Focus on the fundamentals.

Imagine, if you will, a classified ad in the back of Physician Executive that reads something like this:

"Large medical center seeks candidates for newly created position of medical director. Successful applicant must have excellent working knowledge of what business we are in and who our customers are. Some knowledge of financial controls, outcomes management, and CQI also a plus."

Seems silly, doesn't it? We all know what business we are in and who our customers are. Or at least we think we do. It is no secret that the medical marketplace is becoming more complex with industrialization, regulation, mergers, capitation, and the like. In this environment, all of us--from the CEO of the largest medical center to a solo practitioner--must not lose sight of the fundamentals of medicine as a business.

With so many distractions these days, a lack of focus is hard to avoid. We suffer an almost inevitable sense of sadness or loss when we talk about medicine as if it were just another business. Traditionally, physicians have considered their profession as different from any other. A natural longing for the "good old days," when doctors were net "providers" and patients were not "health care consumers," is understandable.

Deeper reflection leads us to realize that those "good old days" were not as great as we might remember them to be. Stories abound about arrogant and paternalistic physicians being more the norm and more tolerated than today. In fact, good patient oriented medicine has always been the best sort of practice. The difference today is that we-practice in a much more competitive medical marketplace. Poor service and cold or arrogant patient care is increasingly intolerable in such an environment.

We must keep in mind that great danger lurks for any business person who-fails to maintain a focus on business fundamentals or to upgrade his/her understanding of the business, mission as the marketplace evolves.

Remember PanAm? The one time undisputed worldwide leader in air travel cannibalized itself out of existence in a deregulated environment. Other airlines were better able to adjust to the new, less regulated reality and were all too happy to buy off PanAm piece by piece. What happened to PanAm can happen to anyone in any business.

How do these concerns apply to medicine? In the past, medicine was mostly exempt from supply and demand economics. Medicine has been what economists call a distorted market: Consumers were buying medical care with someone else's money. Now the hard rules of capitalism are beginning to apply to hospitals and doctors. The result will be a shakeout that is already under way. It is not going to be a pretty sight.

Coping with this new, harsher reality requires scrupulous attention to the basics of our business (this is true of any business for that matter!) As physicians, we must be very clear about what business we are in and who our customers are. The answers to these questions are tougher than they might seem at first.

What is our business?

Such an easy question-our business is medicine! Immediately, we run into a dichotomy: Are we in the sickness business, or are we in the health business? The most traditional answer is, "We are in the sickness business." Taking care of sick people has always been the core of medical practice. We may describe our industry as "health care," but most of us seldom deal directly in health.

Our medical infrastructure has been built with the care of the sick person in mind. Most doctors and nurses chose their professions with a desire to cure those in need of care. Virtually all of the technological advancements in medicine--a major triumph of the twentieth century--have been in the area of sickness care. The evolving marketplace will not ignore this technology, but in the future, illness-based care alone will be insufficient to define our business.

Up until now, our gains in true "health care" have been modest compared to sickness care, but the tide is changing. As the industry continues to consolidate, the remaining players (HMOs, ICSs, etc.) will find that sustained improvements in their bottom lines will depend more and more on advances in true health care rather than sickness care alone. This is a natural consequence of accepting risk through capitation.

In a capitated system, money will he made from preventing expensive medical problems rather than squeezing the last dollar out of the cost of treating them (event-based cost avoidance). Many medical problems lend themselves to the preventive approach: prematurity, injuries, lung cancer, etc. Large organizations taking responsibility for providing health care for populations will discover that funding prevention can be less expensive than paying for sickness care. In the United States, the medical financial incentives have never worked in this way before; the results of risk acceptance may amaze us all.

Recently, our local hospital had a visit by Leland Kaiser, PhD. As usual, Dr. Kaiser said many thoughtful and outrageous things, but perhaps the most remarkable was his claim that we are really in the "entertainment business." By this he seemed to mean that as quality and costs in medicine become reasonably standardized, competition between HMOs or health care systems will depend on customer satisfaction.

The stereotype of the crusty old doctor of yore--who knew his medicine but was not very nice to anyone--cannot be a template for medical care in this future scenario. At every level, empathy, courtesy, and support will be necessary components to patient care. If Dr. Kaiser is correct, we will all need to work on making the patient's experience as pleasant as possible. Perhaps going to the doctor or the hospital will never be "fun" as he proposes, but our efforts will need to be in that direction.

So what is our business? Is it sickness care? Health care? Entertainment? It needs to be all these things. Our central mission will not disappear. When someone is sick or injured, that person will expect knowledgeable medical care. But sickness care will no longer enjoy center stage.

Beyond providing excellent illness care, successful health care plans must develop proactive methods of improving the health of their clients. This is an area of research that has been chronically underfunded, but the incentives are changing. Additionally, the medical marketplace will put a premium on the quality of experience that patients, receive; coldly competent will no longer be good enough when the competition makes medical care a more pleasant experience.

Our fictional medical director of the future had better have a thorough understanding of all the aspects of tire medicine business. His/her new employer is expecting leadership that will compete well for years to come. One has to know the game to be able to play. He/she must assume that the competition is working hard to improve their service in all areas. The new employer expects the same or better of our medical director.

Who are the customers?

Here is another question whose answer is no longer simple. Any physician will tell you the patient is the customer. This is true, but with the advent of the first medical insurance plan, the equation changed. As soon as third-party payers appeared, they became customers as well. For many years, insurance companies were seen as benign members of the medical landscape, but not anymore.

Insurance programs have long since given up writing the check to pay for whatever a physician decides to do. With discounted fee payments, denials, and strict utilization, the polarization between providers and payers has increased. For physicians and hospitals, this is a mistake. In any business, the people with the money are never-the enemy--they are always customers! All medical organizations need to understand this and put it into practice.

Every provider doing business with a local HMO or insurance plan must view that plan as a customer. Far too many physicians and hospitals are taking hard line, adversarial positions against health plans and insurance programs. Even when a particular payer's behavior seems antagonistic, wise providers will do their best to keep a customer focus and avoid hostilities. This is not caving in; it is merely smart business.

Who else is a customer? A doctor's colleagues are customers; referring physicians and consultants will always need each other. Suppliers are customers. Office staff are customers! (Just try to get anything done without them!) Do we treat these people as customers? It is not hard to think of physicians who do not grasp these essential facts. They believe that they are the center of the universe, and everything revolves around them. There is precious little room in the evolving medical marketplace for that type of attitude any more.

At a recent seminar, we were told: "Your competition is your customer." Ponder that! How do we know if our service is any good? Against whom do we compare ourselves? Our competition sets the pace for our daily race. Hopefully, we have friendly competition but, in any event, we must recognize that virtually everyone we deal with professionally is a customer in one way or another. Are we treating everyone in our business world as a customer? If not, why not?

Our hypothetical medical director has a hard job ahead. There will be a lot of physicians and members of the administration who would rather pick a fight than work things out. The concept of treating all players in the medical marketplace as customers is powerful but not easily done. These are the challenges that make the job interesting.

A challenge for physician executives

Successful business people stay focused on the twin issues of business and customer identity. A customer-driven way of thinking is not second nature for rank and file physicians and many others in health care. As we face further medical marketplace stress, physicians are likely to circle the wagons and start shooting each other. This would be disastrous. Physician executives must step up to lead the discussion and keep the business and customer focus for the sake of all their professional colleagues. If they can't or won't--who will?

Earl R. Washburn, MD, is Administrative Physician at El Dorado Pediatric Medical Group, INc. in Placerville, California. He can be reached at 916/626-1144.