What 4 Factors Should Determine a Hospital's Service Line Strategy?
In a webinar on March 28, 2012, Asit Gosar, client services executive with Objective Health, and Connie Cibrone, director of client service at with Objective Health and former president and CEO of Allegheny General Hospital, shared how hospitals can best develop a service line strategy to remain competitive.
Mr. Gosar began the presentation by noting many providers are pursuing targeted service line growth opportunities in 2012. Part of their focus is due to healthcare reform, increased financial pressures and national demographic trends, such as aging baby boomers. Hospital leaders can choose from a broad landscape of service lines, but a few key concepts should be weighed in this decision, according to Mr. Gosar. These include the hospital's mission, market growth, margin and the likelihood of the service line's success, as well as the following factors:
• Hospital mission: Type of patient care (secondary, tertiary, quaternary); types of education; and types of research.
• Market growth: Growth by service line; payor mix by service line; ability to feed into other key profitable service lines; and the ability to partner with payors and/or employers and shift share.
• Margin: Payor mix by service line; impact of reimbursement changes; and ability to partner with physicians to control costs.
• Likelihood of success: Necessary investments, such as physician recruitment and capital expenditures; internal capabilities; and competitors' capabilities.
Mr. Gosar and Ms. Cibrone projected orthopedics will be the fastest-growing service line within most counties in the United States from 2010 through 2019. Following orthopedics, in order of projected market growth, are hematology/oncology, neurosciences, general surgery and cardiovascular service lines.
The rate at which these lines are expected to grow is not directly correlated with their profitability, however. For instance, out of those five specialties, orthopedics is generally third in terms of profits and General surgery is the most profitable. Hospitals will need to cross-examine each specialty's expected market growth and its profitability, as service lines across hospitals and geographies can present different clusters of performance.
While this data can help hospitals prioritize their service lines, some qualitative factors also need consideration, such as competitors' capabilities. Do competitors offer any specific services within their service line? Do they provide key feeder services for your hospital? Also, what is physicians' perception of competitors? How aggressively do they market their service lines? These questions can help bring a greater understanding to how likely a hospital service line is to succeed.
"In our experience, the consequences of getting [service line strategy] right makes massive margin differences at hospitals," Ms. Cibrone said in the webinar. Both Ms. Cibrone and Mr. Gosar stressed that hospitals can no longer afford to be "jacks of all trades," or trying to be all things to all people. This "murky middle" can create problems, and they recommend hospitals focus more attention onto specific service lines to strengthen their competitive edge and distinguish themselves in their respective marketplace.
View or download the Webinar by clicking here (wmv).
Download a copy of the presentation by clicking here (pdf).
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