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3 ways patient experience affects the bottom line

December 1st, 2011

by Jason A. Wolf

In my previous blog for Hospital Impact I suggested that patient experience is no longer a nice thing to do. It is now part of a new healthcare reality and the right thing to do. This stirred a great discussion on how those in healthcare should recognize the powerful impact a positive experience has on patients and their families. While a commitment to experience alone will drive many healthcare leaders to act, there are those still looking for additional justification in the face of competing market and financial demands. For those of you, I offer an additional consideration of this new reality, it is fundamentally a must do. Patient experience is now a key lever impacting your bottom line.

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In a recent white paper from The Beryl Institute, we introduce an important concept not often considered in healthcare: return on service. With the increase in consumer savvy patients and the emergence of ratings sites, recognition programs, and other efforts, the market itself is responding to this shift. Regulatory conversation also has moved in this direction with increased policy measures such as Hospital Consumer Assessment of Healthcare Providers and Services (HCAHPS) surveys and the financial implications of Value-Based Purchasing. These programs have even influenced private entities like insurers and health plans to begin incorporating pay-for-performance programs based on satisfaction outcomes as part of their financial arrangements. The playing field on service has been elevated to new and unprecedented levels, and the financial implications are greater than ever.

An increasing amount of research and writing has been done on the subject, offering healthcare managers an "evidence-based" case for improving the service encounter. In considering your opportunities for a return on service, I offer some initial suggestions from three distinct perspectives: financial, marketing, and clinical.

  • Financial Perspective. Satisfied patients lead to higher profitability. In a 2008 J.D. Power study, hospitals scoring in the top quartile in satisfaction had more than two times the margin of those at the bottom. The 2008 Press Ganey paper, "Return on Investment: Increasing Profitability by Improving Patient Satisfaction," supported these findings. It revealed that when hospitals were ranked by profitability, the most profitable hospitals had the highest average satisfaction scores.
  • Marketing Perspective. There is significant power found in word of mouth. Jacqueline Zimowski shared in a2004 article that a satisfied patient tells three other people about a positive experience. In contrast, a dissatisfied patient tells up to 25 others about a negative experience. The issue worsens, as for every patient that complains there are 20 other dissatisfied patients that do not. And of those dissatisfied patients who don't complain, only one in 10 will return. When you run the numbers, for every complaint you receive, you could be losing a potential 18 patients.
  • Clinical Perspective. Experience and quality are not distinct efforts but critically interwoven aspects of overall care. Patient experience is not just about quiet environments, positive service scripting, or consistent rounding. At the end of the day, it is about ensuring our patients leave healthier than when they arrived (as often as we can). In their 2011 study, Boulding et al. examined quality factors (as defined by The Centers for Medicare & Medicaid Services Core Measures, specifically on acute myocardial infarction, heart failure, and pneumonia) and satisfaction factors (as determined by the two HCAHPS questions: "How do you rate the hospital overall?" and "Would you recommend the hospital to friends and family?") in relationship to readmission rates within 30 days of discharge. The finding was significant. HCAHPS scores (i.e., experience outcomes) were reliable and even more predictable indicators of readmissions than quality indicators. In essence, patient experience, in this case measured by HCAHPS, was a distinct and measurable driver of readmissions, a key quality issue, and a significant financial issue for healthcare organizations.

In addressing patient experience as a new healthcare reality, healthcare leaders should recognize there is a case for experience as a must do. A proven commitment to patient experience has significant and measurable impact, not only in doing what is right but also in ensuring the best quality and most financially sound experience for all who are in and who deliver your care. To be responsible stewards for healthcare systems that are both vital and viable, it is essential to recognize and be willing to address the bottom line issues influenced by patient experience efforts every day.

Jason A. Wolf, Ph.D., is executive director of The Beryl Institute, the global community of practice and premier thoughtleader on improving the patient experience. He is a passionate champion and recognized expert on organizational effectiveness, service excellence, and high performance in healthcare.

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