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Healthcare Providers as Health Managers – “Customer” Issues

by Scott MacStravic

Healthcare providers have always had a problem with thinking or talking about their customers as “customers”, rather than the traditional nomenclature as “patients”.  In the early days of healthcare marketing, physicians in particular, and hospitals in reflection of this, often refused to adopt the customer term, and many still avoid it.  But when health management (HM) is the “product”, rather than sickness care, “customer” is definitely the preferred term.

For one thing, the major customer in HM is likely to be the organization that pays for HM programs, which clearly cannot be deemed “patients”.  And for another, recognizing that individuals who are targeted for and participate in HM initiatives are truly “customers” opens up the potential for application of all the “customer relationship”, “customer experience” and “customer communications” concepts and practices that marketing offers, where “patients” would not.

Like customers in other industries, and for that matter like patients in sickness care, HM depends on, and has to focus a great deal of attention on how organization and individual customers behave.  Where traditional marketing focuses on customer interactions and transaction behaviors, HM depends on these as well, but more on how customers cooperate as “partners” in the HM effort.  And where customer “retention” is a major focus in most marketing, it is far more important in HM, where individuals and organizations that “defect” from existing relationships cost far more than merely lost revenue.

Individual customers in HM are major challenges because of the significant and lasting behavior changes required to make HM succeed.  They must first enroll in HM initiatives, then participate therein, and either complete or continue indefinitely as participants in order to achieve optimal results.  Most must also enroll in other HM initiatives, either simultaneously or in series, since most individuals have multiple health challenges, risk behaviors, risk conditions, productivity/performance impairment factors, diseases, or other problems whose “solution” will add value to both them and the payors who are also HM customers.

Moreover, individuals must adopt and persevere in a number of health behavior changes, in most cases, not merely “buying” the HM product.  In many cases, this involves a lifetime of new behaviors, or at least during the “customer lifetime” that each is a member of the at-risk population involved.  Each must usually cooperate by monitoring and reporting each’s behavior changes, health status changes, and often productivity or other performance changes as well, as part of the HM evaluation process.  Complete, accurate, and timely reporting by participants is essential to HM providers being able to adjust HM interventions as they are implemented, as well as monitoring and reporting progress to payor clients.

Payor clients, in turn, are equally important partners, since they are usually the only ones who can accurately, completely, and honestly gauge and report the progress and results they are getting.  And when these results are the basis for some or all of the determination of their payment obligations for HM programs, achieving and maintaining their continuous and total cooperation will determine the financial fate of the HM provider.  While individual participants often have “perverse” incentives to over-report HM consequences, for example, payor clients have clear financial incentives to undercount and under-report consequences to them.

As is true in most marketing, the most valuable marketing communications sources in HM will be satisfied customers.  Individual customers are ideal sources in promoting HM participation to their peers, and as sources of support and assistance to peers who are participating in the same HM initiatives.  Payor clients are equally valuable as sources of recommendations, case examples and testimonials, as well as support and assistance to their peers, though they may be reluctant to do so when their peers are competitors.  Where HM providers may have thousands of individuals to choose among as sources of such help, they will have only handfuls of payor clients, so every one they can enlist as word-of-mouth “ambassadors” and sources of peer support is that much more valuable.

Fortunately, the benefits to both individual and organizational customers of HM programs tend to persist and grow over time, with full effects of most interventions taking a number of years in most cases to appear, and increasing in the meantime.  This should promote high levels of both satisfaction with past achievements, and confident anticipation of continuing and increasing future benefits, making it that much more likely that they will remain as loyal customers. Anticipation of the loss of such benefits is one of the key “switching costs” that also promotes continued loyalty as well. [K. Lemon et al. “Dynamic Customer Relationship Management: Incorporating Future Considerations into the Service Retention Decision” Journal of Marketing 66:1 Jan 2002 pp. 1-14]

The pattern of continuing and growing benefits common to HM interventions can also mitigate payor clients’ concerns about sharing the results they achieve and helping to promote HM interventions and providers to their competitors.  For example, GlaxoSmithKline has reported its total savings per employee grew from $233 each per year in the first year of its HM program, to $375 in the second, then $944 in the third, and $950 in the fourth.  So even if their competitors jumped on the same bandwagon, they would still be three years behind obtaining the high levels of benefits that it had already achieved. [G. Stave, et al. “Quantifiable Impact of the Contract for Health and Wellness” JOEM 45:2 2003 109-117]

Because the value of customers is so great, and their contributions so important to HM success, managing customer “acquisition”, retention, cooperation and contributions is that much more important in HM planning and operations for its providers.  Healthcare providers that venture into internal, external, or both applications of HM should forgo their sensitivity to “customers” as a way of thinking about them, and master the full range of customer relationship concepts, techniques, and benefits, if they are to compete successfully with the specialized HM suppliers and growing number of health plans already active in the HM market.

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