Skip to main content

What's Your Share of Customer?

THE TAKEAWAY: A Share of Customer analysis is easy to do (with the help of an actuary) and may just point the way to significant, overlooked revenue opportunities.

Take 20,000 random accounts from your revenue files. To each account, append the appropriate demographic variables, diagnosis and treatment codes, and the charges for it all. Bundle it up into a suitably-scrubbed data file (so as to avoid the HIPAA police) and send it off to your favorite actuary.

Ask the actuary to estimate the total charges of that 20,000 person cohort (i.e. how much they’re estimated to spend ANYWHERE on all types of health care) and your “Share of Customer” (i.e. how much of that total they spent with you.)

Reporting on my first SoC analysis, the actuary pronounced that we were the beneficiary of roughly 86% of the cohort’s estimated total spending on inpatient and outpatient care. I didn’t think that was too bad. We were leaving a few million dollars on the table but there’s always things like out-of-area, tertiary and trauma care to consider.

Notably, our market area contained a number of snowbirds who gleefully left us behind as the snow fell and didn’t return ‘til it quit six months later. Their health care spending during that fun-in-the-sun was not really amenable to being redirected back to us no matter how many times we plowed the sidewalks.

And, as a community hospital system, we didn’t perform some tertiary-level services like transplants or heavy-duty trauma care. But now at least we knew what we were leaving on the table - by not competing for it in some cases, and not wanting to compete for it in others.

The actuary’s report continued: “You’re getting very little of their estimated pharmacy spending, and virtually none of their spending on complementary and alternative medicine.” Hmmm. Right there were two revenue streams, each between $5 and $10 million per year, that we weren’t competing for at all. Not at all. Hadn’t thought about it.

Did we WANT to compete? Ah, there’s a question. Both opportunities posed certain challenges - logistical, legal and supply chain challenges in the case of pharmacy revenues, and long-standing medical staff resistance to anything smacking of CAM. Did we have the core competencies and innate patient loyalty to compete with Walgreen’s and CVS? How many pints of blood should we reserve for those debating with the medical staff over, say, acupuncture?

That’s a bad pun and a good question. But now we’d learned the value of having those discussions and the costs of leaving barriers in place: possibly $20 million a year in lost revenues. Everybody - even a hospital CEO - has a threshold where the motivation to do SOMETHING powers through the inertia to leave well enough alone.

And this was for a suburban system of fairly modest size. How many bigger opportunities do YOU have? Add a SoC analysis to the analytical work you’re already doing on market share. It may be good for your opportunities list.



Comments

Popular posts from this blog

Becoming Consumer Friendly In Five Easy Steps...Or Not

An article at hhnmag.com offers hospitals 5 steps to becoming more consumer friendly.

If you still think there's a secret sauce to your hospital becoming more "consumer friendly," these 5 steps are as good a place to start as any.  Unfortunately, it's a little like that old Steve Martin comedy bit where he says he'll teach you how to be rich. The first step is to go find a million dollars.

Step 1 from the article is realizing that "...a Medicare beneficiary with chronic conditions is different from a young mom who brings her kids in for an annual check-up." This is market segmentation for beginners, and, yes, one size decidedly does not fit all. I'm sure your marketing team's been saying this for a while.

Steps 2-5: have a strategy, metrics, a champion and resources. OK. Hard to argue with any of those.

But those things, alone or together, won't overcome culture. They're important components to be sure, but insufficient without a …

My Take On Anthem-Cigna, Big Dumb Companies and the Executives Who Run Them

After last Friday's Appeals Court decision, Anthem's hostile takeover of, er, merger with Cigna has but a faint pulse. Good. Unplug the respirator. Cigna's figured it out but Anthem is like that late-late horror show where the corpse refuses to die. Meanwhile, 150 McKinsey consultants are on standby for post-merger "integration" support. I guess "no deal, no paycheck..." is powerfully motivating to keep the patient alive a while longer.

In court, Anthem argued that assembling a $54 billion behemoth is a necessary precondition to sparking all manner of wondrous innovations and delivering $2.4 billion in efficiencies. The basic argument appears to be "We need to double in size to grow a brain. And just imagine all those savings translating directly into lower premiums for employers and consumers." 

Stop. Read that paragraph again. Ignore the dubious "lower premiums" argument and focus on the deal's savings.

$2.4 billion saved from a p…

Another Day, Another App, Another Satisfied Customer

How might health care providers use technology to turn customers' mobile phones into information displays and ordering devices? A few years ago, the NY Times outlined how retailers are doing it...
"(Designer Norma) Kamali is at the forefront of a technological transformation coming to many of the nation’s retailers. They are determined to strengthen the link between their physical stores and the Web, and to use technology to make shopping easier for consumers and more lucrative for themselves.
...

Cisco Systems, the supplier of networking equipment and services for the Internet, is also a leader in the field. The company’s Mobile Concierge system is capable of connecting customers’ smartphones to retailers’ wireless networks — so a shopper could type “Cheez Whiz” into a cellphone, then pinpoint its location in the store." Ms. Kamali's boutique installed a technology called ScanLife, "allowing people to scan bar codes on merchandise and obtain details about the…