Growing loyal patients.

Patient loyalty drives organizational performance. Patients who are dissatisfied will leave. Loyalty management programs are growing in importance given the increasing number of patients who have the ability to choose their caregivers.

A successful loyalty program leads to increased market share, growing practices and improved financial outcomes. The goals of a loyalty management program include increasing:

* Patient loyalty

* Service volume

* Market share

* Revenues

Loyalty programs help retain existing patients. Positive word of mouth leads others to try your organization. Dissatisfied patients tell many people about their experience. Those people may avoid your organization.

When you satisfy most of your patients your volumes grow and, in stable markets, market share increases.

Patient loyalty is the number of times patients will use your service during a future time period divided by the number of times patients use your service during the current time period. (1)

Loyalty factor = (# using service during future time period)/ (# using service during current time period)

Your Market share at stability = (1-competitor's loyalty factor)/ (2-your loyalty factor - competitor's loyalty factor)

Competitor's market share at stability = (1-your loyalty factor)/ (2-your loyalty factor - your competitor's loyalty factor) (1)

Figure one illustrates how this works. Twenty percent of company A's patients and 50 percent of company B's patients are loyal at time one. Company A implemented a loyalty management program and improved its patient loyalty a time two to 30 percent. Company B made no changes and patient loyalty remained at 50 percent.

Company A's market share grew from 38.5 percent to 41.7 percent or about 8 percent. Company B, whose patient loyalty remained at 50 percent, actually lost market share from 61.5 percent to 58.3 percent.

You can grow your market share by improving patient loyalty. And market share is determined by your patient loyalty relative to that of your competitors. Company B had and has superior patient loyalty yet lost market share because company A was improving its relative patient loyalty.

Influencing patient loyalty

Patient loyalty can be influenced in a number of ways. Many companies use advertising to convince customers to stay or switch from their competitors. It is a common strategy for health care conglomerates and integrated health care delivery systems.

Other companies lower their costs so prices can be lower. This strategy is rarely used in health care where prices are largely fixed. Minute Care[R] is an example of a company that is using a pricing strategy.

Some companies focus on the product. In health care the focus of these efforts is often on the type of service offered. For example, in Minneapolis/St. Paul, Minn., multiple health systems are expanding cardiology.

Others focus on improving health care quality. They improve health care process and outcomes to assure better health for patients. These organizations trumpet awards from national organizations and through websites such as Healthgrades.com. It is not clear that these efforts do much to shift patient loyalty.

Still others look to the aesthetics. Beautiful majestic buildings are the hallmark of premier health care systems throughout the country. These organizations provide an environment that is highly desirable. It is very expensive to compete for patient loyalty in this manner.

Patient loyalty can be enhanced by improving patient satisfaction with their care experience. Patients don't like to wait. They want to be treated with respect. They want the source of their discomfort identified and effectively treated. And they want to be cared for by caregivers who actually care.

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Structuring a loyalty program

Successful patient satisfaction programs begin with the governing body and senior leadership.

Organizational vision and culture are patient-centered. Senior leadership assigns accountability to operational leaders to improve patient experiences and loyalty.

Operational leaders develop and implement a written plan for loyalty management. The plan defines benchmarks and metrics used to measure patient experiences, satisfaction, loyalty, volumes, market share and financial results.

Baselines are established and compared to the external benchmarks and a gap analysis is completed. It is important to identify gaps for both completely satisfied patients and those who are dissatisfied. Pareto analysis is used to identify drivers of patient satisfaction, loyalty and business results.

Next, a real time measurement system for patient satisfaction and dissatisfaction is developed that includes indicators shown to drive performance. Information collected is immediately fed back to the frontline performers. Results are placed into a run chart. The run charts are posted--where frontline performers can see them--and updated routinely.

Each individual performance driver is monitored on a routine basis. Gaps in performance are identified; corrective action plans are developed and implemented. Typically several rapid improvement cycles occur when there are gaps in performance.

Operational performance is also measured using an external benchmarking organization. This typically occurs on a quarterly and annual basis and provides useful, usually blinded random sample information.

Operational and senior management leaders can use these data to validate the loyalty management program, and identify gaps in performance compared to competitors and opportunities to improve performance.

Annually, the operational leaders make a formal presentation about the loyalty management program. These presentations may include high-level measures of satisfaction and patient loyalty as well as specific performance drivers.

Linkages between high-level operational goals and performance drivers and business results including volumes, market share and financial results are reviewed.

Senior leadership and the governing body feed this information into their annual strategic planning, budgeting and management process. New threats and opportunities are identified and goals are set. Senior leadership communicates these goals and priorities to operational leaders and the cycle begins anew.

St. Peter Community Hospital

St. Peter Community Hospital (SPCH) is a 22-bed rural critical access public hospital owned by the community of St. Peter, Minnesota. St. Peter has a population of 10,000 people with a service area of 32,500 people. Its nearest competitor is a 272-bed hospital located 20 miles south in a metropolitan area of 80,000 people.

In 2003, patient satisfaction surveys showed that the emergency department (ED) was below benchmark for patient satisfaction and recommendation. This was causing a decline in volumes and limiting financial performance. The governing board directed that improving satisfaction would be given highest priority. The CEO charged the ED manager and medical director to develop a satisfaction program.

VHA surveys were reviewed, benchmarks and gaps identified, a root cause analysis conducted and a corrective action plan implemented that addressed the structure, processes and performers. A loyalty measure was developed and graphed against the baseline excellent percentage for each variable.

Five high-impact variables were identified:

1. Patients' satisfaction with pain control

2. Wait time

3. Physician satisfaction

4. Overall satisfaction

5. Patients' recommendations

A real time satisfaction program was implemented. Problems with structures, processes, and performers were identified. Structural and process changes were implemented. And non-punitive feedback was provided to performers.

Patient satisfaction improved above benchmark on all measures. The decline in patient volumes was reversed. Net operating income nearly doubled and current market share increased.

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Oakwood Ambulatory Services (OAS)

OAS is a multi-site integrated group medical practice with 200+ clinicians located in more than 30 sites. It is headquartered in Dearborn, Mich., and is affiliated with the Oakwood Healthcare System, a multi-hospital system serving a market of 2.2 million people. Its locations are urban, suburban and rural. Its competitors include integrated health care delivery systems, academic health care systems and independent physicians.

In 1996, a patient loyalty management system was put in place. Its key metric was patient loyalty, defined as patients who were completely satisfied, would always recommend and would always come back.

From 1996 to 1999 patient loyalty improved from about 45 percent to nearly 70 percent and annual visits increased from less than 300,000 to over 500,000 per year. This represented a doubling in market share over those four years.

Do the right thing

Improving patient loyalty is the right thing to do. It is a laudable goal in and of itself. And it is more than that. Managing patient loyalty is a critical element in the success of all health care organizations, large and small. Improving patient loyalty leads to increased volumes, revenues and profitability.

A loyalty management program requires commitment from all levels of the organization. It requires a vision that includes improving patient loyalty. It requires commitment by senior leadership and a patient-centered culture. Operational leaders need to be held accountable to maintain and improve patient loyalty, both in absolute terms and relative to competitors.

Failure to grow loyal patients will result in a loss of patients, even by organizations with excellent patient loyalty. Competitors who implement a loyalty management program will take patients away from those who are complacent about their current performance.

Benjamin W. Chaska, MD, MBA, CPE, is the owner and president of Benjamin W. Chaska, MD, LLC, a health care consulting, medical direction, education and health care firm located in Eden Prairie, Minn. He also serves as medical director and medical staff vice president of St. Peter Community Hospital, St. Peter, Minn. He can be reached at [e-mail]

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References

1. Ressler, T. and Ahrens, M. The Decision Making Book, 7.11 Markov Processes and One of Deming's Diseases, Chapter 7, Applications of Probability, pp. 51 to 52, Fall 2002.

2. Terry, R., Seven Zones for Leadership: Acting Authentically in Stability and Chaos. Mountain View, Calif.:Davies-Black Publishing, Consulting Psychologists Press, Inc., 2001.

By Benjamin W. Chaska, MD, MBA, CPE

Figure 1 Impact of Loyalty Factor on Market Share

Figure 1: Impact of Loyalty Factor on Market Share

                  Company A Market Share  Company B Market Share

Time One Loyalty  0.385                   0.615
  A=0.2
  B=0.5
Time Two Loyalty  0.417                   0.583
  A=0.3
  B=0.5

Note: Table made from bar graph.