Efficiency, Quality and Relationships – the three parameters for any for-profit healthcare group

Stripping away M&A and financial things like indebtedness, all for-profit healthcare businesses will succeed or fail based on these three parameters. And all can be measured along them, too.

They are:

Efficiency creates higher EBITDA and competitiveness.
Relationships whether B2B or B2C determine sales levels if you fulfil customer-perceived needs. Relationships are about trust and other subjective things, as well as the ability to deliver quality and efficiency.
Quality Demonstrating and proving quality can be an engine for growth, or just a hygiene factor, depending upon who you are selling to.

Where a company should be on these three parameters is a function of the customer. Where the patient is paying or where the patient has a choice, quality is of great importance.

Where the state or an insurer is paying, then quality is typically a hygiene factor. This is because state payors and insurers do not really believe what for-profits say about quality.  In any case, these payors measure performance by price (efficiency) rather than quality.

If the customer is a doctor, in some cases quality is of great importance. In other cases and countries, doctors care more about efficiency and some form of commission. But if the individual is the customer, then quality is paramount.

Here are a few examples of how this works out:

  1. A prostate cancer clinic which can demonstrate high-quality outcomes and is selling to insured patients who have choice probably doesn’t need to worry much about efficiency. If you have prostate cancer and fear impotence or incontinence, you will go to the MartiniKlinik in Hamburg because of its results!
  2. For a big lab group in Germany, prices are set by payors and regulators who are arbitrary and prone to giving you nasty surprises. To survive, efficiency is paramount. To grow, the lab group will need to take business off. You can do this by switching the allegiance of their doctor customers so that they send tests to you.  That means winning their trust on the basis of personal relationships and their perception of your quality and efficiency. But quality is essentially a hygiene factor. If your test results are wrong you are screwed, but showing high quality is unlikely to be of much extra financial value.
  3. For a dialysis group in Mexico selling to cash patients, efficiency is of paramount importance in order to hit an affordable price point. Quality has to be good enough to lead to word of mouth recommendations and will be judged on subjective criteria (how friendly are the nurses?) as much as on outcome which patients can not easily measure. Relationships with states are important to get planning permission, relationships with doctors are important to gain patients, but the paramount relationship is with the patient and his or her family, because this will determine recommendations.

Any company which fails to score highly on the right factors for its customer group inevitably faces disaster.

We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.