Case Study: Are physicians to blame for a failed hospital — and why couldn’t they have stopped the financial bleeding?

August 21, 2007

One of our colleagues is currently consulting at a hospital in the Northeast that is in bankruptcy proceedings.

A number of factors have led to the demise of this community hospital, including some strong tertiary care competitors 30 minutes away and a corrupt former CEO who allegedly misused funds for his own gain.

However, the physicians also have been blamed for the hospital’s failure, and their role in the hospital’s collapse raises important issues about physician accountability for today’s healthcare crisis.

The facts: This hospital’s length of stay was over 7.5 days, the highest we have seen in years! Why? Because — according to the staff MDs — physicians receive more money keeping patients in the hospital than by discharging them and following up. Attempts by hospital administration to influence physicians to manage utilization according to protocols and best practices went unheeded for years.

So now the community faces a difficult situation as their only community hospital is about to close, forcing a long drive to the tertiary care facilities. And the physicians will have a hard time getting privileges at other facilities given their dismal utilization record.

Now, this is clearly a unique situation, especially over 2 decades since DRGs led to reductions in length of stay.

However, it points to a few problems in healthcare that every physician must confront and consider:

1. Are you doing enough to help your hospital succeed, or are you sabotaging your hospital? If you derive a benefit from your primary hospital, then you have an obligation to work collaboratively with hospital administration to help them manager costs, utilization, and community reputation.

2. If you are pulling profitable services out of the hospital and into your office (or new specialty surgery center), are you setting the hospital up to fail once every physician in your community does the same (in a systems archetype that Peter Senge calls Tragedy of the Commons) — or does the capitalist system make this issue a moot point?

3. Overall, have you considered the value of your hospital(s) to your practice? If your hospital closed or faced a serious financial crisis (even beyond what it is facing now), would your practice suffer? And if so, are you treating your hospital administration like allies? Or, are you acting like a few too many physicians and ignoring the needs of these struggling organizations — or perhaps taking things even further by behaving in an adversarial manner out of arrogance and lack of understanding of organizational dynamics?

These are tough questions that most physicians are likely to shrug away. “I have my own problems….” you may say.

But that is precisely the problem facing health care today. Too many players in the industry point the finger elsewhere — at insurance companies, the government, the drug companies — without looking at how they can make things better with a more collaborative attitude and the willingness to think about new models that work towards everyone’s benefit.

There is no doubt that things are harder than ever for many physicians. But through an understanding of how to think about organizations and systems, and how to collaborate with complex groups consisting of clinicians and administrators (something not taught in medical school), local and regional health care systems can improve for everyone.


Are you busy and efficient with your time, or busy and inefficient with your time?

December 28, 2006

We rarely meet a healthcare professional who is not extremely busy. However, this “busy-ness” is not always caused by having too many patients. This is a bitter pill for some healthcare professionals to swallow, but many clinicians can improve the way that they manage their time, in order to earn a higher income. Also, even if a healthcare professional has too many patients, he or she may not have the most profitable mix of patients.

Our systems challenge you to take a look at how you spend your time, to assess your management practices, and to evaluate which payers and services are profitable for you. Sometimes the best answer is to renegotiate or cancel certain payer contracts; you end up seeing fewer patients and yet your profits increase. Other times we find that a healthcare practice does have room to see more patients, if it runs more efficiently.

At the same time, healthcare is becoming more and more competitive. It is important to stay on top of local market conditions and help to shape them, instead of reacting to unfavorable changes and threats when it is too late. To do that, you have to free up time from less valuable activities and make time for additional strategic activities.

We are all busy. The question is whether we are getting the best results possible in exchange for our precious time.

Think of your referral base as an Othello game board

December 28, 2006

Do you remember the game “Othello”? The game consists of a board laid out like a chessboard (but with more squares) and a stack of black and white chips.

The object of the game is to control an entire board with chips of your color (either white or black). The way to do this is to lay down chips so that two chips of your color outflank a row of chips of your opponent’s color.

You might think of your referral base the same way.

Your community is the game board. Each square represents potential referral sources. Your goal is to have each referral source become educated about how your practice serves patients, and to think of you first when they find someone with a health-related problem you can solve.

Most healthcare professionals don’t think aggressively enough about controlling the “game board” of referral sources in their community.

There are tactful, educational ways to develop your referral base — without feeling awkward or inauthentic.

One of the exercises we do here at The Healthcare Marketing and Practice Management Institute is to ask healthcare professionals to think in a systematic, disciplined way about the entire universe of potential referral sources in their community. Usually we find that these professionals have a respectable base of referral sources already, but they have not developed a systematic and proactive program to develop new referral sources while nurturing the existing referral relationships.

For instance, we recently worked with a physician practice that had offices near each of the two hospitals in their community, one on either side of town. An analysis revealed that the practice had done an excellent job developing loyalty from referral sources on the East side of town, but had barely penetrated the potential referral sources on the West side of town.

Once they recognized this fact, we went to work to educate a variety of potential referral sources on this side of town — while also taking care to thank and update existing sources.

As in the game Othello, if you don’t control the board, somebody else will. Don’t let things evolve naturally when you think about referrals. Rather, develop a proactive (and tactful) strategy.

Marketing a healthcare practice does not have to be “tacky”

November 20, 2006

It is true that many physicians, for instance in much of the Northeastern United States and near certain Academic Medical Centers, consider marketing to be undignified.

However, the fact is that every physician practice markets its services, whether the physicians in that practice have made a conscious decision to market or not. ”Marketing” is a broad term. It includes the entire patient’s experience, from the time they schedule an appointment with you until they receive their final bill. Therefore, almost every aspect of your healthcare practice fits under the umbrella of marketing: your office, the service your office staff provides, your interview technique, the way you follow up to thank referral sources, your visibility in the community, and even the final bill that the patient receives from you

Healthcare professionals have a choice: They can be self-righteous and let their credentials speak for themselves; or they can be proactive and ensure that their patients have a planned, consistent, and favorable experience. In this sense, marketing and practice management overlap.

At the same time, even traditional marketing doesn’t have to be tacky. At our Institute, we teach what we call ”education-based marketing”. With this type of marketing, you tastefully educate your marketplace about who you are and how your services can help. You are providing information to establish your credibility and help your community learn about how they can improve your health. You are not making tacky sales pitches.

Why word of mouth and referrals are not enough

November 20, 2006

Broadening your patient base requires a more comprehensive and systematic approach than simply relying on word of mouth and referrals.

First, referrals and word of mouth are important. However, even with these tactics, we find that healthcare professionals can be more proactive and effective.

For instance, we find that relying on word of mouth puts healthcare professionals in the vulnerable position on having to depend on happenstance and the good will of busy strangers to think of you first with everything else they have going on.

Similarly, many healthcare professionals are not proactive enough when it comes to generating referrals. What is needed is a systematic approach to identify every high-potential referral source — and then nurture your relationships with these colleagues through educational messages that compel them to think of you first when a need arises.That’s why we detail a system to ensure that you leave “no stone uncovered” when you think about referral sources and how to strengthen relationships with them.

At the same time, broadening your patient base and growing your practice requires more than word of mouth and referrals. Marketing your healthcare practice starts with a strong strategic foundation. You have to make savvy decisions about your goals and vision for your practice, service mix, patient and insurer mix, how you will differentiate your services, your marketing message, and much more.

Then you get visible in your marketplace. There are a variety of low-cost, high-impact, tasteful ways to do this. Being more proactive and systematic in generating referrals, as noted above, is one way, and there are many more.

It is also important to evaluate the patient’s experience of your practice. There are dozens of “touch points” that you must consider to be sure that you provide a consistent, quality experience.

Other marketing topics include: your retail presence, your service model, relationships with local health systems, relations with insurers, and knowing how to work with the right vendors. Finally, it is essential to create a marketing plan and stick to it.

The framework for marketing a healthcare practice

November 20, 2006

Healthcare professionals often ask us to clarify our framework for marketing a practice. Following is a ten-step approach to successful marketing.

1. Make marketing a priority, not a “dirty word.” Marketing refers to everything you do to educate the community about your practice, as well as the experience your patients and colleagues have when they interact with you. Therefore, you are marketing whether you want to or not. You may as well market proactively, and create the image you want your practice to have.

2. Lay a strong strategic foundation. It is imperative to understand the market in your pratice area, including competitors, total referral base, optimal payer and patient mix, and optimal service mix.

3. Build your referral base. Most healthcare professionals do not do as thorough job as they could in building referrals. There are proactive yet tasteful ways to educate colleagues about your practice, and every healthcare professional should be doing what they can to be the “go-to” healthcare professional in their field.

4. Get, and stay, visible in your community using high-impact, low-cost tactics and by following up over time. (We show you a variety of ways to do this that are appropriate and tasteful, and that bring value to your community while enhancing your image and reputation).

5. Develop your retail strategy.

6. Develop your service strategy.

7. Measure and improve your quality and utilization. These measurements not only help you provide more consistent care, but they also can be used to negotiate with insurers and to educate the community about your practice results.

8. Improve hospital and insurer relations. There is a co-dependency between independent healthcare practices and their local hospital(s), and often the relationship can be strengthened to the benefit of both parties. Similarly, many healthcare providers can improve their footing with insurers by understanding how to build leverage.

9. Develop the necessary marketing collateral. Every healthcare provider should develop a set of tasteful, educational marketing materials to educate patients and prospective patients about their services and developments in their practice. This activity does not have to be difficult or costly — and it is important to learn from what works rather than re-inventing the wheel or repeating common mistakes.

10. Develop a marketing action plan. To achieve results, one must plan and take action.

The above framework is a skeleton only. Our marketing system provides the details.


A practice with discrepancies between patient and physician perceptions

October 26, 2006

Recently I interviewed the physicians, office staff, and a sample of patients from a specialty medical practice. The results were remarkable in the discrepancy presented between how physicians viewed their strengths and quality of service, and how office staff and patients did.

Specifically, the six physicians in the practice unanimously saw themselves as a community fixture, caring for two to three generations of people in the local area. They believed that they excelled based on their quality of care, communication, and personal attention to patients.

Patients had some different views. While pleased with the overall quality of care they received, they noted that:

– At least two physician are notoriously late for appointments, often causing patients to miss a few hours of work and have to reschedule. In this blue-collar community, missing work for a no-show appointment is costly and frustrating.

– Another physician almost never communicates to patients about test results in a timely manner. This keeps patients in a worried state while they wait to hear good or bad news.

– Patients and office staff complained about how hard it can be to reach their own physician for specific and important questions about procedures and medications.

– Patients complained about certain office procedures that caused them undue hassle and concern. These issues — like having to bring a complete medication list to each appointment — could easily have been avoided with a pamphlet answering common questions and concerns.

There are a few conclusions to draw from this case study:

1. There is often a gap between your “intent” and your “impact.” You may intend to provide exceptional service, but how you do depends on the impact you have on your patients. It is a good idea to survey patients from time to time to see how you are really doing.

2. Every multi-physician practice should set clear performance standards about communicating test results, timeliness, and other factors — and be sure that all physicians are providing consistent service.

3. Communication comes up again and again in our work as an issue. Patients expect timely communication about both the big and the little things, from test results and their treatment plan to what they need to bring to office visits.

4. Be open to feedback without getting defensive. In today’s environment, it is probably impossible to make everyone happy. But good management demands understanding patient perceptions and continuously improving the consistency and quality of their experience. “Getting better” is of course the ultimate standard from the patient’s point of view, but patients still expect to be treated with respect, dignity, and professionalism throughout their episode. In our experience, some physicians refuse to acknowledge that they can do better — and this does not help their standing in the community.

A simple framework for practice management and marketing

October 19, 2006

On my first day at Harvard Business School our class watched a film about business management that summarized the entire MBA program.

The film showed a cartoon of some sort of business, and broke the business into two parts: cash coming into the business, and cash going out of the business.

The goal in any business, including healthcare practices (and our Healthcare Practice Management & Marketing Systems), is to maximize cash coming in and minimize cash going out.

The rest of the MBA program provided 500 case studies focused on exactly how to do that. We kept slicing and dicing the basic premise of maximizing cash in while minimizing cash out into finer and finer elements.

In a healthcare practice, someone should always be asking whether the practice is optimizing cash flow.

For instance, every medical practice should be reviewing its aging of receivables to uncover opportunities to accelerate cash flow, become better at coding, and understand their most profitable services and insurers.

However, in practice optimizing cash flow is not always easy. For instance, the standard way for a medical practice to increase cash coming in is by broadening one’s patient base. However, we work with many medical practices that could increase profits more by DECREASING their patient base and instead focusing on a more profitable patient mix.

Also, it can be challenging to determine the right perspective between short-term cash management and longer term returns. For instance, investment in new equipment can require a substantial cash outlay, with returns to come over time. In this case, it can take a savvy analysis to determine whether a new investment will really increase cash flow over time, above and beyond the cost of the investment and other opportunities.

Many medical professionals resist using a cold, seemingly impersonal business framework because it ignores the human aspect of patient care. But applying this framework actually presents an opportunity to improve care. Practices that provide outstanding quality and an excellent patient experience will generate rave reviews in the community and increase referrals (which ultimately will increase business results). They also tend to optimize both quality and efficiency of care, which makes everyone better off.

Maximize cash in. Minimize cash out. Easy to say, but not always easy to put into practice.

The little things some healthcare practices do that make a big difference

October 6, 2006

There is a local medical practice in my town that does an excellent job with the “little things” — and these personal touches ensure that I am always thinking about this practice and telling others about it.

Here are some examples:

1. After my first visit, they sent me a nice letter thanking me for placing my trust in them.

2. When I referred my father-in-law to see them, they sent me a very nice letter thanking me for the referral.

3. They send some updates about their practice and about trends in my specific health issue to me by mail. These updates are useful and educational to me, and I enjoy reading about them.

4. When I call their office, the office staff is not only extremely professional and friendly (an attribute that is not as common as it should be), but they also seem quite proud to work for this practice. When I asked if a particular physician was known for a certain procedure, they enthusiastically told me about this physician’s reputation and some of his credentials and achievements.

5. One of the physicians in the practice is very visible in the community. He serves on some non-profit boards, and is featured in the local paper frequently — whether about his community service or his advice on certain health issues.

Of course, it helps that this practice has fantastic credentials and a record of excellent quality. But those little, personal touches go a long way, too.

A strategic planning self-assessment for healthcare professionals

October 3, 2006

One of the products we offer with our Healthcare Marketing & Practice Management Systems is a series of concise but effective self-assessments for healthcare professionals to audit their management and marketing practices.

For instance, we challenge professionals to assess their strategic planning process. Following is an example of our strategic planning self-assessment. This is one of twenty-two self-assessments that come with the Business Audit portion of the program.

The purpose of these self-assessments is to give you a concise checklist of best practices in a clinical practice. This checklist follows the Pareto Principle of focusing on the 20% of business practices that get you 80% of the results. Therefore, we don’t claim that it covers EVERYTHING. But it does cover a good percentage of the most important things.

Let us know your thoughts, and whether you do adequate strategic planning in your practice.

Strategic Planning

  • We do a strategic planning process at least annually.
  • This process gathers input from key stakeholders and data about our marketplace.
  • We review our mission and vision for the practice.
  • We assess the size and growth of the market for our services.
  • We compare our own “penetration” to the size of the market.
  • We assess trends in managed care and payments.
  • We evaluate competitors’ strengths and weaknesses, and how we can gain an edge.
  • We assess the strengths and weaknesses of our referral network.
  • We evaluate the depth and breadth of our overall service offerings.
  • We assess the strengths and weaknesses of our marketing.
  • We assess our payers, including our payer mix.
  • We evaluate our clinical utilization rates and quality or care outcomes.
  • We evaluate our cost controls.
  • We evaluate our cost structure and financial ratios.
  • We review our technology.
  • We take a hard look at the patient’s experience, and how to improve it.
  • We assess the capabilities of our clinicians and staff and identify any gaps to fill.
  • We review physician and staff compensation.
  • We assess our risks, compliance, and malpractice insurance.
  • We evaluate our relationship with local hospital(s).
  • We analyze our financial strength, including capacity for debt, days receivables, trends in aging of receivables, payer and patient mix, and profitability by services.
  • We assess our facility and location, including whether we are located in the optimal zip code/area to serve our desired patient base.
  • We do an overall “Strength, Weaknesses, Opportunities, and Threats” or SWOT analysis about our practice.
  • We determine which services and programs to expand, which to defend, and which to exit.
  • We identify the top issues we need to address, and then identify key priorities to address these issues, achieve our vision, and be more competitive and profitable.
  • We set annual performance/financial goals for our practice and develop a plan to achieve those goals.
  • We assign specific accountability to achieve these initiatives, and a communication plan to follow up on them.