Value Added Services in Health Service Organisations

1. Value Added Services in Health Service Organisations Dr. Ulrich Wagner Professor for Strategic Management and Organisation, Program Director Executive MBA Health Service Management, Center for Management, Bern University of Applied SciencesSwitzerlandulrich.wagner@bfh.ch (wagnerulrich_ch@yahoo.com)

2. Content • Market situation • Industry understanding of „value added service“ • Value Added Service (VAS) definition • Methodology to identify VAS • Findings • Discussion / Questions Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

3. 1. Market situation • In the german speaking countries, which are characterised by an Bismarckian health insurance system with a positive catalog of services, health service providers compete for the patients, which own an additional or a private insurance or are (partly) out of the pocket payers (i.e. wealthy international patients). This is due to that fact, that these payers bring a higher profit margin. Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

4. Market situation II • Of course these patients have more a character of „clients“ and are more pretentious. The basic level of health services are not enough to convince these clients to choose a specific health provider durably, what would not only be desirable on a micro – but also on a macro level. Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

5. Health insurance Insurance market Expert market Health service providers Population / patients Service market Subsidy market Supply - / taxmarket Cantons / public or private owners Market situation - Switzerland Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

6. Customers according to role definitions (following Ossel 1998,130) Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

7. Costs of new acquisition Duration of customer relationsship (in years) Customer retention and rentablitity(i.e. Reichheld et al. 1991) To add for personal services: - Lower integrations cost + higher quality stability (compliance) + et cetera Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

8. 2. Industry understanding of „value added service“ Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

9. 3. Value added service definition I:Value – Competitive capacity (Wagner, 2003) Customer value depending on competitive situation: Value to customer of the products, services and value added services of the firm Value to customer of the products, services and value added services of the competitors => has „only" to be bigger than 1 to win customers !!! Procedures : Optimisation, Innovation, Invention “The customer value paradigm is replacing the customer satisfaction paradigm in management strategy” (Saliba / Fischer 2000, 68) . Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

10. Herzbergs basic model illustrated at the example psychatry Absence of Mental Health - Mental Health Mental Illness - Absence of Mental Illness Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

11. Excitement / Distinctive - 0 + ++ Degree of customer satisfaction following Kano`squality model (1984, 1996 ff) Basic Performance/Proportional Degree of customer satisfaction Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

12. Kanos modell and the value decline of products/services (following Hinterhuber und Matzler 1999) Excitement Performance Basic Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

13. 3. Value added service definition II: • „Die freiwillige Erbringung und Gestaltung zusätzlicher, d.h. die Kernleistung /-prozess begleitender Leistungen und Angebote, die den Nachfragern mit dem Ziel der vor, während oder nach dem Zustandekommen einer Transaktion erbracht werden. Dabei geht es nicht nur um das >Was<, sondern auch um das >Wie< !“ • „Value Added Services“ (VAS) shall be defined as the voluntaritly designed and delivered services, services that accompany the core services or processes and can be deliverd before, during or after the come about of a transaction. Relevant hereby is not only the content, but also the process of delivery. Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

14. 3. Value added service definition II:Value to the Customer Value to the customer = product / service value (function, quality, costs)– sacrifice+ enhancing value whereat: enhancing value = cycle time, cost (i.e. less sacrifice), quality (warranty), service, status, joy/fun, astonishment, delight, pride, et cetera Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

15. 4. Methodology to identify VAS • Self declaration • Use of specific terminology • Self positioning in PR • Use of specific managerial / organizational approaches, instruments Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

16. 4. Systematics for assessing service value (i.e. Bruhn 1997, 61 ) Customer oriented approaches company oriented approaches Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

17. 5. Findings I • Tendency that NPO health providers (hospitals) mainly focus on „basic“ level, are not able to address upper „performance“ categories i.e. quality indicators - exept structural quality. Added services are often understood as „structural elements“ in the sence of “hotel comfort”, “in house hairdresser”, or “patient library”. • Due to limited resources most NPO hospitals are not able to build up structural elements (i.e. hotel comfort) which help to position them well in the value market competition, nevertheless they communicate and promote these elements as value added. • Positive side effects (i.e. on processes) in these settings are not observable. Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

18. 5. Findings II • Many privately owned – for profit hospital (chains) (mainly in D and CH) ever since have positioned themselves in a higher value category (mainly comfort too) but since some years have started to realize the positive effects of value added services on processes too (i.e. through internal marketing approaches, internal SLA, process owners or patient coaches, empowered staff, innovative task assignments – i.e. hotel staff in hospital and therefore easing the burden of health professionals) • These hospitals use now their temporary competitive edge , starting early with the development and implementation of clinical pathways and their methodology. They are outpacing the typical NPO institution, in service features, quality and cost (generating up to 25 % of contribution margin). Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

19. Individual level OPTIONAL U V R S X W Segment level P O Q T General level Basis module Possible implementation model Excitement Performance Human interface Basic Following i.e. Carolien de Blok, Bert Meijboom, Katrien Luijkx, Jos Schols 2007: Applying modular production principles -to unite client orientation and efficiency-, Tranzo, Tilburg University, The Netherlands, in: EHMA 2007 Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH

20. 6. Discussion Value Added Services in Health Service Organisations; Prof. Dr. Ulrich Wagner, Center for Management , Bern University of Applied Sciences, CH