Managing to Customer Specifications

Abstract

Since I first began practicing medicine in 1981, our industry has focused significant resources on growing market share by developing new ways to package and finance our products. We have evolved from traditional commercial indemnity health insurance and fee-for-service Medicare and Medicaid through multiple iterations of HMOs, PPOs, PHOs, direct contracting, and managed-care government programs to models of pay-for-performance reimbursement.Along the way, some healthcare leaders have chosen to manage and organize their businesses around whichever of these financing structures has the greatest potential to funnel patients through their door. Our attention has been too sharply focused on volume, access, and reimbursement, and not nearly focused enough on the value of the services we are selling and, more importantly, which services have the most value to our customers.When Starbucks buys coffee, it has very strict quality requirements for its growers, price being but one. When Boeing purchases raw materials for airplanes, its suppliers must meet unyielding performance and safety specifications within a specified price range. When you build a new hospital or medical building, you establish strict specifications ranging from square footage to life safety codes and budget. You then share them with the contractors and architects, who compete to meet those specs and submit a bid by which they hope to win your business.All successful businesses are accustomed to purchasing goods and services this way, so why should any company purchase healthcare differently from the way it purchases everything else?* This brings us to a key lesson for healthcare leaders: Manage to value and to customer needs and specifications, not just to price. Doing so can give you a competitive edge in the and win the loyalty of your customers.We learned this lesson in 2004 when we were approached by several large employers who had real concerns about whether we were meeting their needs as a supplier of healthcare. From these initial conversations came our first marketplace collaborative. The goal of these collaboratives has been to improve the quality of care. But definitions of quality have varied and have been elusive. So, working together, our first task was to define quality from the perspective of the employer, the employees, the patients, and Virginia Mason.We arrived at a definition of quality made up of five elements that can best be summarized as better, faster, and more affordable. They are the baseline specifications our customers are paying us to meet:* 100 percent patient satisfaction* Rapid access to care* Evidence-based care* Rapid return to function* Affordable costAnd just as we would with the purchase of any service, we determined cost was an intrinsic component of quality rather than a separate element.Defining and managing to what makes a quality product is only the first step. The second step is to understand which products, out of the thousands you offer, have the greatest potential to deliver the most value to your customers.Virginia Mason is one of the best places in the world to be treated for pancreatic cancer. …