Clinical program renovation management.

The day-to-day management of medical practice is so heavily influenced by tactical imperatives that few physicians have the time to think strategically. Traditionally, the difference between tactics and strategy is not a major concern of most physician executives. The realm of tactics is the short run, when managers must make do with the fixed resources at hand. Strategy addresses the long run, when all resources and markets are variable. A tactical focus is understandable, maybe even acceptable, in industries where nothing challenges traditional approaches to production of an established product or service. However, medical care in the 1990s is changing so fast that a physician executive must devote an incredible amount of time and effort just to stay confused about what is going on.

The traditional business product life cycle is suddenly applicable to medical services. Many traditional health care products are in decline, as evidenced by the fact that last year's "cash cow" can be today's "loss leader." Finding new combinations of existing resources (tactics) in current markets is no longer the key to survival and growth. Instead, strategic thinking has rapidly become an imperative for physician executives who want to manage their enterprises for something more than mere survival. The challenge now is not only to find new and different ways to produce mature products that are not yet in decline, but also to find and develop innovarive products that will grow in both consumer acceptance and provider profitability.

We have developed clinical program renovation management (CPRM) to draw an intentional analogy with resuscitation, i.e., revival and revitalization as a systematic approach to strategic thinking about the renovation of clinical programs in today's fast-changing health care industry. CPRM is a series of coordinated management activities designed to produce a financially sound clinical service of quality acceptable to the provider, the patient, and the payer.

Conceptual Foundations

CPRM is based on our firm belief in the importance of the minimum conditions that should be met before a potential solution is adopted for implemenration. When used correctly, the CPRM process will generate a lot of new production ideas, but we suggest serious pursuit of only those that offer promise of meeting two constraints--financial viability and quality.

The emerging realities of health care payment leave little room for cost-shifting or other accounting transfers that allow profits from established products to cover the costs of new or renovated products. Therefore, the acid test of an idea for a new medical service is whether its revenues will likely cover its costs (including normal profit) in a relatively short time. The acceptable time for achieving unsubsidized production will vary, but it will not be very long in our industry when the half-life of underlying medical science and technology can be as short as one or two years.

We also reject any CPRM-generated idea that might lead to unsafe or inappropriate care from a clinician's perspective, but we go a step further to consider quality from the nonclinical perspectives of customers, i.e., patients and payers. Affordability, convenience, and friendly, personalized service are as important to the health care customer as structure, process, and outcome are to the provider. CPRM will produce the greatest successes when the perspectives of both are used to develop new or renovated health care services.

Applying the Principles of Creativity

The initial "brainstorming" phase of the CPRM approach is essentially an application of the principles and processes of creativity to solving problems faced by today's health care providers. It is designed to identify the realm of clinical possibility as the foundation for strategic intervention. Physician executives who are not generally creative will need to learn appropriate skills if they want to enhance their prospects for success in the revitalization of old products or in the development of new ones. Fortunately, creativity can be learned, and many good resources are available to help doctors become more creative.

Imagination and visualization are two keys to creativity in strategic product management. We begin the process by using these techniques to look at established clinical products from as many new and different perspectives as possible. During this initial stage of CPRM, nothing is sacred; everything is subject to new thinking. For example, diseases can be redefined functionally rather than traditionally, i.e., by pathophysiology. Clinical traditions and tasks can be challenged to find better ways to deliver a service, which often involves the use of alternative providers (even patients). Different fees can be charged, and alternative sources of payment can be identified. In other words, traditional practice is ignored while clinically innovative substitutions are examined. Judgment is suspended, and no idea is too dumb to be written down for later examination. Participants should have fun thinking previously unthinkable thoughts.

The objective is to generate lots of new ideas relating to product and production. When the brainstorming process stops producing new and better ideas, the manager leads the group in selection of the four or five most promising ideas. These top priority items are then evaluated for feasibility (i.e., economic viability and quality), and those that meet the constraints are developed into new or "resuscitated" products.

Marketing

Marketing--seeing the product from the customer's point of view, in the wise words of Peter Drucker--is important to the development of new product ideas. A successful CPRM process will involve the various customers (e.g., patients, family, insurers, and employers) in the creative activities, either through separate focus group interviews or through direct participation in the brainstorming sessions. In our experience, customers have provided some of the most productive ideas that have resulted from the application of CPRM to the development of efficient, effective, and valued clinical services.

Physician executives must learn how to gather and use input from consumers and from other members of the provider team. These perspectives provide significant information and indications for shifts in traditional clinical paradigms. For example, marketing studies provide invaluable input into advertising and promotion strategies. Listening carefully to customers almost always provides information about providing more services to an organization's existing customers, attracting the loyalty of competitors' customers, or creating customers who are not currently purchasing the product at all.

Good marketing also reveals consumer ignorance, the level to which purchasers are uninformed or misinformed. Open-ended consumer input can also help providers deal with pricing, an issue rapidly gaining importance in health care as responsibility for payment is shifted from third parties to patients. For example, customers will usually make useful comments about the distinction between "affordable" and "cheap," and they will identify product characteristics that make them willing to pay more for a health service (i.e., views on the difference between quality and value). The cost of these differences to the producer is often less than their value to the consumer. Just getting this information can be worth the cost of CPRM, because it suggests useful changes in inputs, production processes, pricing strategies, and final products.

Marketing's traditional focus on "product, place, price, and promotion" should be preserved in the CPRM process. However, two other Ps must be added--people and perception. Special attention must be paid to integrating the efforts of the various personnel who interact in the provision of health services and to focusing them on new, shared goals and objectives. Because health care depends on personal relationships between members of the health care team and the patient, the pursuit of new services and new markets requires customer oriented planning and a team-oriented management style. Physicians are used to finding and defending truth, but perception can be just as important in the process of making changes to satisfy the customer. The physician executive should never ignore an observation produced by CPRM because it is not true. Perception is very important to the process. All things considered, the physician executive needs to study all six Ps to find consumer-oriented new or renovated products and ways to produce them consistent with the corporate culture.

Management Engineering:

Production/Operations Control CPRM uses basic concepts of management engineering and production/ operations control. Both an environmental opportunity analysis and an internal operations analysis are performed separately, and the results of the two studies are compared. Areas of congruence suggest market opportunities, such as target markets and production possibilities. Areas of dissonance point to products or markets that the producer should avoid, often because the provider is not well-suited to enter the market or because entering the market would be too disruptive to existing operations.

The environmental opportunity analysis forces the physician executive to consider the needs, wants, and demands of potential customers. Needs are products essential to consumer well-being. Wants are products that consumers desire. Demands are needs or wants (or both), coupled with the ability to pay for them. Consumers of health services want things they do not need and need things they do not want, and ability to pay is not always equivalent to willingness to pay. The physician executive using CPRM must be careful to address each consideration separately in order to avoid pursuing new products that are needed but unwanted, wanted but unaffordable, etc. Promising opportunities will be demanded, no matter what the situation with respect to need and want. As simplistic as this sounds, many health providers focus to their detriment only on one or two of the three factors.

The internal operations analysis must be conducted at all levels of the organization. For example, CPRM for a hospital-based emergency service (a unit within an organization) must take into account the mission and goals of the entire hospital system (an organization), not just the emergency department. Key considerations are the unit's and the organization's receptivity and capacity to change; the availability of resources that can be dedicated to change; identification of strengths, weaknesses, opportunities, and threats; and an assessment of the impact of reallocating the organization's resources. A careful and honest self-inspection along these lines will help narrow the list of new or renewed products that will sustain a unit within an organization and the organization in the rapidly evolving market for health care services.

Strategic Intervention Planning

To complete CPRM, the environmental opportunity study and the internal operations analysis should be followed by the development of a strategic intervention plan that transforms the resulting ideas into concrete steps for implementation. The strategic intervention plan will provide specific directions for managing necessary changes in production and operations, advertising and promotions, pricing, and ongoing management. Further, the strategic intervention plan should be written clearly and concisely and should be shared with all relevant managers and workers within the organization. Finally, it should specify tasks to be accomplished, persons responsible for getting them done, budgeted funds available for the tasks, and deadlines for getting the work done.

Feasibility is an important consideration in the specification of all details concerning intervention and implementation. Successful implementation is possible only when the physician executive has developed a strategic intervention plan that is sensitive to the workings of the organization and responsive to the demands of its actual and potential customers. If the organization cannot manage it or the customer does not want to pay for it, even the most fantastic idea should probably be left for someone else to pursue. But when the organization can find converging internal and external possibilities-- the underlying purpose of CPRM--it increases its ability to survive and grow.

The CPRM model is directly tied to the revolution in medical science and technology and the evolution of the delivery and payment systems. CPRM is based on the authors' belief that successful physician executives in the future will be those who are able to match an accurate, operational understanding of consumer demands to their organizations' abilities to provide financially viable services at a quality acceptable to patient, provider, and payer.

Jeff Bauer, PhD, is a health economist and leader of The Bauer Group, a consulting firm based in Hillrose, Colorado, that specialized in creative, market-driven strategic planning and implementation strategies, Kimball A. Miller, MD, MSHA, is a member of The Bauer Group, He is also a member of the College and of its Society on Academic Health Centers.