Spotlight Blog: Healthcare and the “healthcare profit chain” – what it is and why it’s important

Today’s blog entry is one in our “spotlight” series where we focus on a particular leading-edge thought leadership topic.   It's a bit longer than usual, and dives a bit more deeply into an important and current topic.

Healthcare delivery is in a state of dramatic change, driven by forces inside and outside of the industry.  “The Affordable Healthcare Act” is but one of the many new forces driving rapid and sweeping change. 

One thing is certain – the changes are inevitable and will result in winners and losers in the coming years.  What will define the winners?  One factor we can be confident about is “quality” and the many measures that define it, both from the patient satisfaction standpoint and from the new types of objective “outcomes” and “cost of service” measures.

This post discusses some of the concepts around quality, accountability and some of the areas that healthcare delivery organizations at all levels can take to measure and manage to this new quality imperative. 

If you’re in a business relating to healthcare this is familiar territory to you, although some of the new measures, metrics and dynamics may be new.  If you’re in another industry or another type of business, this post can be helpful to you as both a cautionary tale (quality and accountability will always win, and those that ignore it will pay dearly), and also as an inspirational or visionary touch-point- in that quality and the driving values around it will always win… 

Let’s dig-in.

Like any business or process, healthcare has it’s components of value and elements in the path to “deliver” these services to customers.  We call this the “Healthcare Profit Chain” or value chain.  

It’s not surprising that this involves the sequence of experiences and person-to-person interactions around the holistic or comprehensive experience patients have in receiving their care, treatment and follow-up.  What’s new and quite interesting is the “value-based-pricing” that the Affordable HealthCare Act has set up around reimbursements.  

The “bad apple” is only part of the problem

We see this in any other product or service-based business.  The quality of the apples leads us to examine the source and handling of the apples on their way to the grocery store… Equally so, the demeanor and response of the Produce Man at the grocery store (when confronted with “bad apples”) really defines whether or not we forgive him and the store for our bad experience (and whether it’s an opportunity to build loyalty and trust, or to spread the word and “punish” the brand for their poor process and bad outcomes).

For the first time the “patient experience” (and related to that, the caregiver experience) is a measurable and measured component of care ---and now payment.  This is what one industry expert calls a watershed moment for healthcare – a moment that demands huge cultural change.  Healthcare organizations can no longer measure themselves on outcomes alone. 

Today, the holistic patient experience matters as much as outcomes (to the healthcare organizations).  Perceptions matter more than ever.  Brand value and revenue now depend on it.   And now these perceptions have a direct and material impact on the money side of this business. 

But there is good news here:  much of this “healthcare profit chain” is well-understood (if not well-managed) and as a result it’s going to be much simpler to succeed in the new world than was perhaps once thought. 

In this new reality, managers at every level must manage all components of this profit or value chain in order to, as the Kaiser Permanente ad campaign says, “thrive.”  In your business or industry you might consider how this is parallel to your way of driving quality and accountability.

Introducing the Healthcare Profit Chain

The flow above is loosely inspired by the work of the Service Profit Chain Institute, except that in this view of the value or profit chain, we exchange the role of “employee” with “caregiver” (reflecting healthcare). 

In a recent discussion with a “Chief Patient Experience Officer” at a leading healthcare organization, he asserted that

“…Everyone in the hospital is now officially in the “field” of nursing because everyone must be focused on the “experience” of those being cared-for...“ 

Given this, the most important component of “quality” of each and every patient interaction is the overall satisfaction relative to the caregiver.  This is a groundbreaking recognition and one that turns the traditional “respect” and “recognition” of nursing and caregiver on its head, from a “rank” and “influence” standpoint in the industry. 

We’re all “customers” and we’ve all been patients.

As patients ourselves we have long known this and been aware of it.  However if we’re honest with ourselves, we also know that nurses and other caregivers are also historically some of the most underpaid, under-recognized and overworked professionals we know. This has unfortunately been a driving force behind the perceived necessity of nurses and caregivers to seek unionization and collective bargaining protection. 

Collective bargaining as the symptom, not the solution

Bank Tellers, transit workers, fast food workers and even theme park workers have experienced this reality.  Obviously whenever a group of workers is forced to consider or implement unionization it’s a clear sign of a catastrophic break between perceived value of their work and its impact on quality and profitability of the organization.  In healthcare it’s a bit more frightening.  Do you want the caregiver of your premature infant to be brooding over an unfair shift change and a freeze on overtime?  Would you be happy about your surgical nurse worrying about longer hours and shortened lunch breaks during your procedure? 

This upside-down paradox is finally in the open, as a new financial (reimbursement) connection is made at just this point of “interaction and satisfaction.”  As patients (“customers”) we should celebrate it.

Translating to the workers and the workplace

So how does this largely academic diagram relate to the way we manage our organizations?  In healthcare it’s not particularly complicated.  However it’s just as clear that these basic management touch-points are being ignored or allowed to wither.  Consider these factors (and translate them to your industry if you’re outside of healthcare by substituting “caregiver” for “employee” and “patient” for “customer”):

-Caregiver workplace

-Caregiver job design

-Caregiver selection and development

-Caregiver rewards and recognition

-Caregiver tools for serving the patient 

We asked the workers

We recently asked users at NursesCount whether they felt that they were getting the training and help needed to succeed. Only 21% said this was frequently the case; and 58% said it was only occasionally the case.

Great (healthcare) organizations assign a huge value to this point of training and help.  As an industry and as an individual organization, it’s important to ask:  “are we making it easier or more difficult for our front-line patient (customer) care teams to deliver great quality?” 

A break in the value chain results in a cascading break in the profit chain and introduces high risks

This leads to measurement (and now much more effective understanding) of the drivers of caregiver (worker) satisfaction and for that matter, caregiver retention.  Notwithstanding the obvious primary expense of experienced, skilled caregiver turnover, we now have direct correlation to patient satisfaction, team cohesion and outcomes.  This cascades into a huge set of risks for healthcare delivery organizations and now directly throws financial projections into question at all levels.

It’s also about brand risk and brand reputation

One aspect that is not lost on savvy healthcare marketers is the concept of quality of care, patient-to-caregiver interaction and satisfaction and loyalty or “preference” in a brand sense.  In this case it’s the brand of the hospital, healthcare organization or even a specific “rock-star” anchor in a practice.

Yet the components of person-to-person “quality” and loyalty are subtle and hard to pinpoint.  It may be the sum of 100 or 1000 special touches and empathy at each interaction.  A few words, or a lack of being rushed or harried.  A simple smile and a gentle act of reassurance.  Taken together, these drive patient retention and loyalty, CMS evaluations (ratings at hospitals that determine reimbursements) and of course brand value by way of referrals and reputation.  Connecting the dots, this means revenue growth and increased profitability in the new world order of satisfaction and quality-based reimbursements. 

Leaders no longer able to just talk the talk….New imperatives to walk the walk.

The tipping point has been reached.  What was once considered “nice to have” and “thought leadership” but still “soft benefit” and marketing-speak has now become hardcore financial stewardship and risk management. 

Top executives in these companies are not only espousing, but are now expected to put solid policies and “mission-vision” prescriptions into place to act on the age-old lesson from other service industries:  Your business results are directly determined by caregiver (worker) satisfaction, as this is the most direct and manageable factor relating to patient (customer) satisfaction and good outcomes.

How do you manage this so you can improve?

Clearly there is a lot already happening in the effort to improve hospital and healthcare delivery processes.  It’s a red-ocean in many ways.  Crowded with “experts” and fancy consultants (with pretty graphs like the one above) and lots of measurement and process.  Yet the most important piece of this puzzle seems to be lost in the furious effort to “control” the process.  The missing piece is a simple one, yet an elusive one for outsiders to “control” with rules and requirements—Caregiver satisfaction. 

It has been long said that you cannot “fake a smile.”  And what a difference it makes to every patient (and customer) interaction!  If we accept the equation that the sum of patient interactions determines patient satisfaction, there are two simple and easy-to-implement ways to get started. 

Real-Time VS Stale data.  Which would you rather use?

The first is to start to measure caregiver satisfaction regularly.  Just as the weatherman and economic advisors forecast “early and often” so must healthcare workers’ satisfaction be measured.  This is the front-end of the value-chain or profit-chain we saw at the beginning of this post.  

Big Fix Projects VS Continual Improvement philosophy

The second is to move from periodic measurement and “remediation” and drastic break-fix cycles to an approach of continual improvement, feedback and small, frequent adjustments.  If you are a sailor you know this well.  Small, frequent adjustments in the tiller and the sail will always be better than once-a-day measurement and wide swings in direction and remediation.  People work that way too. 

Annual, Quarterly or even Monthly surveys don’t cut it.  The data is stale and the working groups are scattered or re-arranged by the time the “remediation” or “analyses” get to the right place.  It’s not a bad idea to do deep self-evaluations periodically.  It’s just impractical to try to manage something as subtle and ever-shifting as caregiver and patient satisfaction that way.  And now it’s clear that it’s also financially reckless (if not derelict) to do so, as these measures form the foundation of multi-billion dollar financial projections and swings of millions of dollars in top-line reimbursement revenue at any given facility.  We need something that keeps satisfaction results in front of the managers all time, because transparency makes improvement happen.

Actionable data in a digestible format

Finally, we need a way to manage against quality discrepancies as they happen. Depending on paper surveys that are weeks or months old does not allow managers to find gaps and improve.

Caregiver satisfaction and patient quality of care is not an exercise in history.  It’s real-time.  As real-time as an EKG.  History is nice, but in an “event” it’s irrelevant.  Real time is what matters to the patient.

We need to be able see daily how well are doing and find gaps in performance and then be able drill into where the quality of patient experience is succeeding or failing.

Correlating the two sets of data with ease

At same time, we need to have what we call “temporal concurrence” between patient and caregiver data so leaders can cross-reference between patient and caregiver data. This is the best way to reveal the root causes and gaps that are doing damage in near real-time.  And by the same token, reveal the bright spots in the value chain where everything is working brilliantly (and presumably what we want to replicate). 

What are your thoughts on this?   Join the discussion in our LinkedIn group.

NursesCount is leading the industry in this practice of correlating these two sets of fresh data for the benefit of organizations (including healthcare), workers (including healthcare caregivers of all types) and the patients (customers) they serve.

To learn more about how to do this in your organization, write to us at and start following us at @workerscount and @nursescount on twitter.  WorkersCount is the provider of NursesCount, PatientCount and other healthcare industry services and platforms that help healthcare executives and their teams drive and sustain world-class service quality and engagement.

3 responses
WorkersCount upvoted this post.
Provider/Caregiver satisfaction is the only lasting basis for patient satisfaction and quality care. The organizations that realize this and take action on it to build a caregiver friendly workplace will develop a strong competitive advantage in the very near future because it will be so incredibly rare. In my experience only about 3% of organizations are aware of this issue in a way that will have any impact. The vast majority have given up on things being different and simply budget for turnover. You are correct that satisfaction surveys and projects to address staff stressors are the key ... free Google Drive forms will do the trick just fine. The industry of multimillion dollar surveys that require training for your people to understand is joke and waste of time and energy. The missing ingredient is caring. Does your administration care about the workers. If they do ... now is the time to start measuring and acting to improve their satisfaction levels. It is the same key to peak performance the leaders in every other industry segment outside of Healthcare learned a long time ago. Dike Dike Drummond MD
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