We are exposed by similar challenges in our compensation plans for our doctors and decided to co-develop a compensation plan together with administrators and our specialist. I believe this is possible especially in the elective care field we are operating in.
Currently we offer a 90% fixed compensation plan and have a 20% variable plan. We’re moving towards an 80/30% compensation scheme. This allows for an 110% compensation and provides incentives for our specialists to align the organizations and specialist interests. The variable compensation is paid on the basis of individual specialist and group performance. These contain performance indicators such as quality measures, NPS scores, production measures. An important aspect to successfully implement the compensation plan is the co-creation with the specialists. If it were to be imposed on specialist by administrators, the support is likely to be less and creates tensions between management and doctors.
From an organizational point of view, in a health care system that has challenges on multiple levels (payor, government, provider, patients etc.) one can get lost easily where to start. In such a volatile environment it could help to start with a quickscan plan for a 5-year strategic outlook containing at least;
-Purpose and vision of the existing organization
-External risks and opportunities and a critical evaluation of span of control on these items
-Gap analysis of operational excellence (short vs long term improvement plans)
-Analysis of current resources to achieve above goals (e.g. management execution capacity, facilities etc.)
Seems like you have some challenges to overcome. Here are some thoughts for short term/longterm measures;
-Expectation management towards patients before the enter your facilities.
-‘flag’ possible long-stayers as early as possible and separate them from short-stay patients.
-logistical management of critical resources to ensure efficient throughput in your facilities (daily discharge meetings, decision support systems, pull management etc.). Managing the bottleneck for the short term would require to streamline your business facilities as such that patients efficiently ‘flow’ through your facility and do not stay longer than medically necessary.
-partnerships with long term facilities. Or when not available greenfield investment and expanding vertically?
-investing in education or importing skilled nurses from other countries.
Judging from your post it gives me a feel of ‘David fighting Goliath’. In the long run, the M&A train will prevail and in a market where there will be competition based on price and volume the incentives to merge and acquire are large. However, it seems like you have a quality/knowledge advance in a focused area of orthopedics. This allows you to produce at good quality at a competitive price. This is a competitive advantage that should not be ignored. My advice would be to map your strengths weaknesses in relation to what is of competitive interest for players in your area. Personally, I do not believe in the straight dichotomy between merger or staying independent. You can do both in a strategic partnership with neighboring hospitals, remain independent while collaborating. With our orthopedic company we designed partnerships with hospitals in which we offered to provide business knowledge on how to efficiently run orthopedics while renting their excessive OK capacity for our own production. Of course, multiple other models exist. If you’re interested, i’d be happy to discuss some more during our next module.
In my experience working for private equity in the Dutch healthcare sector we have similar challenges participating in acquistions, strategic partnerships etc. For matters of governance and span of control and consolidation we always aim for a majority stake in new or acquired ventures. we started off some years ago we had quite the learning curve. In the acquistion projects we go through a pretty standard M&A process. However, we collaborate with our board early in the process and have a very transparant process. With this we construct 3 business cases; conservative, management & best case. In the conservative case we do not include any synergies in the numbers (upswing in turnover, cost savings etc.). As you describe, RoI in JV’s, acquisitions usually goes beyond the numbers so we would explain ‘soft’ RoI’s like ‘strategic knowledge’, ‘market power’ etc. in our rational memo’s. When going through our internal approval processes we include the conservative case and our soft rational and discuss it with our board. One of things we learned is not to incorporate synergies in the business case as projected true benefits. This makes for a rather conservative positive Business case, but if the numbers are right in these scenario’s, the rest is the upswing. When we incooperate business we review the original business case to challenge the assumptions we made prior to engaging in these projects, this creates much of our learning curve. i’d be happy to talk some more on this topic during next module.