Hospitals: Do you know who your customer is?

There are many hospitals out there pursing Six Sigma, in an attempt to provide rigorous discipline in order to boost hospital quality. And they sure do need it. Hospital insiders know one thing for certain, going to the hospital is no picnic, and it can even be dangerous.

Don’t take my word for it: watch how insiders behave when one of their loved ones needs to go to the hospital. The invoke all kinds of “insider” privileges to make sure the experience is routed with special handling. The ‘right’ people are contacted to make sure that their family doesn’t get the standard treatment. In fact, I have personally asked over 200 hospital middle-managers: “Would you take your father to this hospital?”, and over 65% respond with an emphatic NO!

So it is silly to argue against an operational excellence framework like Six Sigma or Lean; the rigor of which is a potent part of its own success formula. Unfortunately, the basic nature of the typical short-term care facility limits the potential of these tools. Why? Because a hospital cannot really define their customer.

With few exceptions, the customer in any other transaction is clear. A customer is the entity that makes the buying decision, and then provides the consideration. There is an unmet need, there is an evaluation of the products or services that can fulfill the need, the selection is made, and then the consideration (usually money) for said product or service is paid. A complete and legal transaction.

Who is the customer of hospital services?

The patient and their family is the most often cited. The majority of Americans have insurance, (and even more are becoming insured every day since the implementation of the Affordable Care Act) so the majority of the payment for service is paid by a 3rd party. And don’t forget that the patient makes almost none of the decisions on what to buy — the doctor does. The patient is really just along for the ride most of the time, they don’t represent themselves, AND sometimes they don’t even want the service, because they are not aware of their unmet need.

There is no universal truth here, because there are examples where a patient could be the customer. In many cases, patients select their physicians, hospitals, and make decisions on whether or not to visit the ED. However, even in this case, there will be many buying decisions that are outside the purview of the patient and family. Right or wrong, a reasonable argument can be made that the patient is not the customer.

The next choice might be the doctor. After all, the doctor is the one who admits patients to the hospital, select which hospital they will perform operations — in effect, they make the choices. The doctor is the one who orders tests, prescribes treatments and is generally held liable when things go bad. However, the doctor doesn’t have to provide the payment for their decisions. Some doctors order extensive workups, others don’t, and often (some might suggest too often) economics and quality of service is not a consideration.

In fact, in a cynic’s view of the situation, the doctor is both the customer and the provider. There is not enough separation between the two. It is a confused relationship. Clearly a major part of the buying decision happens within the doctor’s influence, yet the doctor seldom feels the financial consequences of their decisions and generally do not share the patient’s experience with the hospital’s operational quality.

Far too many hospitals actively recruit physicians to practice in their hospital for them NOT to be considered a customer. If they are not a customer then why do hospitals court them, feed them, provide lounges, etc. What is the difference between a customer’s order and a doctor’s order?

The third constituency is the insurance company, the payer. The people who pay the bills usually believe that they are the customer. The decisions made by the payer can have dramatic market share impact. The insurance company can drive patients to the competition. For instance, in 2006 United Health Care publically announced that they were no longer in a contract with HCA Hospitals in Florida and Colorado. So, if you were a United Health Care insurance policy holder, overnight, you had a new provider of services.

Few even have a choice in insurance providers. The employers and more recently, the government, typically pick the providers. HMOs are notorious for forcing a change in healthcare providers. HMO or no HMO, the insurance company has a great deal of influence in who is selected to provide the service —- to fill the unmet need.

This question on ‘who is the customer’ might see trite, but it has serious implications and is extremely important to the operating strategy and investment of the hospital. The customer becomes a significant question even more so when pursuing any real quality improvement.

Quality efforts change based on the customer

Take Six Sigma as an example. One of the fundamental definitions requires that the customer’s expectation is defined and measurable. This reference is needed to evaluate the performance of the system; to give it a mean and standard deviation. The mean plus or minus Six Sigma (6 standard deviations) must come within the bounds of customer expectation.

Here’s an illustrative story (simplified a bit, but practical and largely true):

Let’s assume that an executive does market research, surveys the community about quality, and discovers that the patients believe that wait time is the most critical aspect of the ED experience. The executive learns that potential patients go to the ED with the fastest turnaround time. The hospital CEO wants to be the ‘best hospital’ in the community and has found that most patients believe that a high quality ED should be able to get them in and out in 1 hour and no more than 2 hours.

The Six Sigma team studies the ED performance. The study reveals that the average cycle time in the ED is 90 minutes, but the standard deviation is 30 minutes. So the ED length of stay is:

1 sigma: 120 minutes
2 sigma: 150 minutes
3 sigma: 180 minutes
4 sigma: 210 minutes
5 sigma: 240 minutes
6 sigma: 270 minutes

Obviously this hospital is capable of delivering quality experience (90 minutes on average), but very incapable of doing so reliably! The patient wants out in 2 hours, but at 6 sigma they are looking at 4.5 hours!

Is this a big deal? Well, only if the hospital CEO is spending large amounts of time and money pursuing Six Sigma. If the executive truly wants the benefits of a rigorous pursuit of Six Sigma quality, then they are going to experience a significant upheaval in their organization, because the Six Sigma team is going to study, recommend and change the process all predicated on this notion that the patient needs to be out in 2 hours with Six Sigma quality. They then need to reduce the standard deviation to less than 5 minutes — meaning they will work to achieve essentially no outliers. What happens next is that these teams get very disruptive and question every reason why someone stays longer than 90 minutes. They will identify 50 reasons why people stay longer than 90 minutes, pareto the root cause, and launch a series of small improvement projects. Lots of money is spent on improvement, but the clinicians are cynical: they fight the new process; money is spent, time is invested, but lasting benefits are lacking.

Change the customer, change the story. Assume that the customer is not the patient, but the doctor. We survey the doctors and ask them to define quality, and they say the key to quality is to get orders executed and back to them in less than 1 hour. The Six Sigma team studies radiology and lab turnaround times. They discover that the average cycle time is 50 minutes with a standard deviation of 20 minutes. So again the process is capable but not reliably: at 6 sigma the cycle time is 170 minutes. While identifying the root cause, the Six Sigma team discovers that additional radiology equipment is required (ever wonder why GE offers Six Sigma training as a service to hospitals — this might be the reason!). They also find that the radiology group is not cooperative and needs to be replaced, and that a new high-density imaging system is needed to get the turn around time achieved. They propose a 5 million dollar construction project, and a 2 million dollar technology project.

What about the insurance company? As the payer, their focus is appropriately fixed on costs. Length of stay or turnaround time is just not the issue. When setting prices in contracts, they are insistent that the quality goes up while the costs go down. Within a Six Sigma framework they might insist on pay-for-performance in the core measures, or on capitation in costs in the ED, effectively ending defensive medicine that the ED group practices in the hospital, etc.

Hopefully now it is easy to see the why a change in customer could radically change the strategic direction of a hospital.

Quality improvement fails without clear direction

Now sit in the shoes of the top executive of a hospital. They have invested time, money and talent into Six Sigma, and there is a genuine strategic effort to achieve next-level performance. Yet, they are still without a clear concept of the customer. Unable to articulate a clear customer requirements; they are forced to compromise and dilute the potential of their investment in improvement. The power of Six Sigma lies in the hard-core quantified rigor; it is about flawless execution.

The hospital executive has a unique challenge moving forward. They have to design and implement a principled quality system, sustainable in a 24x7x365 environment, which is more of a open federation of private business people rather than a corporation, and do so to the satisfaction of at least three (some say the employees and the employers are customers also!) customers that don’t share a goal view of quality.

Designing such a system is not a matter of applying some best practice, but rather a more deliberative approach that fits the individual hospital, and contemplates constant change and adaption.

There needs to be a clear non-interruptive definition of operational execution. These are to be the rules of the game for the hospital, highly enforced at the moment of truth. Next there must be a management platform that:

1. Provides clear measures
2. Translates measures into a clear set of behaviors for individual team members
3. Provides individuals with systematic accountability
4. Instigates change and continuous improvement.

Lastly, this quality system needs to be supported with an IT architecture that provides the management with information at the same speed that the hospital is running and providing retrospective insight into how the system is performing in different operating scenarios.

The investment in Six Sigma can serve a hospital well, if it is used as part of different kind of quality system. Without a unifying vision of the hospital that is implemented with strong purposeful leadership, the results of these classical quality programs will always tend to disappoint.