A Radical Idea in Healthcare: Refunds for Dissatisfied Customers


I love stories of humility and customer focus in healthcare. Let me share two such stories with you today. Oh, and, I ended up sharing a story of mine that's related and might just recount a few screw ups on my part… but I think I eventually did the right thing.

Failing (?) the NorthBay Way

While this is all a “failure” in one sense, it's also a “success” if you're a fan of doing the right thing for people.

In a blog post, Gary Passama, the CEO of NorthBay Healthcare in Northern California, writes about a situation where he admits the system failed a patient from a financial perspective:

Failing the NorthBay Way

In the post, Gary writes about how a patient of theirs was referred to the emergency department instead of being treated at an outpatient service of theirs.

“The patient did receive the treatment she needed, but at a significant expense. The emergency room was not the appropriate place for this patient. The result was a bill which was much greater than it would have been had the patient been seen at the outpatient location. The patient's father eventually brought the bill to my attention. After confirming the details, the balance owed was waived. It was the right thing to do because we did the wrong thing.”

I appreciate the humility involved in admitting a mistake to a patient and to admit it on their blog. By giving this refund, I assume it will spur NorthBay, as part of their Lean journey, to understand WHY this occurred… looking at system and process problems rather than just blaming an individual. Understanding the cause of this inappropriate E.D. referral is a key step in preventing future failures of this type.

I'm happy to be including some quotes and thoughts from Gary in the upcoming third, revised edition of my book Lean Hospitals.

In part, it says:

“Gary Passama, CEO of NorthBay Healthcare (Fairfield, California) reflected on the start of their Lean journey by saying, “Our approach to inculcating Lean at NorthBay was deliberate in nature. We were not interested in a “big bang” approach. We wanted Lean to become part of daily life at NorthBay. We also wanted our team members at all levels to feel empowered to apply Lean principles at the work site level. That is what we have worked hard on over the past three years.

While cost savings are nice we did not set out in our Lean activities with that as a primary goal. Our staff understands this and therefore does not fear Lean. We have had no significant layoffs since embarking on our Lean journey. It may be a coincidence but since we started using Lean principles we have had our best years in terms of financial results and employee satisfaction scores.”

Hear Mark read this episode (learn more about the podcast):

Owning My Own Mistake

I recently started taking pre-orders online for the new edition of Lean Hospitals. I'm using a service and website plugin from a company called Celery, which allows me to take pre-orders and then only take payment from the customer when the signed book actually ships.

I had written text into the order page saying that I was accepting pre-orders only from people with U.S. mailing addresses, since international shipping costs are so high (and dealing with customs can be a pain).

I was surprised (yet happy) to see an order the other day from somebody in Finland. I was happy, yet I realized, “Uh oh, the shipping costs to Finland will wipe out the profit from selling a few books to U.S. customers.”

At first, I didn't really respond correctly to the customer. The website was technically set up, even with my disclaimer, to accept orders from anywhere in the world for a flat price of $50, including shipping. This was my fault, not theirs.

In my initial email to the customer, I explained my honest mistake and that I hadn't intended to offer free shipping globally. I asked them if they would be willing to pay a bit more to cover the cost of international shipping.

The Finnish buyer rightly pushed back and said that I had made that offer on the web, to sell and ship the book for $50 and they thought it was fair.

I thought about it a bit more and realized that I had an ethical obligation to follow through on the deal. I can absorb the shipping cost. I realized that I'm not selling the signed copies as a money-making endeavor… I was really offering it as service to those who would like to buy my book and I'm doing it to build relationships with book readers.

So, I'm going to ship the book to Finland with a smile.

But, I've also properly configured the sales engine so that orders are now limited to U.S. buyers. I think that's the right response… I hope international buyers will buy the books locally through distributors or book sellers in their country.

Geisinger's “ProvenCare” Model

Screen Shot 2016-04-27 at 12.15.12 AM

I wrote about Geisinger in the second edition of Lean Hospitals, highlighting their approach to standardizing cardiac care (note: it was the cardiac surgeons who led this effort) and providing a flat rate or a warranty that said the cost of any follow up care would be paid for by Geisinger, not the patient.

This recent Washington Post article shows how they've taken this commitment to customer value and quality to the next level:

The most unexpected hospital billing development ever: Refunds

Geisinger is the first American hospital system to do this:

“At Geisinger Health System in Pennsylvania, hospital officials want to keep their customers happy. So when patients are upset about a long wait in the emergency department, or a doctor's brusque manner, or a meal that never arrived in a room, Geisinger is doing more than apologizing.

It's offering money back on their care, no questions asked.”

The CEO added:

“We want to make sure we not only have the right care that is high quality and safe, but we also want to make sure our care is compassionate, dignified and delivered with a lot of kindness,” said [CEO David] Feinberg, who took over Geisinger last May after running the UCLA health system.”

While others in healthcare have called this a “dumb idea,” it makes me think of the line from the movie “This is Spinal Tap:”

“There's a fine line between stupid… and clever.”

It turns out patients haven't abused this promise of a refund. There have been:

“74 requests that Geisinger received between October and mid-March. In response to those requests, the system refunded or waived charges of nearly $80,000, officials said. Only co-payments and deductibles can be considered.”

One expert said:

“They can make the math work,” compensating for short-term losses on refunds through longer-term relationships with the insurance customers.”

That's principle #1 of “The Toyota Way” management philosophy… making decisions for the long-term, even at the expense of the short term.

The cost of the refunds = $80,000

The value of building trust in one's community = potentially priceless

What do you think about any of these scenarios?

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Mark Graban
Mark Graban is an internationally-recognized consultant, author, and professional speaker, and podcaster with experience in healthcare, manufacturing, and startups. Mark's new book is The Mistakes That Make Us: Cultivating a Culture of Learning and Innovation. He is also the author of Measures of Success: React Less, Lead Better, Improve More, the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, and the anthology Practicing Lean. Mark is also a Senior Advisor to the technology company KaiNexus.


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