summary

Blueprint for Growth 2020

Study in Brief


10 Lessons for Product, Pricing, and Sales Strategies for a Retail Market for Health Care

The Customer-Focus Mandate

1. Growth strategy in a retail market must focus on patient-

oriented products, not just billable services. Purchasers choose

emergent care, shoppable procedures, and enhanced management

solutions. Most organizations have a well-defined approach for

appealing to payers and referring physicians, but lack a strategy for

selling these products directly to consumers and employers.

2. Successful product strategy involves patient-oriented design,

competitive pricing models, and retail sales tactics. Successful

organizations will be those that can successfully apply this

framework across the three types of products that consumers and

employers buy.

Consumer-Oriented Product Design

3. There is limited potential to differentiate the core business of

procedural care on the basis of brand, quality, or experience.

Providers should prioritize initiatives that have the potential to

differentiate products on non-price factors in the short term, while

enabling longer-term pricing flexibility through and cost reduction

and efficiency gains.

4. Building a successful network of emergent care offerings

requires a focus on individual patients—not employers. Due to

the limited amount of time available to make a decision, consumers

exert more direct influence over the purchase of emergent care

services than products in any other category.

5. Top performers sell employers enhanced management

solutions which include disease management services in

addition to traditional wellness services . Evidence suggests

that disease management services—not lifestyle management

services—deliver a concrete, short-term ROI to employers.

Competitive Pricing Strategy

6. Providers should pursue targeted discounts rather than global price

cuts. Though long-run cost control and lower across-the-board prices are

inevitable, short-term strategy should focus on reducing rates for price-

elastic services and extending discounts to price-sensitive patients. This

approach enables providers to lower prices only as necessary and avoid

an unnecessary race to the bottom.

7. Employers and consumers are attracted to the predictable pricing

inherent in a bundled payment. To transition bundled payments from

physician alignment lever to growth driver, arrangements must include

sufficient volume steerage and downstream revenue gains to offset the

cost of implementation and the price discount inherent in most offerings.

8. Subscription-based payment models provide steady revenue

streams and encourage patient loyalty. A successful subscription

model must be priced according to expected utilization. Providers must

take care to put the appropriate incentives in place to encourage enough

utilization for the purchaser to derive sufficient value, but not so much

utilization as to sacrifice profitability.

Retail Sales Tactics

9. Price transparency is quickly becoming a requirement from both

patients and employers. Patients require up front estimates of how

much a given service will cost, customized by insurance. And employers

require not only price quotes, but estimates of potential total cost savings

over time.

10. Top performers recognize the value of sacrificing short-term gains

for long-term loyalty, using tactics like guarantees, free trials, and

platform sales to drive growth over time. Commitment to such

strategies requires providers to weigh the investment costs of such

strategies against the potential for revenue gain.


For many years now, provider

organizations have pursued growth by

appealing to two constituencies: payers

and physicians. While both of these

parties will remain important

stakeholders in the health care

purchasing process, the mechanics

underlying the industry have begun to

shift in some fundamental ways. In

particular, employers and consumers

are beginning to take a more active

role in the health care purchasing

process.

Employers, struggling to control

benefits expense, are experimenting

with cost control tactics such as

Centers of Excellence networks and

reference-based pricing. They are also

investing in new services like e-visits

and onsite health services.

Meanwhile, consumers, faced with

greater cost-sharing through high

deductible health plans, have become

much more informed and influential

decisionmakers.

The rise of activated employers and

engaged consumers signals that health

care is transforming into a retail

marketplace where clear value

propositions are essential.

The Customer Focus Mandate

New Customers Exerting Greater Influence Over the Buying Process

Mandating More Direct Consumer Focus

Source: “The New Health Care Imperative: Driving Performance, Connecting to Value,” Towers Watson/National Business

Group on Health, http://www.towerswatson.com/; CDC/NCHS, National Health Interview Survey, 2009-2014,

http://www.cdc.gov/nchs/nhis.htm; National Business Group on Health annual survey, August 13, 2014,

https://www.businessgrouphealth.org/index.cfm; Health Care Advisory Board interviews and analysis.

1) Centers of Excellence.

2) High deductible health plans.

3) Consumer directed health plan.

Employers Experimenting with New

Services and Purchasing Mechanisms

Consumers Increasingly on the Hook

for Care Decisions

38% Provide coverage

for e-visits

38% Offer onsite

health services

41% Use reference-

based pricing

60% Use COEs1 for non-

transplant services

Percentage of Employers with Strategies

in Place or Planned for Next Year

0%

100%

23% 36% in 2009 in 2013

Percentage of Consumers with HDHPs2

or CDHPs3

Open to New Options

Employees who would “definitely

travel” to a COE for knee surgery 68%

http://www.towerswatson.com/

http://www.cdc.gov/nchs/nhis.htm

https://www.businessgrouphealth.org/index.cfm


Unfortunately for many organizations,

hospitals and health systems are often

ill-prepared to grow in a retail

environment. A major root of the

difficulty is the growth strategy process

itself.

Traditionally, health systems set

growth strategy through a process of

internal analysis. Organizations begin

by performing an inventory of current

services and determining which

services drive the greatest profitability.

An assessment of market trends,

including reimbursement changes and

demographic shifts, enables systems

to project future volumes and

profitability. Finally, achieving desired

growth targets in high-margin, high-

volume services requires the internal

optimization of staff, technology, and

physical assets.

All these steps are useful and should

not be abandoned. But such a process

does not adequately account for the

demands of consumers and

employers. It is therefore no longer

sufficient in today’s market. As the

industry becomes more costumer-

driven, providers must instead begin

the growth planning process with an

analysis of employer and consumer

needs.


The Old Approach to Growth Strategy

Driving Growth Through Introspection


Identify most

profitable services

Optimize internally

to enable growth

Assess market trends,

project volumes

Cardiac Services

• Cardiac

Catheterization

• Cardiac Surgery

• Medical Cardiology

Lab

• Consultation

• Testing

Neurology

• Degenerative

Disorders

• Multiple Sclerosis

• Seizure/Epilepsy

• Stroke and

Transient Ischemic

Attack

General Medicine

• Dermatology

• Endocrinology

• Gastroenterology

• Infectious Disease

• Nephrology

• Psychiatry

• Pulmonology

• Rheumatology

• Substance Abuse

• Primary Care

Obstetrics

• Antepartum Care

• Delivery

• Post-partum

Orthopedics

• Joint Replacement

• Sports Medicine

Neurosurgery

• Brain

• Peripheral and

Cranial Diseases

General Surgery

• Bariatric

• GI

• Endocrine

• Transplant

• Trauma

Oncology

• Hematology

• Radiation Oncology

Radiology

• CT

• Mammography

• MRI

• PET

• Ultrasound

• X-Ray

Spine

• Fusion

• Medical Spine


To develop a customer-focused growth

strategy, provider organizations must

answer two additional questions.

First, systems need to understand what

purchasers want to buy. Providers

must identify which key problems

customers want solved and what

corresponding solutions will address

those pain points. This analysis will

enable organizations to identify

services that represent top

opportunities for growth.

Second, it is critical for providers to

understand how consumers are

shopping for those products. Because

purchasers tend to have numerous and

varied preferences, a detailed analysis

of consumer buying behavior will

inform the development of a successful

go-to market strategy.


The Customer-Focused Approach to Growth

Answering Two Broad Strategic Questions


What Are Purchasers

Shopping for?

• What problems and pain

points do they have?

• Which solutions will actually

meet those needs?

How Are They Shopping

for Those Products?

• What information do they

use to make their decision?

• What trade-offs are they

willing to make?

Identify Top Growth Opportunities

Figure out which products and services

have biggest potential to drive growth

Develop a Go-to-Market Strategy

Put together a strategy to deliver

those products to the market


It is helpful to recognize that despite

the hundreds of distinct billable

services most organizations offer,

purchasers tend to think of their health

needs in terms of three types of

products: emergent care, shoppable

procedures, and enhanced

management solutions.

Emergent care services treat an urgent

illness or injury that must be addressed

quickly. Ranging from serious

emergencies to low-acuity but time-

sensitive needs like a child’s strep

infection, these needs allow consumers

very little time to make a purchasing

decision.

In contrast, shoppable procedures

encompass treatments and

interventions that patients schedule in

advance. For these services,

consumers have the ability to shop

around and compare provider

offerings.

Finally, enhanced management

solutions focus on disease prevention

and the treatment of longitudinal health

needs, typically within the confines of

an ongoing relationship with a provider.

Due to the non-urgent nature of these

care needs and the importance of the

provider-patient relationship,

consumers tend to shop around

extensively, taking time and care to

make an informed decision.


What Are Purchasers Shopping For?

Consumers Think in Care Episodes, Not Itemized Bills


“I have an urgent injury or

illness that must be

addressed immediately.”

“I need to have a procedure

done, but it’s not urgent.

Where do I go?”

“I want a relationship with

a provider to manage my

ongoing health needs.”

• Low- to-mid acuity

urgent care

• Emergency care

Emergent

Care

• Diagnostic procedures

• Surgical procedures

• Therapeutic procedures

Shoppable

Procedures

• Preventative care

• Lifestyle management

• Chronic disease

management

Enhanced

Management

Choosing Three Types of Products


Shoppable

Procedures Enhanced

Management

Emergent

Care

Successfully driving growth by selling

products across all of these categories

requires a three-part go-to-market

strategy.

First, providers must design products

that address distinct consumer

problems and meet specific purchaser

preferences and needs.

Second, health systems must develop

a successful pricing strategy for each

product. This includes not only a

competitive price point—one which

drives sufficient value for both

purchaser and seller—but also the

most appropriate payment

methodology.

Finally, selling these products requires

an effective sales strategy that

communicates and proves the value of

these offerings to potential purchasers.

The remainder of this study will focus

on imperatives for successfully

accomplishing each element of this

customer-focused growth strategy.


How Are They Shopping?

Go-to-Market Strategy Must Answer a New Set of Questions


Consumer-Oriented Product Design

Which features and attributes should these products have?

Competitive Pricing Strategy

What price point and payment methodology will appeal to customers?

Retail Sales Tactics

How do we demonstrate product value to consumers and employers?

I

II

III

Growth in a Retail Health Care Market


I. Consumer-Oriented Product Design

Protecting the Core Business

1. Maintain realistic perspective on differentiation opportunities


A successful growth strategy must

begin with a desirable product.

While health systems have become

incredibly skilled at orienting around

physician needs and preferences,

providers have not traditionally

packaged health care services in a

consumer-friendly fashion. Hospital

executives tend to view health care

services as a series of line item

codes, rather than a complete episode

of care.

While organizational structures such

as hospital departments and service

lines attempt to integrate and

coordinate care, they do so from the

provider perspective and tend to

organize around clinician training

models. These structures make

incredibly effective operational

frameworks, but fall short of appealing

directly to consumers.

To remain competitive in a retail

health care market, providers will

need to approach product design from

the customer perspective and

combine the inputs on the left of the

graphic here to form the value-added

outputs on the right.

From Individual Inputs to Consumer Products

Designing Around Purchaser Preferences


Office Visits

Imaging

Lab

Emergency Care

Inpatient Procedures

Outpatient Procedures

Wellness Programs

Long-Term Care

Pharmacy

Product

Packaging

Shoppable Procedures

Diagnostics, surgery, follow-up

care, planned treatments

Emergent Care

Low- to mid-acuity urgent care,

emergency care

Enhanced Management

Care/disease management,

wellness, ongoing primary care

Current Health Care Production Model


Providers will encounter unique design

challenges within each product

category.

First, as price competition increases,

hospitals and health systems looking to

maintain a higher price point for core

procedural services will need to find

ways to deliver a superior product. This

entails determining what aspects of

product quality—clinical outcomes,

reputation, and patient experience—

consumers will pay more for.

Second, as retailers and vendors

continue to offer consumers an

increasing number of convenient

emergent care options, health systems

will need to figure out how to succeed

in a crowded marketplace with a large

number of potential product offerings.

And finally, as employers struggle to

contain health care costs and chronic

disease continues to drive long-run

costs, providers have an opportunity to

move beyond one-size-fits-all primary

care and wellness solutions, and

instead develop health management

products that deliver a demonstrable

impact on cost and outcomes.

The subsequent section will examine

how to address each of these

challenges in turn.

Building a Customer-Focused Product Portfolio

Meet the Unique Retail Market Challenges of Each Product Type


Retail

Market

Challenge

Best-in-Class

Approach

Consumers’ definitions of

convenient access varies

by demographic, market

2

Ensure that access

networks meet

diverse patient

demands

Emergent Care

Current offering not

delivering return on

investment

Design offerings to

address concrete

purchaser needs

3

Enhanced Management

1

Maintain realistic

perspective on

differentiation

opportunities

Consumer cost sharing,

price transparency

driving price competition

Shoppable Procedures

Competing in an On-

Demand World

Expanding the Enhanced

Management Portfolio

Protecting the

Core Business


As the industry transitions to value-

based care, focus has shifted away

from hospital-based services to

primary care and care management.

However, procedural services continue

to represent the biggest book of

business for almost all hospitals and

health systems.

For these core services, hospitals now

face a new challenge in the form of

price competition. Price sensitivity and

transparency now extend beyond the

familiar terrain of diagnostic imaging

and selected outpatient procedures—

and so price competition does as well.

The risk of commoditization is very

real. We estimate that up to $700

billion of revenue within the health care

market comes from procedures that

consumers could shop around for on

the basis of price.

To be clear, commoditization is not

inherently threatening. Many extremely

profitable industries are based on the

efficient production and delivery of

commodities. The difficulty lies in the

fact that hospitals, with their high fixed

cost structures and historical reliance

on cross-subsidization, are particularly

ill-prepared to succeed in a

commoditized market.

Protecting the Core Business

The Looming Threat of Commoditization

Commoditization Not Limited to the Usual Suspects

Source: Advisory Board Estimates; Healthcare Bluebook, https://healthcarebluebook.com/; Health Care

Advisory Board interviews and analysis.

Healthcare Bluebook provides prices on more

than 200 shoppable procedures including:

Biggest Areas of Pricing

Weakness Already Exposed

Diagnostic Exams

Front line of price sensitivity;

main area of focus for steerage,

with little to no quality variation

Outpatient Procedures

Care performed in the outpatient

setting is increasingly vulnerable

to price competition (e.g.,

ambulatory surgery, GI centers)

Definition of Shoppable

Procedures Expanding

Arm Amputation (hospital, physician,

anesthesia fees)

Pacemaker Insertion (hospital,

physician, anesthesia fees)

$700B Estimated market size of

shoppable procedures


In the inevitable world of price

competition, providers have two

options: either embrace

commoditization, achieve meaningful

efficiencies, and thrive as price-takers;

or justify above-market prices through

clear and sustainable product

differentiation.

These two strategies are not mutually

exclusive; organizations may

differentiate a select number of

services on non-price factors while

competing on the basis of price for

others. Only the rare organization can

maintain above-market prices across

the board, and in the long run all

providers will need to trim underlying

cost structures.

In today’s retail market, however,

differentiation opportunities do exist.

Let us consider the practical viability of

three different approaches: providing a

truly unique market offering, delivering

demonstrably superior clinical

outcome, or providing perceptibly

better patient experience.

Theoretically, all should be possible,

but in practice, none of these three

options are easily achieved—or

maintained.

1. Maintain realistic perspective on differentiation opportunities

Two Paths Forward in a Commoditized Market

Providers Faced with Budget or Service Improvements

Source: Pellet, J, “Controlling Health Care Costs,” Chief Executive, 2013;

Health Care Advisory Board interviews and analysis.

Study in Brief: Sustainable Acute

Care Enterprise

Health Care Advisory Board presents a

comprehensive strategy to restructure

acute care operations and bend the cost

growth curve

Reduce labor costs, streamline

supply chain management

Attain a unique market position

Demonstrate superior clinical outcomes Focus on improving case mix,

increasing profitable procedures

Deliver exceptional patient experience Establish role as price-taker,

advertise services only on price

“We’re dealing with people, not screws

and hammers…we must maintain, or

better yet, improve the quality of care.”

Herb Pardes, Executive Vice Chairman,

New York Presbyterian Hospital

Differentiate to Preserve Pricing Power Embrace Commoditization


History has established the potential to

differentiate on niche or rare services;

children’s hospitals, in particular, have

done so quite successfully for many

years. However, the market for rare

services is typically limited, and only a

few organizations can realistically rely

on this approach as a comprehensive

growth strategy.

In lieu of offering a rare service, some

providers may charge a higher price

point for a premium brand name. This

can take the form of a single physician

or encompass an entire institution. Of

course, reputation generally takes

many years to build, and increasing

patient willingness to travel means that

competition on this front will be limited

to those that can build nationally or

even internationally recognized brand

names.

Unique Market Position

Does This Sound Like You?

Only a Select Few Truly Unique

Source: U.S. News & World Report Best Hospitals Rankings 2014; Mayo Clinic , Rochester, MN; National

Organization for Rare Disorders, Danbury, CT; UPMC, Pittsburgh, PA; “Dr. James Andrews Gets Topps

Trading Card,” July 12, 2014; ; Health Care Advisory Board interviews and analysis.

Provide a Niche, Rare Service…

UPMC’s Children’s

Hospital of Pittsburgh

specializes in the

diagnosis, study, and

treatment of rare

genetic disorders

The National

Organization for Rare

Disorders (NORD)

helps patients track

down providers

treating rare diseases

…Or Cultivate Indisputable Brand

One-of-a-Kind Physician

• Dr. James Andrews,

renowned orthopedic

surgeon

• Go-to physician for injured

athletes

• Received own sports

trading card in 2014

Unassailable Reputation

• Mayo Clinic, world-

renowned hospital

• Ranked the number one

provider in eight

specialties in 2014 (only

3% of providers rank in

one specialty)

IMAGE CREDIT: THE TOPPS CO.


While most organizations recognize the

limited potential to compete on the

basis of reputation alone, many have

bet on the ability to differentiate on

clinical outcomes.

However, for clinical performance to

justify above-market prices, the

standard is not excellence, it is

exceptionalism. This is a much more

demanding criterion.

For one thing, although patients value

clinical quality and claim to be willing to

pay more for it, research has shown

that individuals tend to assume

provider quality or to depend on poor

proxies such as recommendations from

friends and family members.

Furthermore, if patients were to

examine true clinical outcomes data,

they would find minimal variation.

Providers have made tremendous

strides in recent years against

industry-wide quality standards and

core measures. While these gains are

undeniably a success for the industry

as a whole, widespread clinical

excellence limits the opportunity for

any single organization to differentiate

on these types of measures.

Superior Clinical Outcomes

Excellence Not Necessarily Exceptional

Consumers Want Quality, but Difficult to Differentiate from the Median

Source: “Consumer Choices About Physicians, Health Plans, and Hospitals,” Harris Interactive Poll; “Finding Quality

Doctors: How Americans Evaluate Provider Quality in the United States,” The Associated Press-NORC Center for

Public Affairs Research; “Improving America’s Hospitals, The Joint Commission’s Annual Report on Quality and

Safety 2013,” The Joint Commission; Health Care Advisory Board interviews and analysis.

Difference in Quality Difficult to See Transplants

Cancer care

Heart surgery

Patients Seeking Quality Care…

Percentage of patients

responding they want the

best quality health care

“no matter what it costs”

81%

…But Assuming Quality, Using

Proxies

Percentage of Joint Commission-

accredited hospitals meeting core

quality performance requirements

99%

60% Patients who say they very much

or completely trust “quality” ratings

from friends or family

Patients assume clinical quality of

physician and facilities; often use

their own experience as a proxy

for quality

Particularly for Life-Threatening

Conditions, Procedures


While the opportunity to differentiate on

clinical quality when appealing directly

to patients may be limited, some

payers do analyze quality data and

reward providers for better outcomes.

Blue Cross Blue Shield, for example,

uses a tiering system that recognizes

high-quality providers as “Blue

Distinction Centers.” BCBS also works

with employers to design benefits

around these tiers, with distinction

centers receiving preferential status

and the potential for steerage through

reduced cost-sharing on the part of the

patient.

However, BCBS also analyzes cost

efficiency data in addition to clinical

outcomes, and those organizations that

prove to be both high-quality and low-

cost receive even higher distinction

than those that succeed on clinical

outcomes alone. And the types of

outcomes data that BCBS analyzes—

infection rates and readmission rates,

for example—often have a direct link to

total cost.

While outcomes do enable

organizations to differentiate and

potentially maintain a higher-price

point, these types of programs do not

preclude price competition altogether.

Preferred Tiering a More Realistic Opportunity

Gaining Entry into More Attractive Tiers

Source: “Blue Distinction Centers: An Overview,” www.bcbs.com; “Cost and Quality Transparency,” www.allhealth.org; Health Care

Advisory Board interviews and analysis.

Case in Brief: Blue Cross Blue Shield

Blue Distinction Centers

• National designation program that

recognizes providers for high quality

outcomes at low cost for specific services

• Distinction centers are grouped in higher

tiers in employer benefit design

Blue Distinction Specialties

Hip/knee

replacement

Cardiac

care

Spine

surgery Transplants

Blue

Distinction Plus

Blue

Distinction

Employer Benefit Tiering

90%-100%

Benefit

70%-80%

Benefit

50% Benefit

17.4% Overall

cost savings

Results from Spine Program:

Lower site

infection, 30-day

readmission rates

In-Network

Not Precluding Price Competition

“What quality can get you is inclusion in a

better tier. Within that tier though—there’s

still going to be price competition. You can’t

succeed on quality alone.”

Senior Director of Planning,

Academic Medical Center

http://www.bcbs.com/

http://www.allhealth.org/


In the face of difficulties in leveraging

reputation or clinical outcomes, some

organizations have turned to patient

experience as a differentiator.

Providence Health & Services, for

example, focused heavily on the

patient experience when establishing a

new approach to maternity care for its

Oregon market.

Recognizing the high cost of its

maternity care services relative to the

market, Providence set out to develop

a maternity package that would be

worth the greater cost. Leaders not

only reviewed publicly available

literature but also convened patient

focus groups to incorporate consumer

preferences directly into the design of

the package. Providence’s new offering

includes the use of new, value-added

services such as nurse midwives,

doulas, and group visits—services

which consumers had enthusiastically

requested.

Since rolling out the package, the

redesigned service has not only

increased volumes, but also reversed

payer mix at the initial rollout site from

60% Medicaid to 60% commercially

insured. The package also significantly

reduced the cost of maternity care;

Providence has achieved a 15%

reduction in inpatient maternity costs.

Service Excellence

An Experience Worth Paying For?

Adding Value to a High-Cost Service


Providence recognizes

the high cost of

maternity care and

shifting consumer

preferences

Surveys consumers,

reviews journals, and

consults providers to

define market need

Standardization

improves capacity,

reduces cost while

package features

attract new patients

Develops maternity

package, standardizing

care with nurse

midwives, doulas, and

group visits

Providence Structures Maternity Package

to Meet Consumer Preferences

Case in Brief: Providence Health & Services Oregon Region

• 1,484-bed system in Portland, Oregon

• Created a maternity package to appeal to changing consumer preferences

• The new offering increased volumes, reduced costs, and improved capacity

Package Increases Capacity, Attracts

Commercially Insured Patients

30% Increase in

capacity

15% Reduction of

inpatient costs

60% 40%

40% 60%

Payer Mix

Operational Improvements

Before Package

Rollout

After Package

Rollout

Commercial

Medicaid


Of course, the specific elements and

features that drive patient experience

will differ greatly product by product.

While doulas and group visits

effectively differentiate maternity care,

those looking to make improvements to

cancer care or cardiology services, for

example, will need to consider other

types of differentiators. The table

presented here lays out some of the

most common differentiators across

service lines.

While organizations have achieved

great success in attracting consumers

by improving the patient experience, it

is important to note that competitors

can easily replicate these types of

efforts. Efforts may be short-lived and

providers will need to continuously

iterate on product design efforts to

maintain advantage over time.

Difficult to Sustain Experience Advantages

Which of These Is Out of Reach of Our Competitors?


Service Line Patient Experience Differentiators

Maternity Doulas, midwives, group visits, 24/7 access

Oncology Navigators, expedited first visit scheduling, 24/7 access, short wait

times, faster diagnosis, second opinion

Cardiology Specialist or second opinion visit scheduling, access

Imaging Reduced wait times, extended hours, access, improved ease of

scheduling

Neurology Specialist or second opinion visit scheduling, access

Orthopedics Location, access, hours

Typical Differentiation Strategies


However, there may be longer-term

strategic gains from both clinical quality

and patient experience differentiation

efforts as well. In practice, these efforts

often require providers to improve

efficiency and thereby reduce

operational costs. In other cases,

patient-focused improvements also

increase capacity and hence generate

additional revenue

For example, North Shore-LIJ Health

System’s “Dream Practice” initiative

focuses improvement efforts in key

specialty practices by transforming

customer service, streamlining billing,

and improving staff engagement. In

addition to increasing patient

satisfaction, reforms in the system’s

orthopedic practices have increased

revenue by $3 million within two years.

This type of differentiation effort yields

two advantages. First, it provides a

short-term competitive advantage by

increasing patients’ likelihood to

recommend a service to friends and

family. Second, the accompanying

efficiency and revenue gains allow

providers to prepare for inevitable price

competition.

When It Pays to Do the Right Thing

Opportunity to Translate Short-Term Differentiation into Pricing Flexibility


Personalized Customer Service

• Call center conducts appointment reminder,

follows up with no shows

• Concierge makes follow-up appointments,

provides next steps

Simplified Billing

• Improved copay collections, clarified billing

for patients

• Developed new coding process to reduce

denials

Case in Brief: North Shore-

LIJ Health System

• 17-hospital system based in

Manhasset, New York

• “Dream practice” aims to

achieve 99th percentile in all

metrics

• Practices organize around

patient-centric care, reduce

inefficiencies resulting in cost

savings

Increase in revenue

from 2012 to 2014

$3M

Dream Practice by the Numbers

Increase in average

monthly visits from

2012-2014

35% Improvement in patient

“likelihood to recommend

practice” score

2.8%

North Shore “Dream Practice” Works to Create

Ideal Patient Experience


If procedural services represent the

biggest book of business for health

systems, they are followed by

emergent care services, which

currently represent a $125 billion

market in the United States.

The dominant challenge for health

systems in the emergent care market is

the shift away from traditional delivery

sites. Growth in alternative sites of care

such as freestanding EDs, retail clinics,

urgent care centers, and e-visit

platforms vastly outpace the growth in

primary care offices and EDs.

Advisory Board analysis suggests that

by 2020, revenue from alternative

emergent care sites alone will reach

$40 billion, up from $24 billion today.

Competing in an On-Demand World

Landscape for Emergent Care Shifting

Fastest Growth Occurring in Nontraditional Settings

Source: "A New Front Door," Health Facilities Management, www.hfmmagazine.com; Kahn S, "Emergency & Other

Outpatient Care Centers in the US," IBISWorld, August 2014;"Retail Health Clinics & Urgent Care Centers Poised For

Strong Growth – Market Worth $10 billion," Market Data Enterprises, www.prweb.com; "When the Tiny Hospital Can't

Survive: Free-standing EDs with Primary Care Seen as New Rural Model," Modern Healthcare,

www.modernhealthcare.com; Son A, “Urgent Care Centers in the US,” IBISWorld, February 2013; Health Care Advisory

Board interviews and analysis.

1) Freestanding emergency room, telemedicine or e-visits, urgent care center, retail clinic.

Alternative Care Sites Already Large

Part of Provider Business

$24B

$64B

$38B

Traditional

Primary Care

Alternative

Emergent

Care1

Moderate-Urgent

ED Care

2013

Projected alternative emergent

care site revenue, 2020

$40B

8.9%

4.0%

2.5%

Alternative

Emergent

Care

Traditional

Primary Care

Moderate-

Urgent ED

Care

Alternative Care Sites Significantly

Outpacing Traditional Growth

2014-2020

http://www.hfmmagazine.com/

http://www.prweb.com/

http://www.modernhealthcare.com/


Available to Health Care Advisory Board Members

A Strategic Thought and Implementation Partner

Best practice studies and

national meeting presentations

clarify cutting-edge ideas from

across health care

Blogs and frequent Insights

memos offer up-to-the-minute

coverage of new developments

On-call Expert Center prepares

custom responses to specific

member questions

Unlimited access to phone

conversations with leading

subject matter experts

Customized Assessment Portal

presents dozens of organization-level

performance indicators with no user

input needed

Market Estimators reveal local

trends and opportunities from service

lines to individual procedures

Inpatient and Outpatient Forecasters

project volume trends in all service lines

Benchmark Generators compile

nationwide performance standards for

customizable industry cohorts

Intensive workshops convene

Advisory Board experts, member

leaders for rubber-meets-the-road

planning sessions

Implementation guides, diagnostics,

and ready-to-use templates bridge

the gap between idea and execution

Onsite presentations deliver

actionable intelligence to the

entire organization—from the

board of directors to frontline staff

Strategic Guidance Actionable Data and Analytics Implementation Support

Member-

Specific Focus

National

Perspective

For more information on the Health Care Advisory Board, please contact Ellie Barlow at [email protected] or 202-568-7954.

mailto:[email protected]

Blueprint for Growth 2020 - Advisory · ©2014 The Advisory Board Company • advisory.com...

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