Cost-effective service excellence in healthcare

Berry AMS Review, 9(1–2), (2019) highlights the urgent need for innovation in healthcare as cost pressure is intense and service quality, both in terms of objective care and treatment quality, is critical for the wellbeing of our societies. Yet, administrative and operational waste is prevalent and service quality leaves much to be desired in many healthcare institutions. This commentary draws on the article by Wirtz and Zeithaml Journal of Service Management, 29(5), 907–931, (2018) and discusses how three strategic pathways towards cost-effective service excellence (CESE) can be applied to healthcare. CESE is defined as achieving low unit costs (i.e., high productivity) while at the same time delivering service quality (i.e., service excellence) at an industry-leading level. The three pathways are the dual culture strategy, the operations management approach, and the focused service factory strategy. Implications for innovation in healthcare are discussed.


Introduction
highlights the urgent need for innovation in healthcare as cost pressure is intense and service quality is critical for the wellbeing of our societies. Yet, administrative and operational waste is prevalent and service quality (both in terms of objective care and treatment quality, and in addressing the emotional needs of patients) leaves much to be desired in many healthcare institutions. Ideally, innovation in healthcare should aim to achieve excellence in care and at the same time make the healthcare provision much more cost-effective. However, there is a tradeoff between customer satisfaction and productivity that has been widely acknowledged in the literature whereby Bincreasing service productivity often involves a tradeoff, with better service typically requiring more labor intensity, lower productivity, and higher cost^ (Rust and Huang 2012, p. 47).
Although the general view is that service excellence and cost effectiveness are in conflict, there are organizations that achieve both; see Wirtz and Zeithaml (2018) for ten case examples. Wirtz and Zeithaml (2018) use the term cost-effective service excellence (CESE) to refer to organizational performance that is among the best in its competitive set in terms of both customer satisfaction and productivity. In a healthcare context, Singapore runs one of the globally most costeffective healthcare systems (Bloomberg 2018). It has one of the lowest shares of GDP of developed countries (around 5% of GDP compared to the OECE average of 9% and the US with 17%), yet Singapore is at the globally leading edge in terms of healthcare quality indicators (e.g., life expectancy of over 82 years and a maternal mortality ratio of 10 per 100,000 live births). Bloomberg (2014Bloomberg ( , 2018 regularly ranks Singapore as the number 1 or 2 country in terms of efficient healthcare, whereas the U.S. ranks near the bottom. In a way, Singapore's healthcare sector can be considered delivering CESE. In addition to a few global cases, I will draw on a number of examples from Singapore throughout this article. This article draws on the three pathways towards CESE advanced by Wirtz and Zeithaml (2018) and examines them through the lens of healthcare services. These three pathways are (1) dual culture strategy; (2) operations management approach; and (3) the focused service factory strategy. Note that these strategic pathways can also be used in combination. See Fig. 1 for an overview of these pathways with healthcare examples.

Dual culture strategy
The first pathway is the dual culture strategy which focuses an entire organization on the simultaneous pursuit of service excellence and productivity and makes both integral parts of an organizational culture. This approach allows service to be flexible and customizable, and the service offering can be wide. Although this type of service tends to be inefficient, a dual culture approach achieves productivity through ambidextrous organizational approaches. How organizations are able to simultaneously pursue different, often conflicting strategic goals has been studied in the management literature with leadership ambidexterity and contextual ambidexterity as important approaches (for a review see Raisch and Birkinshaw 2008).

Leadership ambidexterity
In a dual culture approach, it is imperative that leaders rally their organizations to pursue and integrate conflicting demands and internalize a Bboth/and^rather than an Beither/orl ogic (Collins and Porras 1994, pp. 43-45;Smith et al. 2016). This view allows leaders to put systems in place to focus and energize the organization on conflicting demands, role model ambidextrous behaviors, and reinforce them with internal communication, training, rewards, and recognition (Gibson and Birkinshaw 2004).
In Singapore, leadership driven by the Ministry of Health pushes public healthcare providers (they cover some 80% of incare patients) towards CESE using transparency and benchmarking of key performance indicators (KPIs) that range from average wait times, successful surgery rates, infection rates, and cost per treatment. For example, Yishun Health, a regional health system which is part of the National Healthcare Group in Singapore, is implementing a patient value compass to track outcomes across four categories: clinical, functional, stakeholder experience and cost-effectiveness/productivity. This intense focus on healthcare outcomes and patient experience combined with innovation on how they can • Standardized product offering with few standard opƟons and liƩle flexibility and customizaƟon • Standardized and industrialized service processes also in the front office • Tight selecƟon of paƟent segments whose needs fit the service model precisely • Standardized paƟent input into the service process through Ɵght paƟent scripts

Focused Service Factory
Reduces paƟent contact > Reduces paƟent contact in the service producƟon system > Uses: • SSTs that replace paƟent interacƟons with front line employees • Tight paƟent scripts • Service robots (in physical and virtual form) and AI

OperaƟon Management Approaches to Reduce Process Variability
Kaiser Permanente Northern California's 100 online services; Epic's MyChart paƟent portal OM approaches require careful consideraƟon of target paƟents' needs and wants. i.e., paƟents have to be saƟsfied with changes in service interface and opƟons offered.
Can be pursued in combinaƟon with a dual culture strategy Can be pursued in combinaƟon with a dual culture strategy Fig. 1 Three strategic pathways to achieving cost-effective service excellence in healthcare. Adapted from Wirtz and Zeithaml (2018) be delivered at reduced costs is a key driver of CESE in Singapore's healthcare system.

Contextual ambidexterity
Contextual ambidexterity involves pushing the integration of conflicting goals to the individual employees and shaping their behavior through context (e.g., via systems, processes, and attitudes) so that they can exercise their judgment in dealing with conflicting demands (Gibson and Birkinshaw 2004). Employees need to know how to make such decisions and an internalized dual culture provides this governance mechanism.
For example, Dr. Devi Shetty, founder and chairman of Narayana Health in India, stated, BThe notion that 'if you want quality, you have to pay for it' went out the window a long time ago at Narayana Health^(Global Health and Travel 2014, p. 44). Text messages on the previous day's expenses are sent to senior employees to encourage cost consciousness and motivate them to generate ideas on how to reduce costs and improve processes (Govindarajan and Ramamurti 2013). The hospital explored how to reuse medical devices that are sold as single-use productsthe $160 steel clamps that are employed during open-heart surgery are now sterilized and reused up to 80 times (Govindarajan and Ramamurti 2013).

Generic productivity strategies and tools
A dual culture strategy enables organizations to adopt best practices and deploy generic productivity strategies and tools to the extreme to achieve excellent customer experiences and outcomes with less input. These strategies and tools include cost control, waste reduction, training and motivation of employees (to do things faster, better, and cheaper), improved capacity utilization, and redesign of customer service processes (Heracleous and Wirtz 2010;Wirtz 2018). Applying these tools and strategies combined with innovative thinking helps to address the issues highlighted in Berry's (2019) article relating to inefficient processes, duplication of services, and documentation overload. In a healthcare context, Toussaint and Berry (2013) advanced the use of BLean^to drive a Bculture of insatiable appetite for improvement^(p. 74). Dual culture organizations are masters of using generic productivity strategies and tools to cut costs and boost productivity while managing for service excellence, and top management needs to drive this culture (Wirtz and Zeithaml 2018). Indeed, managers need to become facilitators and mentors to allow frontline employees to make constant improvement towards better healthcare at lower cost (Toussaint and Berry 2013).
For example, Singapore's Ministry of Health is currently working on an electronic medical record system called Next Generation Electronic Medical Records (NGEMR) which standardizes patient records throughout Singapore from data capture, information processing, benchmarking, and enforcement. In addition to vastly better information, the records will be easily accessible to any physician or clinic a patient grants access to and thereby reduces duplication of data capture and testing, and administrative load. The potential efficiency and quality gains such data can provide in combination with AI (e.g., in interpreting PET scans and suggesting treatment schedules) are substantial.
Of the three pathways, the dual culture strategy is the hardest to execute. A dual culture strategy can strain employees and requires a credible Brallying cry^as it seems counterintuitive to offer great service externally but be so very cost-conscious internally (Wirtz and Zeithaml 2018). To obtain buy-in, organizations can emphasize various rationales, including keeping healthcare affordable for all as is used in Singapore or supporting a charitable cause as in Narayana Health's case.

Operations management approach
The second strategy, the operations management approach, increases the level of efficiency by reducing customerinduced variability and thereby reduces potential conflicts between productivity and service excellence. It deploys a combination of operations management tools that are used to reduce process variability so that systems and technology can increasingly be deployed to deliver CESE. These tools include (1) isolating and industrializing the back office, and reducing the front office by shifting activities to the industrialized back office, (2) modularization of service, and (3) self-service technologies (SSTs), robotics, and AI. See Wirtz and Zeithaml (2018) for a detailed review of these tools. Unlike a dual culture approach, these operations management approaches typically require some degree of change in the customer interface (e.g., customers have to follow a tight script as they are an integral part of the service process) and tend to reduce customer choice (e.g., offering modular options rather than full customization).
Singapore pushes the entire public healthcare sector to streamline equipment, medication, and consumables procurement and usage to improve efficacy, expertise, and cost-effectiveness. For example, instead of letting knee replacement implant types proliferate, a few standard types are selected and their use is monitored (e.g., physicians have to justify if they use other types of implants). Volume lowers costs, reduces process variability and allows process streamlining, eases process improvements and innovation, and overall improves the expertise of healthcare providers with this particular process and implant.
Cost-effective self-services and remote service delivery increasingly become available. For example, Berry (2019) highlights Kaiser Permanente Northern California's online self-services, its remote services via email (incl. Dermatologic diagnoses), and Dexon's smartphone app that continuously monitors patients' glucose levels. Other examples include MyChart offered by the electronic medical record system Epic. This mobile app serves as a patient portal used by many healthcare providers including the Mayo Clinic. It allows patients to manage appointments, review test results and medications, upload health and fitness data, contact their physician(s), and view and pay their bills. Self-service is frequently preferred by technically apt patients as it obviates mundane tasks for both patients and service providers.
These operations management approaches of buffering, modularization and moving towards self-service can cut cost and increase patient satisfaction at the same time. Innovation using operations management approaches offer particularly high cost-saving and enhanced patient convenience potential for separable core and delivery services (see Fig. 1 in Berry 2019).

Focused service factory strategy
The third pathway is the focused service factory strategy that serves the largely homogeneous needs of a tightly-defined target segment. The resulting low variability in its operations enables the deployment of industrialized processes. It reduces customer-induced variability to a minimum-customers tend to receive a single, highly standardized, and excellent service offering. This focused factory approach allows simplicity, repetition, homogeneity, and experience that breed competence, improvements, innovation and lower cost (Skinner 1974). These, together with a leadership and service culture that focus on service excellence, frequently result in excellent patient experiences (Fig. 2).
For example, Narayana Health focuses on cardiac surgeries. Compared to general hospitals it pursues a highly targeted business model. This focus enabled it to concentrate on surgery quality, learning, and innovation (e.g., it pioneered the Bbeating open heart surgery^) (Global Health and Travel 2014). Centralization of surgeries in a few hospitals (with larger facilities) allows high utilization of operating theatres and equipment, and the volume of similar surgeries enables detailed analyses and continuous improvement. Doctors receive benchmarking data of 22 hospitals and are encouraged to share best practices (Govindarajan and Ramamurti 2013). Another example is the India-based Aravind Eye Care System that provides eye care services at high levels of productivity and top quality. These organizations' focus results in volume-enabled learning and innovation that lead to improved care and lower cost (Govindarajan and Ramamurti 2013).
The adoption of focused service factory strategies can occur even in large legacy healthcare systems. The National Health Service (NHS) is government-run and is the predominant provider of healthcare in the UK. Over the last 20 years, the NHS has mandated consolidation of sub-specialty programs such as cardiac, thoracic and vascular surgery from many smaller, lower volume programs into designated centralized high-volume centers.
In the US, health delivery care is fragmented with federal, private for-profit and public not-for-profit systems all competing in the healthcare marketplace. Even in such a fragmented market, focused service factory  However, more can be done including, for example, care providers agreeing on standardized management of commonly seen conditions such as pneumonia or heart failure where treatment schedules, medication choices, and costs can vary greatly.

Variability in service processes
The level of variability designed into service processes is a strategic decision. If a business model keeps variability high, it requires an extraordinary effort to achieve CESE through leadership and contextual ambidexterity in a dual culture strategy. Alternatively, variability can be reduced either on the process-side through operations management approaches or on the customer-input-side through the focused service factory strategy. These alternatives involve very different business models.
As organizations pursue an operations management or focused service factory strategy, the systems and technology increasingly hardwire productivity and cost-effectiveness into the business model and employees can focus on service excellence without having to focus so heavily on cost and incremental productivity gains. This makes operations management approaches and focused service factory strategies easier to implement than the dual culture strategy.
Even within a given business model, managers need to be aware of the cost implications of providing options, flexibility, customization, and added products and features. Complexity and variability grow exponentially and thereby reduce the level of potential productivity while making it more difficult to deliver excellence (Shostack 1987). Therefore, it is an important strategic decision on how much variability a business model, a facility or even individual processes should contain.
For example, Narayana Health decided against building a general hospital that intertwined many service processes and patient segments and therefore would have been complex and expensive without the same quality output (Global Health and Travel 2014; Govindarajan and Ramamurti 2013). Instead, it built separate facilities for cardiac surgery, neurosurgery, and gastro surgery, amongst others. The principle is simple, who will be better, faster and more productive, a specialist who only delivers a single product to a single segment or a generalist who must cater to a wide range of customer needs? If a service fits the requirement of a focused service factory, it will win hands down in most cases.
Singapore uses a strategy of general hospitals at the center but surrounds them with modularized and even focused service factory systems such as imaging centres, labs, and specialist clinics. These use a host of tools and techniques to reduce patient interface, payment options (credit card auto deduct), standardized messaging for appointments, and require small deposits for the next appointment to discourage no-shows.
Any medical procedure that can be scheduled (i.e., is not an emergency) and has a sufficient volume of patients with relatively homogeneous needs and does not have complications or additional chronical diseases (something I call Bclean cases^) would be served better by a focused service factory model. Examples include imaging centres, annual health check-ups, dental check-ups, common surgeries such as hernia, eye surgeries, and fertility treatments, and increasingly remote-and app-delivered services. Good examples in the US include elective surgery providers such as those in the orthopedic field that focus on total knee and hip surgery cases; they tend to have better outcomes when done by dedicated staff due to their higher volume and learning for all team members including surgeons and nurses. Shifting Bclean^cases into focused service factories will also result in lower infection rates.
What then should full service-type general hospitals focus on? Their core competencies should include emergencies and complicated cases that have high levels of uncertainty. For instance, hip replacements involving older patients with additional ailments (e.g., a heart condition and diabetes) would make a focused service factory or OM approach difficult to use. The Sunnybrooke Holland Centre in Toronto is a good exampleit handles the 'clean' cases, but when a hip, knee or any orthopedic case is complicated by comorbidities, it is handled by the general hospital sister campus, the Sunnybrooke Health Sciences Centre.

The industrialization of healthcare
The service sector in general and healthcare in particular appear to be at an inflection point with regard to productivity gains and service industrialization, similar to the industrial revolution in manufacturing that started in the eighteenth century. Virtually all service sectors will be transformed by rapidly developing technologies that become better, smarter, smaller, and cheaper. Especially exciting in the healthcare context are the opportunities offered by developments in robotics, AI, analytics, the Internet of Things, wearable technologies, and geo tagging. These technologies will lead to a wide range of innovations that have the potential to dramatically improve the patient experience, the quality of care, and productivity all at the same time (c.f., . Robot-and AI-delivered service is likely to show unprecedented economies of scale and scope as the bulk of the costs are incurred in their development. Physical robots cost a fraction of adding headcount and virtual robots can be deployed at negligible incremental costs. For example, holograph-based humanoid robots providing service at information counters in hospitals will require only low-cost components and fully virtual robots (e.g., voice-based chat bots) have already close to zero incremental costs ). Many basic healthcare services will be AI provided and are likely to range from making appointments, pre-screening, and monitoring of basic health indicators, to visual skin analysis, vision tests, diagnostics of basic symptoms, and patient information and guidance. Healthcare service providers will increasingly use a mix of delivery mechanisms, very much like financial institutions that use the gamut of apps, online banking, and ATMs for routine transactions and use personal consultation for important high risk services.
Healthcare delivered by human-robot/AI teams Many high involvement healthcare and nursing services require providers to possess both analytical and emotional skills. AI will in the foreseeable future be unlikely to acquire the social intelligence and communications skills needed to deal adequately with complex emotional issues. However, many of these services are so complex that it seems likely that in the not too distant future human providers will feel uncomfortable offering such services without AI support. In fact, it may become gross negligence to do so. For example, a general practitioner will be unlikely to correctly diagnose many of the rare diseases, but an AI will be able to map all patient data and symptoms against its knowledgebase and provide probabilities of even the rarest diseases for a doctor to consider and examine further and suggest treatment schedules. Likewise, a medical robot may well take blood pressure, assess other patient health indicators and prepare medication while a nurse performs the soft skills (e.g., display empathy to reduce psychological discomfort; . These services will increasingly be delivered by human-robot/AI teams.
Note that there are concerns regarding dehumanization, loneliness, and patient adoption of healthcare robots and AI. However, I am confident that careful development of such services will mitigate these risks (see the discussion on ethics related to service robots and AI by .

Strategic shifts in the provision of high-quality healthcare
The frameworks discussed in this commentary offer strategic lenses through which innovations in healthcare can be viewed. Similar to the shift from craftsmen to mass production in the industrial revolution, an accelerated shift in healthcare towards modular services, SSTs, robotics, AI and focused service factory-based business models is likely to occur. As in manufacturing, the craftsman-equivalent will continue to offer a viable business model, but at a high price. The mass market, however, for many healthcare services is likely to shift to operations management approaches and focused service factory strategies with increasing deployment of service robots and AI (c.f., . The opportunities are vast as many healthcare services are information-based which can be delivered on scale at negligible incremental costs, and many services that require personal contact (e.g., surgeries, physiotherapy) can be delivered through focused service factories that are unbeatable in terms of service quality and productivity.
The strategic pathways to CESE combined with innovation in AI and robotics have the potential to dramatically improve the quality, availability, and affordability of healthcare services that are so important for the wellbeing of our societies. I hope this commentary provides food for thought to professionals and academics alike when driving innovation in healthcare.