VICTORY CONSULTING™

HEALTH CARE BUSINESS STRATEGIES & ECONOMIC RESEARCH

FOR EMPLOYERS AND PROVIDERS

Using Organizational Culture To Positively Influence Recruitment, Retention, Quality and ROI

Market penetration by Consumer Driven Health Care Products Requires That Providers Change The Culture Of Their Organizations

"Society is telling the industry that its business model is no longer sustainable and that our inefficiencies will not be subsidized.” (Sidney Taurel CEO. Eli Lilly Inc., as quoted in the August 21, 2004 issue of the Indianapolis Star.) The power behind the foregoing statement was sufficient to usher in a stringent austerity program at the global pharmaceutical giant, a major stakeholder on the supply side of the health care industry.

Even though most provider organizations, are not as easily identifiable as Lilly and its competitors they are just as much targets of society’s campaign to revolutionize the health care industry. Consequently, many providers have been searching for strategies that would reduce operating cost, improve clinical outcomes and, increase the level of satisfaction patients/clients derive from the consumption of their health care products/services.

Understandably, by doing so providers aim to have their brand image stand out in the minds of savvy health care consumers and attain or maintain a competitive advantage over competitors. They recognize the need to do so is urgent because of a series of recent developments. For example, the Institute of Medicine’s (IOM) negative report on quality outcomes continues to reverberate throughout the industry. Aggressive campaigns are being launched by a network of affiliated and unaffiliated, public and private-sector entities to educate consumers on health care choices and to reimburse providers on the basis of pay- for-performance. Such measures are combining to revolutionize the health care market.

While it is debatable whether the magnitude of the changes occurring on the demand side of the marketplace will culminate in an industry dominated by consumer driven health plans (CDHP) — essentially spin-offs from the medical savings account (MSA) concept - this much is undeniable. We are witnessing the most revolutionary restructuring of the health care market since managed care. This scenario mirrors the conditions predicted in my book “The Victory Principle: An Essential Strategic Guide For Health Care Providers In Search Of A Competitive Advantage And Increased Market Share” M. L. Wavecrest Publishing 2000. Moreover, elements of the Victory Principle… bear even more strategic value, now that CDHPs are clearly becoming established as the dominant market force.

The following lends support to the preceding conclusion. An April 23, 2004 study published by researchers for The Journal of Health Affairs suggested that new CDHPs were on the verge of making a significant penetration in the health care market. Their research, based on projections from a random national sample of 1,856 employers concluded, “the percentage of covered workers who can choose a health reimbursement arrangement (HRA) plan should grow dramatically during the next two years.” They also anticipated that health savings accounts (HSAs), fueled by tax and financial benefits incorporated into the December 2003 Medicare Prescription Drug, Improvement, and Modernization Act (MMA), which were proving to be even more attractive than HRAs, would only grow in popularity. As a consequence the future seemed very bright for the emerging CDHPs, the type of insurance/benefit product most likely to be purchased with funds tied to HRAs or HSAs. Not surprisingly, recently updated research findings are confirming these projections.

 In anticipation of employer demand, virtually every major health insurance company or health plan is offering , or is considering a CDHP. For example, United Health Group, citing reasons similar to those given by Health Affairs researchers, reported in August 2004 that it expects more than 150,000 HSA participants for January 2005. Based on these developments, it is likely that a 2003 projection by Forrester Research Inc., showing CDHPs accounting for 24% of the health benefits market by 2010 may prove to be a conservative estimate.

Indeed, the marketplace is evolving into one in which new CDHPs are facilitating savvy consumers in demanding more for their health care expenditures and providers must employ strategies such as the “Victory Principle” to foster health and well being centric organizational cultures that are responsive to their needs.

Fostering An Organizational Culture That Effectively Serves As A Competitive Advantage

 The big questions for providers to answer are: (a) What strategies have been the most effective at addressing the demands of savvy health care consumers and; (b) Could they successfully deploy such strategy within their organizational culture? The answers to the questions posed are: (a) A provider that focuses on the achievement of continuous quality improvements (CQI) can be successful at addressing many of the health care market issues that are troubling to society and; (b) To achieve success in this endeavor, however, a provider must first foster a health and well being centric organizational culture.  

Evidence now exist that upholds the strategy of fostering a culture that is quality-focused, as the principal method by which providers can effectively achieve CQI  and drive other benefits through the organization, such as: reduced operating cost, improved clinical outcomes,  and an increase in the level of satisfaction patients/clients derive from the consumption of health care products/services.

 This evidence also suggests that a provider that focuses on the delivery of quality products/services, can expect to be rewarded with significant reduction in employee turnover ratios, increased market share and ROI. To meet this challenge many provider organizations are employing or considering six sigma, a strategy that has proven to be effective in saving non-health care entities millions of dollars, and pulling others back from he bring of complete ruin. Six Sigma is defined by some experts as a quality-centric approach to achieving continuous improvements. It is considered superior to other quality management strategies i.e., human performance technology (HPT), because it requires and enjoys rigorous support from upper management in companies where it is employed.

 Most notably, six sigma is heavily reliant on the existence of a responsive organizational culture to be successfully deployed. In effect, even one of the most highly acclaimed business strategies can prove to be ineffective unless management first addresses a fundamental business truism - an organization’s people are its greatest assets – and adopt strategies that foster the development of a health and well being centric organizational culture which identifies with, and is committed to achieving the company’s goals.

 The interests of providers may be best served by spotlighting aspects of SSM Health Care’s (SSMHC) experience at fostering such an organizational culture that culminated in a significant competitive advantage.

Unless you are already intimately familiar with the case history of this Catholic provider, you will benefit from knowing that SSMHC became the first health care recipient of the prestigious “Malcolm Baldrige National Quality Award” and has been cited by both Baldrige and the Joint Commission on Accreditation of Healthcare Organizations as having an organizational culture that is focused on CQI.

To SSMHC, an operational translation of CQI might read, in part:

"Our basic philosophy is that all of our employees, at all levels of our organization are leaders… the health system is obligated to somehow bring out the leadership in each… the hospital system started doing just that by establishing an organizational culture that demonstrated respect for its employees and valued their ideas.”

The foregoing, is an abridgment of a direct quote published by the American Hospital Association’ News Now, Monday May 3, 2004, from a statement made by Sister Mary Jean Ryan, CEO of SSMHC. The St. Louis-based SSMHC 20-hospital health system is spread over 4 states, with nearly 5,000 physician partners and 23,000 employees. Among a host of other achievements, Sister Mary Jean Ryan and others at SSMHC are credited for employing creativity and bold innovative strategies, e.g., commissioning a cutting-edge theatric group to create a theatre piece, which helped to drive elements of the desired organizational culture from St. Joseph Hospital in St. Louis, through the other hospitals across the system.

Sister Mary Jean Ryan’s commitment to CQI, and her strategy for deploying it in a receptive, responsive organizational culture brought SSMHC from the depths of an operating deficit in 1999. SSMHC’s organizational culture so seized on the CQI philosophy that by 2002 SSMHC realized net income of $17 million, on revenue of $1.8 billion.

Of notable significance, credit is due to a network of programs SSMHC undertook during that period to influence the direction of its organizational culture towards CQI. 

SSMHC increased its market share over each of the three year period between 1999 - 2002 to 18 percent, while three of its five competitors lost market share.  And, very impressively, SSMHC lowered its annual turnover to about 10 percent in 2002 from 15 percent in 2000. Mindfully, these feats were accomplished in an environment where the national turnover rate averaged more than 20 percent and shortages of nurses, in particular, abounded.

To achieve the distinction as a CQI leader in the health care industry it was necessary for SSMHC to run a hospital system with business concepts typically employed in non-health care industries. It implies, therefore, that health care executives who have become all too familiar with new business paradigms that portend radical change for everyone but provider organizations, must now explore the option of incorporating concepts such as knowledge management (KM) - considered by many to be the new business of the 21^st Century - total quality management (TQM), re-engineering, e-commerce, human performance technology (HPT), and six sigma in a very diligent manner, in order to revolutionize their operations and meet the challenges posed by radical changes occurring in the health care market place.

The only constant in the business of health care is “change.” And, SSM Health Care has assumed the leadership role by demonstrating that it is possible to foster an organizational culture that will positively respond to virtually any new development spawned by the marketplace

Victory Consulting Facilitates The Efforts Both Large And Small Client Providers To Realize The Benefits Of A Quality-Focused Health and Well Being Centric Organizational Culture

Victory Consulting believes that it is possible for both large and small client provider organizations to realize benefits similar to those achieved by SSMHC. Assuming, that is, management adopts a philosophy that communicates in essence: “All of our employees, at all levels of our organization are leaders. However, it is critically important that employees first be regarded as “internal customers” who are in need of specific resources and appropriate rewards from management, before they can be expected to function effectively in their interactions with “external customers” i.e., patients,  payers and plans.

Also, management must recognize that the probability of achieving long term success with the deployment of strategic programs such as six sigma is dependent on its ability to foster a health and well being centric organizational culture which is reflective of the personal and professional aspirations of internal customers/employees, who are in-turn entrusted with the responsibility of satisfying the needs and demands of external customers.

Victory Consulting advocates a comprehensive strategic approach to fostering a quality-focused health and well being centric organizational culture in a provider environment. The process begins at recruitment, and is weighted heavily towards long term personnel retention. Because, in the long run, in addition to selecting the most qualified candidate for any position, fostering the right organizational culture may be the only viable way to address many of the issues that a changing society now presents to health care providers.

Victory Consulting believes that the significance of the concept of organizational culture to provider organizations is being borne out by research conducted at the Institute of Health and Productivity Management (IHPM) which is now unveiling what is being described as surprising data. For example, when employers participating in a recent study were asked to rank the factors affecting employee performance, most conclusively, organizational culture received “ nearly twice the votes as employee health.” Therefore, it should come as no surprise that SSMHC's approach to managing employees helped the organization ascend to its leadership position in such a dramatic manner.

Logically, therefore, as employers, providers are also responsible for fostering the right organizational culture amongst their own personnel. Organizational culture must be regarded as a prerequisite for achieving or maintaining a competitive advantage in the rapidly evolving health care market. Chapter 17 of the previously cited book, “ The Victory Principle …” is devoted to a discussion of strategy for fostering  “ a positive-oriented organizational culture.” And, in a manner similar to the philosophy espoused by Sister Mary Jean Ryan, “ The Victory Principle ...” addresses the significance of empowering every employee with strategies so that they assume both the responsibility and authority for managing patient / client interactions or the moment of truth.

 The concept of “organizational culture” which is integral to the issues discussed in 300 plus pages of the book helps to ensure that like any good investment, the value of  “The Victory Principle...” has and will continue to prove invaluable to health care executives seeking strategy in response to a changing marketplace. Since, clearly, as the foregoing suggests, the issue is not whether a quality focused organizational culture is the appropriate strategy, but, the concern should be how to go about fostering a health and well being centric organizational culture.

 Noel K Harper, MBA

 President Victory Consulting

Author’s Note:

The Victory Principle …” is available from J.A. Majors Co. Medical & Scientific Books / Dallas. Tel.# 972-353-1100 or Victory Consulting / Indianapolis. Tel.# 317-441-6735

For additional information on our services or for a more in-depth discussion of/or lecture on any of the concepts discussed in this document: Contact: Noel Harper M.B.A. President, Victory Consulting 317-441-6735 e-mail: hctrendlines@vcstrategies.com