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Let value drive pricing conversations

September 1, 2010
by Dennis Grantham, Senior Editor
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Jaywalker Lodge overcomes “bottom-line fear” while profitably redefining its treatment brand

If you own or operate an addiction treatment center, chances are that you've entered into the business based on your own conviction about how important it is to offer a program that promises real help-the potential of freedom-for those who suffer damaging addictions. Your mission is compassionate: You want that individual in treatment; you want to heal his or her pain. In your heart, you know that your mission is right because it's never about the money; it's about the life you can save.

But while it takes that kind of conviction-together with a healthy dose of entrepreneurial skill-to open a successful treatment center, it often takes much more to succeed and grow, while making the return needed to provide an outstanding level of care.

Just ask Bobby Ferguson, president of Jaywalker Lodge (Carbondale, Colo.), whose 12-Step, extended-stay program features what he calls a “physically active approach” to residential addiction treatment. After five years in business, he knew that Jaywalker Lodge had a strong staff and a good reputation. But he felt that, in order to succeed long term, he must transform Jaywalker from “a startup business where things are more personality-driven to a longer-term business that is principle-driven.”

To make this step, he retained a consultant to manage the process of documenting Jaywalker's core competencies and business processes, with special attention to three areas: its unique expedition program; its communication process about patient progress to program referents; and its ability to gather departing client impressions and track patient outcomes.

But in the course of meetings to achieve this goal, the consultant that Ferguson hired to manage the transformation process—Bill Corbett of Addiction CEO—started asking some unexpected questions. They weren't about competencies or expeditions, but about Jaywalker's sales process, a process in which Ferguson continued to play a vital, personal role.

“Bill noted that we were giving out a lot of scholarships, even when we were full,” says Ferguson, who had come to accept “scholarships” and other discounts despite some occasional and obvious mistakes. “Nothing,” he laments, “is more discouraging than the feeling that you've given a scholarship and [the patient] pulls up in a brand-new Lexus. You know then that it's not a matter of need. It's a matter of someone being a better negotiator than you are. And it means that you can't help someone else.”

Despite the potential negatives, Ferguson insisted to Corbett that any discounts offered were essential-along with his role in the sales process. “I was very comfortable with talking to prospective patients and their guarantors and was very uncomfortable with what would happen if I handed over the phones. We don't have an extremely high call volume here and I was afraid that others would fail to convert.” Surely, he argued, filling beds—even at a discount—was preferable to having them empty.

But Corbett didn't see it that way. “Bill thought that by ‘going to the top’—essentially to me—patients and their guarantors were securing discounts for services that they would not have received through a structured sales process,” says Ferguson. To back his argument, Corbett asked Ferguson for a list of prospects with pricing concerns—the type to whom Ferguson would be most likely to offer discounts. But Corbett, drawing on business and recovery experience, converted them all without a single scholarship or discount offer.

It was an eye opener for Ferguson, who, with Corbett's help, recognized that he tended to discount based on a “bottom-line fear” of empty beds. “For every 100 calls we received, it became clear in about half of them, right up front, that there was a concern about price,” he recalls. “What we learned through the process [with Corbett] is that if beds are down, there's a knee-jerk reaction in treatment centers—including my own—that's based on fear.

“Two bad things happen,” he continues. “You begin to discount your own beds by allowing the caller to start a conversation about price. Then, it's easy to fall into a reflexive conversation based around what they're willing to pay and offering a scholarship,” he says. “If that's the conversation, you also tend to get more patients that don't fit your clinical profile. The result is that it's bad for the treatment center, bad for the staff, bad for the patients as you allow everything to be controlled by the bottom line.

“The correction for that, the big shift,” he continues, “is to recognize that the conversation is never really about price. It's a conversation about a person facing a chronic, progressive, and life-threatening disease, about getting that person into the right treatment bed-whether it's ours or someone else's. It's a conversation about who we are, what our ideal patient is, what we do and don't do. It's about redirecting the language of the conversation from one of price to one of life-changing transformation and taking the attitude that that purpose is about getting the best, most appropriate care.”

It was precisely this approach—which is now scripted and cross-trained at Jaywalker—that Corbett used to redirect price-driven conversations into value-driven conversions at full price. And, it's why Ferguson knows that he did well to get out of the sales process.

He admits that “despite concerns that not talking about price would hurt us,” Jaywalker has only benefitted from the “value-driven” approach, because:

  • It has cut scholarship discounting (based on gross revenues) from an average of over 20 percent annually to under five percent annually-without impacting Jaywalker Lodge's average census.

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