Running any healthcare organization, large or small, involves constant involvement in cost-benefit analysis, or what is often called “optimization”. If we apply optimization thinking to an entire healthcare business, it may be easier to view a business as having a variety of levers, which can be pulled and adjusted to change the way that various parts of the operations are run, monitored, and staffed.
Before we look at what business levers may be useful to consider, let’s first clarify what we mean by what kind of healthcare “business”.
A healthcare business is any organization of people which has a commercial goal. This includes hospitals, medical practices of all types, surgery centers, clinics, medical laboratories, Imaging centers, pharmacies, medical technology companies, life-science organizations, assisted living centers, Behavioral health facilities, Rehab centers and wellness facilities or various kinds, including gyms, yoga/Pilates centers and spas.
What Optimization Challenges are Common to Healthcare Businesses?
Although the levers of business performance potentially run into hundreds at the micro level in any given organization, it’s easiest to think of four key optimization areas. These are the levers of “Prospects”, “Processes”, “People” and “Profits”.
Although we can engage in optimization effort in any one of them, all four levers also need to be considered collectively, or with the overall impact of one on another being carefully thought about, in order to start to successfully optimize a business. So, let’s now look at what each realm covers.
“Prospects” comprise the first of the four key realms proposed here because a healthcare organization needs to know where its future patients or fundraising sources are coming from. After all, without customers, there is no reimbursement potential. There is no guarantee that even a strong customer/patient base that has bought or used a healthcare organization’s products or services on a regular basis in the past will continue to do so in the future.
Particularly in today’s fast moving and highly competitive economy, continual awareness of customer expectations and the shifting needs landscape of its present and future customer base is essential if a healthcare provider is to keep pace with the competition.
“Processes” are the means by which a healthcare business manages its internal operations so as to deliver the product or service it has promised its customers. This might include tangible products such as drugs or x-rays or intangible ones which as advice giving or help via telemedicine means.
In the modern world, these processes can encompass many internal functions and teams and so require effective coordination at all levels of the organization and even outside it, as external suppliers and other partners to the enterprise can also be part of the process.
“People” are the individuals and teams who work in the healthcare business, directly and indirectly, on a part- or full-time basis, to appropriately address the prospect, process, and profit realms so that they perform at their best.
If these individuals and teams are not sufficiently focused and effectively aligned, the business will inevitably operate sub-optimally.
“Profit,” determines whether a healthcare business has enough liquid capital to supply the products or services it sells to its customers/patients, as well as earning a profit. Much of the initial focus in this realm is therefore on such hard issues as the planning and control of investments, revenues, and costs. A strong focus on the areas of governance and risk management is also necessary for optimization purposes.
By thinking about any healthcare business in terms of the above levers, a medical provider organization can perform at a higher level of efficiency and planning, and ultimately be more successful. It is important to remember, though, that business optimization should not be pursued as a random process. Rather, it needs to be viewed and pursued as a systematic and holistic review in which you focus on the four key business areas discussed here, according to which is in need of greatest attention, and then collectively.
In ideal circumstances, the levers will be addressed in this order, before being reviewed collectively:
- Have we optimized our focus on Prospects, so that we are winning and keeping customers?
- Have we optimized our focus on Processes, improving smooth task execution?
- Have we optimized our focus on People, aligning individuals and teams?
- Have we optimized our focus on Profits, creating sustainable financial control and growth?
This review activity is best done by asking well-crafted questions about current performance, which will inevitably lead to follow-up questions as responses are gathered.
Don’t forget, not only is every healthcare business changing daily in terms of its efficiency and effectiveness, but rapid change is also occurring in the outside world. Factors such as technology, new suppliers, partnerships, collaborations, competitor actions, and more can all be cause to re-evaluate and investigate new optimization tactics.
Healthcare businesses must keep a mindset of optimization in times of success and challenge, in order to always grow and improve.
RX4 Group employs experienced healthcare business optimization consultants. Contact us today about your medical organization’s business challenges.
Dr. Jon Warner
CEO-RX4 Group-The Business of Healthcare
Jon is the CEO of RX4 Group based in Los Angeles, California. He can be reached at jon@RX4Group.com