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QFD in a Managed Care Organization38 Managed care was introducedin the United States nearly two decades ago as a means to maintainqual- ity while managing costs. A managed care organiza- tion (MCO)contracts with physicians, hospitals, medical equipment companies,and home health agencies to provide services to its members(patients). The MCO markets its services and actively enrollspeople. Once enrolled, members receive a handbook that explains howthey can access the services offered by the MCO and its affiliatedproviders. The member handbook has become a main source ofinformation regarding an Each session was facilitated by anindependent researcher unaffiliated with the MCO, and eachparticipant was provided lunch as a reward for participating in thestudy. The six focus groups all followed these steps: 1. Determinecustomer requirements. 2. Measure the importance of the customerrequirements. 3. Rate customer satisfaction with the company’scurrent member handbook. 4. Rate satisfaction with the competitor’smember handbook. 5. Develop a list of characteristics that arewithin the control of the company and could poten- tially improvethe handbook. These character- istics are referred to as substitutequality characteristics. The QFD process begins by capturing thevoice of the customer or the customer requirements. The keycustomer requirements identified were ease of use, accuracy,timeliness, clarity, and consciousness. The technical requirementsthat describe how the organi- zation will respond to each of thecustomer require- ments were identified as follows: • Font size •Up-to-date information • Use of pictures or illustrations • Use ofcolors • Glossary of terms • Answers to frequently asked questions• Expanded table of contents • Offering the handbook in more thanone language After gathering the customer and technicalrequirements, the MCO determined there was a strong correlationbetween the substitute quality char- acteristic (technicalrequirement) of ease of use and the customer requirements ofexpanding the glossary of terms and the table of contents.Similarly, the fol- lowing substitute quality characteristics had amoder- ate correlation with ease of use: • Font size • Use ofpictures or illustrations • Use of colors • A question and answersection • More language friendly Providing updates had a weakcorrelation with ease of use. The results of the MCO’s QFD studyresulted in the House of Quality shown in Figure 7.26. The numbersin the Rate of Importance column indicate the relative importancecustomers assigned to each requirement. The importance rating usesa numerical scale from 1 to 5, with 1 being low and 5 being high.Members were asked to use such a rating scale during the focusgroup sessions. Two customer requirements—ease of use andaccuracy—were assigned high importance ratings of 4.5 and 5,respectively. The other three customer requirements—clarity,timeliness, and conciseness—received importance ratings of 3.8,3.2, and 2.5, respectively. The entries in the Company Now columnindicate how customers rate the organization’s performance withrespect to their stated requirements. This rating is based on anumerical scale from 1 to 5, with 1 being poor and 5 beingexcellent. The entries in Com- petitor X column represent how thecustomers rate the chief competitor X with respect to their statedrequirements. As is the case in the Company Now col- umn, theseratings are based on a numerical scale from 1 to 5, with 1 beingpoor and 5 being excellent. According to this study, the chiefcompetitor’s hand- book is outperforming the MCO’s handbook in easeof use, accuracy, and clarity, as perceived by its custo- mers. ThePlan column indicates where the company wishes to be with respectto each of the quality requirements stated by its customers. Theplan for each requirement is determined by examining the MCO’sposition in relation to its competitor(s) and its customers’ rateof importance. It is also based on the organization’s strategicplan. After taking all things into account, the MCO’s QFD team seta goal of achieving a performance rat- ing of 4.5 for ease of use,4.6 for accuracy, 3.8 for timeliness, 3.9 for clarity, and 4.1 forconciseness. The MCO expects to achieve these levels of perfor-mance the next time its customers are surveyed. The Rate ofImprovement column contains the ratio of the company’s goalcompared to where the company is today. It is determined bydividing the value in the Plan column by the value in the CompanyNow col- umn for each requirement. The Absolute Quality Weight isdetermined by multiplying the rate of importance by the rate ofimprovement. It is an attempt to assign a weighted rate to whattheincreasingly complex array of benefits offered by the thousandsof MCOs. Designing the handbook and creating its content are,therefore, important components of any MCO’s business strat- egy.Unfortunately, a member satisfaction survey indi- cated thatmembers have a poor understanding of their benefits. When membersare unable to under- stand their benefits, the MCOs’ memberservices switchboards are inundated with calls, resulting infrustration and anger and further delaying patient access to theMCOs’ services. The MCO receives an average of 3,000 calls per day,with each call lasting an average of 3.2 minutes. Approximately 50percent of these calls involve issues discussed in the memberhandbook. The MCO also spends more than $250,000 per year inproviding supplemental materials to its members as a result ofinadequacies in the member handbook. To improve the handbook andmember satisfac- tion, QFD was used to redesign it. The input forthe QFD process was obtained through a series of focus groups. Atotal of 131 MCO customers participated in six focus groupsessions. Participants were selected based on two criteria: 1. Theyhad to have been members of a competing MCO—whose member handbookwas used for comparison—for at least two years prior to join- ingthe MCO being studied. 2. They had to have been members of the MCObeing studied for at least two consecutive years. The focus groupprocess was then administered in two stages: Stage 1. Participantswere provided with a copy of the company’s member handbook and thecompetitor’s member handbook. Even though the participants had allused the competitor’s member handbook, it was necessary to providethem with copies to ensure a fair comparison. They were allowed totake both handbooks home for one week to look them over. Stage 2.The groups were brought together for a follow-up session thatfocused on data collection.customer considers to be important andthe goal (value established in the Plan column). The Percentage ofImportance was determined by transforming each absolute weightvalue into a percentage of the total absolute weight value (25.1).After thoroughly looking at what is important to the MCO’scustomers, the company’s current perfor- mance, its chiefcompetitor’s current position, and the goal, the MCO determinedthat accuracy is the most important requirement driving customersatisfaction, with nearly 30 percent of the demanded weight. Thefigures in the Importance of the Hows row rep- resent the sum ofthe products of each column symbol value and the correspondingdemanded weight. The two most important technical requirements wereglossary of terms and updates, with totals of 460 and 427.9,respectively. Each entry in the Percentage of Importance of theHows row is divided by the sum of all the entries in that row andmultiplied by 100 to convert it into a percentage. The Company Nowrow gives the values of the measurable technical requirements. TheQFD team
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1. Although this example of QFD involved the design of tangibleitems, why is it more difficult to implement in a service contextas opposed to a pure manufacturing context? 2. Verify thecalculations in the Importance of the Hows row and Percentage ofImportance of the Hows row by showing the detailed calculationsused to arrive at these figures. 3. What lessons can be learned andapplied to other service organizations that se
