How to encourage Physicians and patients to choose quality and safety.
In this very high reputed Hospital, positioned in the past as the highest cost – benefit in the market, some of its patients are choosing other Hospitals with low quality and safety, but with low prices. An important group of its physicians prefer conserve their patients helping them to choose cheaper hospitals, and are receiving monetary incentives of these institutions. The Hospital prefer to keep away of this kind of incentives because consider them as non aligned to its values.
Hospital Metropolitano is the most important private Health Insititution in the country, a Tertiary Care Hospital qualified to address high complexity and It is the only local institution accredited by the Joint Commission International (JCI), which ensures compliance with the best practices of quality and patient safety.
The Hospital offers 147 hospital beds and it’s the institution of choice for many of the best doctors of the city and country. The medical staff is independent, they are not employees of the Hospital, and they ask to be qualified to be active or associate staff, with different levels of privileges and obligations.
The institution is part of a corporate group that includes a health insurer which, acting in accordance with the rules of competition, is one of the main volume generators. The Hospital also generates its volume from other insurers, patients who decide on their own and the derivation of physicians.
In the best years the Hospital reached occupancy levels from 75% to 85%. In 2017 the occupancy of the Hospital was 65%, however it was the year with the highest net profit of the last 7 year, mainly due to cost efficiency. Therefore, one of the short-term goals is to generate previous years´ occupancy levels.
Due to its specialized and differentiated infrastructure, cost structure and market power, the Hospital has opted for a high prices differentiation strategy, becoming a reference for its competitors. So, it is not the cheapest, but the best quality option.
In previous years, the market has expected the Hospital to communicate a rise on its prices (e.g.: + 5%, + 10%) and according to that, competitors has acted. On the other hand, due to the economy in the last five years, the Hospital hasn’t risen its prices since 2014. Therefore, the gap in prices with the average competitor is 25%. Despite this, volume has shown no sensitivity to the freezing of prices, so the Hospital has decreased its occupancy levels in the last four years.
In that period, the Hospital has been able to generate net margins between 1% and 4% (latter in its best year 2017). So, knowing that the impacts of pricing decisions are important, a general prices discount may affect significantly its capacity to achieve financial sustainability.
The main problem is that in recent years one of the reasons for the volume decreasing is the lack of patients referred by the doctor, since their patients are looking for cheaper hospitals trading off lower prices for quality. There are also some cases of conflict between the physicians and the institution, so they prefer to take their patient to the competition. This has led the Hospital with a low-level occupancy and a low complexity cases that, are not of great interest for the institution.
I am looking for a way to encourage the doctor to choose and promote quality above any other incentive that they may be receiving from any other hospital whether it is as cashback or other monetary or non-monetary benefit.
Please consider that the Hospital would rather not compromise its policy of not encouraging anyone economically as in cashback or rebate mechanisms, however, it may only be acceptable if the benefits far outweigh the financial and ethical costs.
The key leverages of the aforesaid hospital are the only tertiary care hospital in the area with JCI accreditation. In such a scenario, the hospital would contemplate on increasing the volumes and increasing the value. Large volumes usually come at low cost . As there is no probability of compromise in cost structure, we should work on increasing value. Such value can be achieved through high ticket cases and complex procedures as this hospital is with high quality infrastructure and can attract highly experienced doctors to perform these procedures in the hospitals. Once the positive patient outcomes for highly complex cases are established, the ripple effect would inturn increase the volumes for other tertiary and secondary care procedures based on the perceived value – A hospital which can handle the highly complex case very efficiently has experts to be able to tend to all other major illnesses.
In our publically funded tertiary care hospital, a portion of a Department’s academic funding is tied to meeting certain quality and patient safety metrics. This relatively small stipend has been a significant incentive for various Departments to achieve their quality and patient safety measures. As the other hospital Departments are aware if these metrics have been attained, peer pressure is also another strong incentive for various Departments to achieve their quality and patient safety measures.