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The Rx for Improving Hospital Finances

by Rick Blizzard, D.B.A.
Healthcare Editor

Improving inpatient loyalty costs hospitals millions of dollars annually. Driving these costs are the myriad of organizations that have invested in highly defined quality-improvement processes and staff training. Yet Gallup's work in the healthcare industry indicates that there is no consistent "magic bullet" -- the key lies in the identification of specific areas in each facility or department that deserve focus. Unfortunately, these areas are often identified by employees without a sufficiently broad perspective on the facility's processes -- or worse, by the "squeaky wheel" method, whereby the most frequent sources of complaint are chosen as areas of focus.

A Successful Hierarchy

A better system is needed to target key areas. First priority must be given to areas known to have the greatest impact and return on time and resources. Gallup's quantitative research has identified a hierarchy of approaches to guiding quality improvement while simultaneously improving the facility's financial performance.

  • Level One: Process*

    Patients entering a hospital expect smooth and efficient operations -- if they expect anything less, they will probably select another facility. Efficient operations are not likely to delight a patient, but their absence will cause dismay. Smooth processes can include quick admissions, effective discharge planning, and lab, x-ray, and hospital cleanliness. These attributes, while they won't produce patient loyalty, are necessary prerequisites.

  • Level Two: People**

    Many quality improvement efforts -- even if they focus on concrete action plans with measurable objectives -- go no farther than the first level of the hierarchy, modifying policies and procedures. They miss a true opportunity -- the chance to meet and/or exceed patient expectations. Policy changes only produce temporary improvement in scores if they are implemented by disengaged staff members. Once acceptable processes are in place, the quality-improvement effort must turn to fostering engaged personnel. This second level includes pain management, the concern shown by staff members, and the effectiveness with which they make patients feel safe and secure and anticipate their needs.

  • Level Three: Overall Evaluation***

    Process and personnel results combine to form overall patient satisfaction. However, service retrieval is another key dimension. Patients realize that things do not always go smoothly the first time, and they accept this. But when problems occur, it is crucial that they are resolved to the patient's satisfaction.

  • Level Four: Patient Loyalty

    Patient loyalty is the key predictor of hospital financial performance, measured by patients' likelihood to return. To produce patient loyalty, two factors -- trust and reputation -- interact with Level Three of the hierarchy. Trust and reputation include such items as believing the hospital will do what is right for you as a patient, and trusting the hospital to handle all of your future healthcare needs.

Key Points

The most sophisticated quality-improvement process will fail if applied to the wrong indicators. Success lies in identifying where your organization fits in the inpatient loyalty hierarchy. Poorly performing organizations can benefit from policy and procedure development, but if the effort ends there, it will only succeed in removing sources of dissatisfaction and the improvement rate will quickly plateau. Sustained improvement also requires a focus on higher levels in the inpatient loyalty hierarchy, and most importantly, on the contribution of engaged staff members.

*They predict 77% of the variance at Level Two.

**Variance at Level Two predicts 79% of the variance at Level Three.

***The combination of patient satisfaction and problem resolution predicts 52% of the variance at Level Four.


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