NRC Health CFO Weighs In On the Importance of Strategic Partnerships
Kevin Karas offers a unique perspective on healthcare’s fiscal demands. He’s one of the rare few whose experience straddles both sides of the industry divide.
As NRC Health’s CFO, he understands the rigors involved in observing the bottom line. But he’s also served in the industry directly, as CFO for a national ambulatory-care provider.
That background gives him special insight into the priorities of healthcare organization C-suites. And it positions him well to understand the fact that today’s organizations don’t just want vendors—they want strategic partners.
In this article, Kevin weighs in on the difference between the two, and how the evolving relationship between providers and their partners will shape the future of healthcare.
Vendors Sell. Partners Understand.
Kevin argues that vendors take a shallow approach to their business relationships. “They’re here to sell a service and collect revenue,” he says. “They’re not always interested in the bigger picture of how they are meeting the needs of their clients.”
Partners, by contrast, make the effort to explore things in-depth. “Where partners show their real value is in their engagement with leadership,” Kevin says. “They review what the organization’s strategy is, and figure out how to help them meet their priorities.”
He underscores, though, that he’s not talking about typical tactics deployed in the field of consulting, like gainsharing. “This isn’t just aligning payment incentives. It’s more about sharing a single strategic point of view,” he says. “More than ever, it is imperative that healthcare organizations align with business partners who are willing to be held accountable for delivering an ROI for their services as well as enabling the achievement of strategic objectives.”
The Focal Point of Today’s Organization
To understand that point of view, Kevin points to the research.
“The Advisory Board put out a study about this,” he says. “They surveyed healthcare CEOs and found that their top three priorities are, in order, like this: number one, cost control; number two, finding innovative approaches to expense reduction; and number three, diversifying their revenue streams. There’s a pretty clear trend, here.”
Obviously, healthcare leaders are dedicated to a mission of quality patient care. If organizations aren’t operating sustainably, however, they won’t be of service to anyone. It’s a popular truism in the industry today: no margin, no mission.
But Kevin wants organizations and their partners to see that, often, the margin and the mission come together. “More and more we’re seeing—and the data justifies this—that quality patient care is what makes for a good bottom line,” he says.
High overall satisfaction with their hospital experience, for instance, leaves patients 39% less likely to be readmitted. Patient satisfaction has also been linked, again and again, with stronger post-discharge adherence to medical instructions, which leads to much better long-term outcomes.
In an environment inclining ever more toward value-based purchasing, satisfied patients represent dramatic opportunities for cost savings. It’s the best way to protect margins, provided organizations get the experience right—and find the right partners to help them do it.
The Consumerism-Loyalty Connection
But the opportunity’s even better on the other side of the balance sheet. Satisfying patients bolsters earnings, too.
“The biggest trend healthcare leaders need to come to grips with is consumerism,” Kevin says. “Healthcare needs to become a lot more like retail, and give customers an outstanding experience. It’s how consumerism fosters engagement, which leads to loyalty, which drives revenues.”
A positive patient experience is inextricably linked to patient loyalty. And loyalty, in turn, is critical for organizations to maintain their fiscal health.
“Loyalty produces that customer activation where patients become more proactive consumers of health services and are more involved in their own care,” Kevin says. “That’s better for them, and better for organizations too.”
Bain estimates that a 5% increase in customer loyalty boosts a company’s profitability by 25%. That’s especially true for organizations in the healthcare industry, where the lifetime value of a patient is extraordinarily high—up to $1.4 million per individual.
Retaining patients, then, is a critical concern for healthcare leaders, which is why NRC Health has devoted itself to driving a deeper understanding of loyalty.
“The first obstacle to improving patient loyalty is coming to grips with how to measure it,” Kevin says. “It’s incredibly complex and multidimensional.”
Seeing this gap in understanding, NRC Health created the Loyalty Index.
“We’ve discerned seven components of consumer loyalty that health systems ought to observe,” Kevin adds. “Breaking it down into quantitative measures gives organizations a way to benchmark their performance and plan improvements. Quantifying it is of enormous value, given how central loyalty is to healthcare strategy.”
A Genuine Partnership
And that attention to numbers is the hallmark of what Kevin believes healthcare leaders should look for in a partner. His long career of financial stewardship has taught him the crucial importance of measuring success, which may be why he shares this vision of NRC Health’s mission on our website:
“We are focused on being a valued strategic business partner, providing solutions that enable our clients to be successful in meeting their strategic objectives while driving measurable economic results.”
In other words, it’s NRC Health’s commitment to help organizations pursue the mission and preserve the margin at the same time.