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Business Focus: How to Spin Your Triangle

Clint Maun, CSP

The topic is business focus. Or, as I like to put it, “How do you to spin your triangle?” Many organizations are looking at themselves and asking: “Are we on the right mark?”, “Are we setting up the right focus in our operation and in our facility?” and that very important question, “How do we go about determining if we are or not?”

We believe that effectiveness in business, particularly healthcare, lies in creating competence and capability in three areas. The first one is RE, or Revenue Enhancement. It is crucial to remember, as stated in “Here’s How to Maximize Income” on the Premier Healthcare Resource website, that “simply building patient volume will not generate significant additional revenue.” RE encompasses multiple areas that must be integral pieces of your overall revenue enhancement plan, including the development of new products and services that result in additional sales through increased occupancy, customer involvement, or boosted patient flow. RE also concerns the organization’s ability to identify and implement new ways to generate more dollars—fondly known as ‘in-store sales’—that can provide additional revenue or relationships, which in turn lead to more revenue to increase that ever-present bottom line.

The second area is CC, or Cost Containment, which is an organization’s ability to eliminate bad ‘dollar decisions’: waste, errors, over-utilization, and the dollar drain associated with labor costs and temporary staffing use. The 2003 Sourcebook for Journalists from the Alliance for Health Reform states that “labor costs... make up the bulk of expenses.” Cost containment incorporates measures for increasing the effective productivity of everyone in the organization, an area providing the biggest resource for reducing bottom line expenses.

Additionally, cost containment necessitates keeping costs within capitated reimbursement rates, controlling costs against managed care requirements, and developing strategies for more effective and efficient supply utilization. In its article, “Managing Health Care Costs: Lessons from the Private Sector,” the NGA (National Governor’s Association) Center for Best Practices endorses “leveraging... purchasing power to pursue innovative strategies that balance improving healthcare quality with reducing healthcare costs.”

The third area important to healthcare is QI, or Quality Improvement, a plan of action that involves implementing continuous quality-improvement programs. It includes the organization’s ability to put team-based initiatives into operation, get process- improvement systems organized, re-engineer poorly performing systems, and seek measures to augment the skills of all people in the organization. The goal of quality improvement is to bring about better results for your customers, patients, and clients.

The Institute for Healthcare Improvement, in reporting on “Patient Centered Healthcare in Whatcom County,” says about patient participation: “patients’ viewpoints have shown to be instrumental in creating positive and relevant change.”

Revenue Enhancement, Cost Containment, and Quality Improvement are all important in operating an effective healthcare business. The most interesting aspect of these is their inextricable connectedness to one another. You can’t do one without the other. Increasing revenue necessitates taking into consideration what it would cost to get the new business and that will increase the revenue. Implementing new revenue-enhancing programs is wasteful if they don’t meet your quality standards. Cutting costs is not effective if it jeopardizes quality. There is nothing gained by having new quality initiatives and buff-ups of programs, services, and products if you don’t go to the marketplace and sell them, thereby increasing your revenue. They are all interrelated.

This group, which we can call RE-CC-QI, creates a triangle that demonstrates how you position your business. For example, if the problems in your organization currently have to do with cost, you are not running the business for the right price. Are there problems with managing labor costs and dealing with supply issues? Are there concerns about wasted time, money, and energy in the delivery of services? If so, you need to put cost at the top of your triangle. These key questions will assist you in making that determination.

If the primary problem in your healthcare business is quality, you should spin your triangle to place quality at the top. In other words, concentrate on issues of improving quality. Implement strategies and teams to improve processes, re-engineer systems, and pursue improved ways to utilize your human resources more effectively.

You can also spin your triangle to place revenue at the top. Revenue concerns address several issues and prompt a number of questions: Do you need to generate more business? Do you need to have higher occupancy, increased admissions, or an improved census mix? (Yes, we know—not a favored term in healthcare.) Are you able to establish better relationships, better market flow, and better sales opportunities? If so, how?

A report regarding public/private partnerships from the Health Care Cost Summit of Erie County, Pennsylvania asserts, “Improving community health and reducing health care costs is an enormous undertaking.” Moreover, this needs to be done while making sure the bottom line is profitable. But it needn’t be made an insurmountable task—just spin your triangle to put the needed focus at the top.

Our point of view about effective healthcare delivery is rather straightforward. If both cost and quality are good, put Revenue Enhancement at the top of your triangle, then proceed to drive that area of the business. If your product is not up to the desired quality level, place Quality Improvement at the top of your triangle, making the decision to fix the issues of quality standards so that you can spin your triangle and commit resources to ‘go get more business’. Is the quality of your products and services good, but are they being delivered without the right price and the right timeliness, efficacy, efficiency, or effectiveness? If so, you must put Cost Containment at the top of your triangle and devise strategies to eliminate the shortcomings that affect matters of cost. In a nutshell, if you control cost and quality to create products and services worth delivering, you can put the revenue issue at the top of your triangle and direct your business focus in that direction to enhance your bottom line.

Your business focus is about spinning your triangle. It is about developing an objective view of your business by asking critical questions about where your focus should be at any particular moment. We believe that individual operations and facilities need to drive their businesses in customized ways to accommodate the specific needs of their communities. You need the flexibility to spin your triangle in the directions that makes sense for you at any given time to make sure that all three areas are maintained at the highest possible level.