Structure to Win

Organizational structure is the foundation for how people communicate, collaborate and perform on the job and affects overall performance of the company.

Most people talk about organizational cultural as being one of the key principles of creating a great company but structure is equally important. Culture is a function and reflection of the structure.

Leading companies use the customer’s voice to align the organization, foster teamwork and create products that meet the customer needs.  Most have adopted a matrix structure and assigned people from functional departments to cross functional teams responsible for managing products and/or services.  Moving more expertise to the front lines gives the product managers and/or general managers respectively the timely support needed to solve problems, develop solutions, create new products or processes and enhance service that meets the needs of their customers.

Many companies operate with a weak matrix structure meaning the company is structured according to function [aka: functional silos] rather blending resources from the different functions into cross functional teams.  A functional structure helps develop expertise, systems and processes needed to enable staff do a specific job well, but are weak structures for promoting collaboration and enhancing customer focus. In fact, functional structures are thought to tilt the organization away from the customer which is never a good thing.

Granted there are challenges with every organizational structure and matrix structures are no different.  Studies of cross functional teams have reported that 75% are dysfunctional.  Getting people to work together is no easy task.  However, there are a few learnings from leading companies that can help make cross functional teams more successful in any organization.

People: Functional managers need to assign people who have the knowledge and experience to contribute to the cross functional team and the people assigned need to be open to working with others that think differently than them.

Support: Functional managers need to support the cross functional teams and evolve their method of monitoring, developing and supporting their people working outside the department.

Rewards: Functional managers need to be rewarded for supporting the cross functional team and the success of the team.  Broader metrics that reflect the company goals should be more heavily weighted in their compensation structure.

Developing an organizational structure is not a one and done type of exercise. Structures need to evolve to help the organization outperform in good times and be resilient to changes in the economy, industry and technology.

The changes underway in healthcare are a good example. With healthcare becoming more consumer focused, healthcare provider organizations should be adopting a matrix structure of cross functional teams to support and develop their service lines. The main role of a service line manager is to help build the business – similar to a Product Manager or General Manager in other industries. Speaking from my own experience working as an interim Service Line Manager for a prominent teaching hospital, few have the direct support needed.  Most have to manage from the middle with influence as their main method to get the information and resources needed to do their jobs well.  Granted influencing others is an essential skill for any manager but influence alone can limit management effectiveness especially in a weak matrix structure.

Structural changes should also be made to help employees be more efficient and productive with their time so that they have time off from work to live healthy, happy lives. If people are routinely working more than 8 hour days, is it a function of the culture, structure or their job? It would pay to find out.

“Quality in a service or product is not what you put into it. It is what the client or customer gets out of it.”

– Peter Drucker

About the Author: Shannon Smith is a healthcare strategist with over fifteen years of experience helping companies achieve greater success.  She is also the founder and CEO of Hello Workout.

Success with Wellness

There is no silver bullet for increasing engagement in wellness programs. However, successful programs with higher than average participation have common elements. 

5 Elements of Successful Wellness Programs:

Offer choice so that you meet people where they are at on their journey for better health.
Working out should simply be time for everyone to do something physical and enjoyable. Offering choice is the easiest way to meet people where they are at on their journey to better health. Many corporate wellness programs make it easier for employees to move throughout the day by implementing walking meetings, standing desks and treadmill desks. Personal trainers, including Harley Pasternak now believe that people can get lean in life just by standing more and walking at least 10,000 steps/day which is about 5 miles/day. 

Lean is not enough. People also need to be strong [and flexible]. Some companies are encouraging employees to workout at their desks or wherever they feel like it because just 5 minutes of resistance training each day improves health over time. Others are offering on-site classes, access to company gyms or contributing to workout related expenses by adding a fitness benefit

Make the healthy choice the default choice.
Subtle changes in what you offer and how you offer it can have a big impact on choice and waistlines without causing mutiny. Target makes the healthy choice the easy choice [aka default choice] by giving employees an extra discount on healthy food and workout clothing purchased from their stores. Other companies such as IDEO are finding success simply by putting the water on the top shelf and soda on the bottom shelf in company fridges. Employees are now drinking more water than soda. 

Reflect your cultural values in your program
Think about what your company does, who your company serves and what the company values for ways to link your wellness program to the core mission. Target successfully aligned their business with their social mission to reinforce their cultural values of wellness in the communities where their employees live and work.

Engage people who can inspire healthy changes and support the program
Dayton, Ohio RTP [Fat Bus Drivers] took a risk by adding a health coach and it paid off over time by reducing healthcare costs. The “secret” to their success is that they truly care for their people and it’s reflected in everything they do from privacy to celebrating milestones. Having a boss that has walked a day in your shoes probably helps too. Mark Donaghy, CEO of RTP shared at the recent FitBit Captivate conference that he started as a bus driver and to this day still identifies as being a bus driver. Can you imagine having a boss that not only relates to where you are now but also shows you the path to a more successful life? That’s powerful.

Reward Healthy Behaviors
Share the healthcare savings with employees who participate and meet their goals. The Dayton Ohio RTP program rewarded employees who participated with enough money to cover the increase in premiums each year. Doing so reinforced the fact that healthy behavior lowers healthcare costs for all.

Successful wellness programs do more than lower healthcare costs. Publicly traded companies with wellness programs are outperforming their competitors with better recruitment, retention and productivity.

About the Author: Shannon Smith is a healthcare strategist with over 15 years of helping companies achieve greater success and the founder and CEO of Hello Workout, Inc.

Pricing Transparency

Will pricing transparency reduce the cost of care?

Many people inside and outside the industry are grappling with this question. A recent Harvard study reports that pricing transparency does not lower cost and they are not sure why.

Having access to prices is important to patients required to shoulder more of the financial burden for their care. For the most part, patients were already able to get the cost or at least a reasonable estimate in advance of their services from outpatient providers. However, comparable information is generally not available to patients when medical services are more complex and unplanned. Those complex and unplanned services are the real cost drivers of healthcare.

However, there is more to pricing transparency than most realize. Let me shed some light on it for you.

Charges vs. Contracted Rates

There have been a lot of stories in the news sounding alarms about the high cost of care.  However, the stories are often comparing charges from one provider to the next or comparing charges to Medicare reimbursement.  There is some validity to making those comparisons but in reality neither comparison has much to do with cost to the consumer.

Medicare requires providers to set a uniform charge.  There are so many billing codes that many large provider organizations, including hospitals and medical groups, set charges as a multiple of Medicare reimbursement rates.  For many organizations, Medicare reimbursement reflects a payment floor, not their break-even point.  Adding a multiple to those rates allows the provider to comply with the Medicare requirement of a uniform charge and set a charge sufficiently high to allow for full reimbursement from all payers.  The contracted rate is the cost consumers pay for the service and for most providers, it is a fraction of their charge. 

Contracted Rates

Contracts with commercial insurers such as Blues, Aetna, Cigna, United etc. are given volume discounts by large providers. Physicians by in large have to accept the commercial rates to participate in the plan unless they are exceptional.  The contracted rates from one insurer to the next vary because the rates reflect the market power of the insurer.  The market power of the provider is built into all the commercial rates and therefore, has little to do with the variability experienced by consumers.

For the most part, the contracted rates in existence limit the reimbursement to providers [in other words, limit what consumers pay] because they are paid a group rate for the billing code(s).  Each of the commercial payers use different reimbursement methodologies for complex services and items routinely passed through such as high cost implants and supplies.  The variation in terms muddy the waters and make the payment for those services hard for even professionals to compare without repricing technology. 

Out-of-Network Providers

Out-of-network providers added to the variability in charges and in most cases, their charges became the high cost outliers.  The reimbursement rate to non-contracted providers is lower than that to contracted providers. Consequently, the non-contracted providers raised their charges billed to insurers to make up for the total reimbursed amount but at the same time, discounted the amount billed to patients.  Patients choosing a high cost, out-of-network provider were largely unaffected but insurers or employers of self-funded plans in the end paid a hefty price.

As payers limited out-of-network benefits, the out-of-network providers kept increasing their charges which is why few employers now offer plans with out-of-network benefits and why the outlier charges should soon disappear if they haven’t already. Access to out-of-network providers is limited under most plans and most patients will pay more now if they choose to continue using them. 

Closed Networks

We’re entering another period of closed networks designed at least in theory to better manage the health and healthcare of patients by coordinating care and increasing compliance with behaviors that lead to healthy living.  However, these networks will also help reduce cost by using primary care physicians to channel patients to a fewer number of providers in exchange for bigger discounts. The downside is that patients often give up choice and control which scares some people.

Higher Discounts

Employer groups and others are reporting savings from using reference pricing and package pricing, also referred to as a bundled payment, which yield bigger discounts from providers on high volume services. Bundled payments make it easier for healthcare consumers to understand the cost of complex services and reference pricing makes it easier for them to choose a low cost provider.

However like most large businesses, healthcare providers including hospitals thinks about cost and profitability at a much higher level than a specific service or the patient.  Large providers can change their allocation methodologies to discount certain services as long as they can make it somewhere else.

Deeper cost cutting for all services will take some time.  What many outside the industry do not fully appreciate are all the constraints on the main cost drivers for delivering healthcare.  For instance, labor is the most significant cost driver for provider organizations and it is constrained by regulatory guidelines, unions, geographical location and staffing shortages.

So in the short run, the cost of some services may decrease and others may increase as a result of pricing transparency. The impact on the total cost of care will depend largely on what happens with demand and other initiatives to align the interests of the healthcare delivery supply chain.

With that said, pricing transparency is a good thing for everyone including healthcare providers. It is much easier to collect money for services rendered when people understand what they owe and know that they will receive good care in return.

Before a diamond shows its brilliancy and prismatic colors it has to stand a good deal of cutting and smoothing.

– Unknown Author


About the Author: Shannon Smith is a healthcare strategist with over fifteen years of experience helping companies achieve greater success.

Welcome to Rush 2.0

Much like the healthcare industry, The RUSH GROUP, LLC had been undergoing an evolution over the past several years.  We felt it was time to recognize our evolution with a new name and a new web-site that better reflects the scope of work that we do and the value we provide our clients.

Our scope of work has expanded with the increasing need to understand the health risks and needs of patients.  Our work integrating systems and streamlining workflows has crossed into the clinical realm.  For example, we have been working with our clients to enhance the clinical data captured in electronic medical records (EMRs) and to develop reporting solutions that enable them to get the insights needed to manage their patients and better serve their physician partners and the market.

Understanding the health risks of patients is critical especially for those assuming financial risk under capitation agreements.  A colleague recently spoke with me because he is having trouble getting the data needed to develop a capitation model for a provider client. His client did not have the needed data and the payers involved were reportedly, not incentivized in this particular situation to share their data.  So we spent a few minutes talking about alternative data sources that could be used to uncover the risk of a population.

Having done market research on the causes of rare and complex cancers, I recalled that there are basically four environmental factors that increase cancer risk.  As a physician, he concurred that obesity, smoking, drinking and exposures to toxins (i.e. working with or being exposed to chemicals, radiation etc.) are the main environmental factors that increase the risk of cancer and cause or contribute to other medical conditions.  So we proceeded to talk about the potential for using other types of market data reflective of the four environmental factors such as spending per capita on fast food restaurants that could be correlated with the provider’s data to estimate the risk.  He liked the ideas and declared that we were on our way to starting Capitation 3.0.

Regardless of whether Capitation 3.0 becomes a reality, we know that providers today need better methods, tools and reporting systems that provide the reliable information needed to thrive as new payment models emerge and healthcare consumerism becomes a reality.

I hope you will join the conversation on Rush 2.0 and share your ideas, experiences and insights on this topic as well as others that will help advance the business of healthcare.