Lessons from the Cheesecake Model

In an article recently published in The New Yorker, author Atul Gawande discusses the success of the Cheesecake Factory and how a similar model might be applied to health systems. Benchmarking a restaurant chain in their efforts to combine quality and cost control with innovation presents a noteworthy comparison for hospitals. We consider the application of the Cheesecake Factory concept (a chain that delivers a wide range of options to millions of people with a consistent level of quality) to support services specifically, and discuss ways in which this may maximize productivity, enhance best practices and influence cost savings.

In fact, health systems (managed and self operated) have been attempting to adopt this methodology over the past several years, but have struggled with developing a solid infrastructure and plan. “I think we are much closer on the procurement aspect, although the remaining concepts are far from completion. Several contract management companies have acquired or developed their own procurement programs and corporate menus, but the menus are not typically followed in the marketplace. Recent successful product standardization efforts that we have implemented with our customers have resulted in decreasing food and supply costs by several percentage points,” says Chris Brown, Senior Vice President.

Indeed, there are several similarities between the Cheesecake Factory concept and joint venture models in health systems. Support service vendors have systems that can be implemented within the support service arena to reduce costs and increase satisfaction. For example, within health systems, standardized procurement practices have been developed in an effort to increase satisfaction and decrease cost. Other similarities we are seeing between the Cheesecake Factory model and health systems include signage and point of sale (POS) programs for retail operations, policy and procedure binders, hourly employee training programs, uniform programs, and procurement programs. “For these particular programs, compliance is high because significant rebates are associated with these programs that typically go back to the provider,” says Mr. Brown.

Healthcare ConsultantsA standardized health system chain or conglomerate might be viewed as advantageous to both employees and vendors for a number of additional reasons. “Synergies are gained by incorporating best practices across an organization. Employees can become more efficient in how and what they do on a daily basis, and they can also have the opportunity to work at additional locations; this is especially important to those who work on an as-needed basis,” says Mr. Brown.

“Co-sourced” departments allow the institution to retain a majority stake and control in the process. According to President and Founder Brian Nugent, “Health system administrators are not experts in support services, and in many cases it would serve them better to contract these services out—similar to practices associated with other conglomerates such as schools and universities. These support service vendors have the talent and systems to reduce costs; the goal is to make the agreements transparent so that the health system’s share is the majority stakeholder in the savings.”

By virtue of their size, health systems have greater opportunity to maximize efficiencies, decrease costs, and improve services by standardizing proven systems and processes across the entity. The key to success is a robust program that includes accountability for both management and staff.

Innovative and creative solutions are usually the result of motivation, not the motivator. Market conditions are motivating health systems to find innovative and creative solutions that drive down costs and provide a superior delivered product. Product standardization and leveraged purchasing is a daily discussion amongst hospital leaders. “The services that we provide help to hone these solutions by focusing on best practices and bringing cost savings in today’s competitive market,” says Mr. Brown.

Educating competent leaders on how to implement these standardized best practices solutions is a key to success and developing employee accountability. As a solid infrastructure plan continues to develop, this methodology will become more widely accepted.

Reference

Gawande A. Annals of Health Care: Big Med. The New Yorker. August 13, 2012.

About the Author:

Chris brings more than 18 years of healthcare support services expertise. As a former contract management provider, Chris has an in-depth knowledge of provider fees and fee structures, enabling him to safeguard critical funds. Chris excels at finding ways institutions can reap benefits via rebates, paying the right price for the right product, and retaining low costs.