Service Line Ins and Outs – Making the Strategy Work 2009 ACHE Congress on Healthcare Leadership

1. Service Line Ins and Outs – Making the Strategy Work2009 ACHE Congress on Healthcare Leadership Bill Vanaskie - COO, Maricopa Integrated Health System, Phoenix, AZ Cecily Lohmar - Principal, New Heights Group, Huntersville, NC American College of Healthcare Executives

2. Session Objectives Understand the challenges in implementing service line management in healthcare and its implications on the organization Learn how to determine the most appropriate approach to service line management for your organization Identify strategies for addressing the key barriers to successful implementation of service lines American College of Healthcare Executives

3. The Challenges Fully understanding the strategy and implications Focusing on the right structures and services Engaging physicians Integrating service lines with traditional structures and functions Source: 2008 survey of strategy executives sponsored by New Heights Group/ Healthcare Forum for Strategy American College of Healthcare Executives

4. Understanding the Service Line Strategy American College of Healthcare Executives

6. The Fundamentals An organizational model borrowed from other industries (think P&G, Saturn) More closely aligns operating units with the customer base (patients) Traditional hospital model aligns with staff and physicians Has been adapted for use in healthcare In its adaptation, basic intent has been forgotten: To design, organize, and manage a distinct area of the enterprise to create a product of greater value American College of Healthcare Executives

7. Corporate Development Foundation President and Chief Executive Officer Strategic Planning Office of General Counsel Chief Operating Officer Nursing Professional Services Support Services Quality and Medical Affairs Finance Program Planning and Execution Human Resources Chief Information Officer Cardiac/ Surgical Radiology Clinical Effectiveness Treasury Program Administration Organization Development Information Systems Materials Management Women’s Health Labs Food Services Hospital Effectiveness Internal Audit Marketing and Communications HR Planning and Communications Medicine Oncology Medical Records and Archives Environmental Services MD Staff Office and Research Financial Planning and Analysis Physician Support and Outreach Personnel Administration Ortho and Neuro Patient Escort and Security Pharmacy Case Management Services Planning and Market Research Property Management Financial Operations and Admitting • Therapeutic • Services: • Rehabilitation • Respiratory • Therapy Facilities and Engineering Psychiatric Services Biomedical Engineering The traditional healthcare silos established to support the staff, not the patients In House Agency Emergency Services Nursing Development Ambulatory Care Services American College of Healthcare Executives

8. President and CEO VP of Corporate Development VP of Systems and Finance VP of Managed Care VP of Medical Affairs Executive VP and COO Director of Cardiology Services VP of Human Resources Director of Oncology Services VP of Facilities Development VP of Support Services Director of Behavioral Health Services VP of Patient Care Services Director of Women/ Children Services Service lines bring a different mix of staff together to support patients Director of Long Term Care American College of Healthcare Executives

9. When is a Service Line Strategy For You? American College of Healthcare Executives

10. What is Your Objective? Greater focus on “mission critical” services - those services of most importance to organizational success (core service lines) Strategic ‘watchdog’ to monitor and respond to market changes Enhanced operational efficiency Greater alignment with physicians More appropriate allocation of organizational resources – human and capital Expedited decision making; enable organization to assess vulnerable areas and adjust rapidly to changes in submarkets Keep up with the other guy American College of Healthcare Executives

11. What Constitutes a Service Line? In practice, no consistent definition applied. Delivery settings (rehabilitation) – do stroke patients go through similar continuum as sports patients? Demographic populations (women’s) – are needs of young women at all similar to those of older women Revenue centers (surgery) – is the continuum of care even similar for trauma as it is for pediatric ENT? A patient population that travels through the same continuum of care; typically defined by group of diagnoses (cardiovascular) Beginning to see subgroups of service lines develop (thoracic, vascular) American College of Healthcare Executives

12. Selecting the Service Line Model That’s Right for You, Not Them American College of Healthcare Executives

13. Service Line Models - The Continuum Service line organization Service line management Service line leadership Service line marketing High Consumer industry models Implementation Challenge Hybrids adapted for healthcare Low Low High Ability to Create/Add Value American College of Healthcare Executives

14. Service Line Marketing • Focus: marketing only • No authority/ accountability across functional areas or departments American College of Healthcare Executives

15. Jones Hospital American College of Healthcare Executives

16. Critical Success Factors – Service Line Marketing Do Validate that your product is worth marketing Prove you can deliver on any promises Try to get at least one physician behind your efforts See a longer vision – is this the endgame or a means to a different end? Seek to understand your service line market before your campaign Don’t “Dump” this in marketing’s lap; leadership must still own service and strategy Market without measurable performance objectives – volume, payer mix, etc. American College of Healthcare Executives

17. Service Line Leadership • Service line leaders are champions and thought leaders • Matrix relationships across organization • Support by planning, marketing, finance, recruitment, other staff functions CEO Service Lines Service Line Support Nursing Planning/Marketing Finance Ancillaries American College of Healthcare Executives

18. Carnegie Hospital American College of Healthcare Executives

19. Service Line Management • Service line managers have accountability over operational departments affecting their service line • Service line managers both operational and strategic leaders • Typically report directly to COO or CEO • Senior leadership active support critical American College of Healthcare Executives

20. St. Somewhere Health System American College of Healthcare Executives

21. Cardiovascular Service Line Management American College of Healthcare Executives

22. Service Line Organization Complete organizational redesign Functional departments become support to service lines; no independent identities Multiple campuses run by site administrator who ensures service line needs are met on site Senior leadership take on dual roles – site administrator and service line leader American College of Healthcare Executives

23. Health System Leader Cardiology Pediatric Oncology OB / GYN Ambulatory Behavioral Health PROS CONS • Service line teams are important in obtaining institutional support from key players • Avoids ambiguity over authority and accountability • Technical specialists with knowledge in one area are brought together • Scarce or expensive resources can be best utilized • Aligns service specific patient care requirements across the continuum • Information systems overhaul needed to support change • Service line managers’ lack of authority over physicians and functional departments limits ability to increase revenues and control costs • Relies on integrated systems to manage the flow of information • Changes medical staff structure • Matrix structure often confusing • Outpatient services can be difficult to fit in to service lines and system structure • Culture change VERY difficult American College of Healthcare Executives

24. All Saints Medical Center American College of Healthcare Executives

25. Focusing on the Right Things: Portfolio Analysis American College of Healthcare Executives

26. Components of a Portfolio Analysis Hard components: Market assessment Financial assessment Soft components: Operational Quality Softer still Physician leadership Physician interest The foundation Used in rating services and determining actions and priorities American College of Healthcare Executives

27. Market Assessment Percent of total volume indicates organization’s reliance on service Compare case mix index against comparable facilities – are we seeing the same patient types? Comparing ALOS against regional/national norms provides some indication of operating and quality performance American College of Healthcare Executives

28. Market Assessment Market size measured by use rates to control for population size; compare against regional and national rates to see if discrepancies exist. Review trends. Reviewing regional draw shows how far beyond service area service draws from; relevant for some orgs only. Future opportunities can be found in use rate changes due to ‘normalization’, demographics, technology and other external forces. American College of Healthcare Executives

29. Financial Indicators Other measures may include payor mix, % government payor Contribution margin measures financial performance before overhead and indirect expenses. Organizational reliance measures percent of total net income attributed to that service line. American College of Healthcare Executives

30. Service Line Summary American College of Healthcare Executives

31. Pulling it Together Rating scale developed for each indicator evaluated Services measured against each other Score provided for each rating Provides evaluation of both current and future opportunities Serves as decision making guide, not recommendation itself American College of Healthcare Executives

32. Service Line Rating - Surgical American College of Healthcare Executives

33. Understanding the Results Highest scores – these are the ‘mission critical’ services: The 20% that drive your revenue They should be getting the disproportionate share of your resources to grow/thrive This is where you service line emphasis should be The middle range: Invest after investment in above, only if you can improve position Be very selective; maintain skepticism What is the opportunity to improve operating performance? What is the opportunity to improve market position? Is this realistic? The lowest scores: Can you divest/outsource to minimize your losses but maintain service? Objective is to keep it viable if truly needed in community, but investment is minimum American College of Healthcare Executives

34. Engaging Your Physicians American College of Healthcare Executives

35. American College of Healthcare Executives

36. Why Is This An Issue? Why can’t we get physicians engaged? Once we get them engaged, why do they disengage? American College of Healthcare Executives

37. Why Physicians Disengage Data disillusionment Process paralysis Focus on the hospital not physician # 1 Reason: Physician sees NO ACTION If service line leaders aren’t given the ability to take some action, or if this is not structured into implementation in some way, you are almost guaranteed to lose the physicians American College of Healthcare Executives

38. Factors that motivate physicians and hospital managers 9/6/2014 Slide 38

39. Engagement Models Service line management teams Medical directorships Physician advisory groups Management services agreements Clinical institutes Increasing complexity American College of Healthcare Executives

40. Service Line Management Teams Physician/Service Line Leader Physician/Nurse Clinician/Service Line Leader Team co- manages the service line. Size, complexity of organization drives need for duo or trio team. American College of Healthcare Executives

41. Team Roles and Responsibilities: Duo Physician/Medical Director Utilization management Physician engagement Physician recruitment/ retention Evidence based practices Quality initiatives Service Line Leader Marketing Program development Financial performance Service line metrics Staffing ratios Patient satisfaction Very effective model. Requires committed physician with specific job description American College of Healthcare Executives

42. Team Roles and Responsibilities: Triad Physician/Medical Director Utilization management Physician engagement Physician recruitment/ retention Evidence based practices Service Line Leader Marketing Program development Financial performance Service line metrics Most effective in larger, more complex organizations, academic centers • Nurse/Clinician Director • Evidence based practices • Quality metrics • Staffing ratios/practice patterns • Patient satisfaction American College of Healthcare Executives

43. Medical Directorships Plan before you write! Organizational strategy Type of organization and degree of responsibility dictates job description what is the overall organizational plan/strategy Detail areas of responsibility and specific actions expected Accountability clearly defined, e.g. cost, quality, throughput etc. Relationship to other formal structures like Med Staff listed and defined Reporting relationships both up and down Compensation must be at Fair Market Value American College of Healthcare Executives

44. Advisory Groups Physician advisory groups must report to a person with authority to effect change Hospital role to facilitate meetings, provide necessary information, solicit input Groups geared around specific tasks Strategy and program development Operations and utilization management Quality improvement and evidence based guidelines Key to effectiveness of advisory groups is hospital’s willingness to respond to recommendations American College of Healthcare Executives

45. Selecting Your Advisory Group One physician group or multiple groups represented? Referring physicians or service line specialists? Expectations on loyalty or none? Quality criteria? Expectations on confidentiality? Expectations on competition? American College of Healthcare Executives

46. Management Services Agreements Contractual relationships with a group of physicians Depending on depth of agreement, may include group management of: Unit/provider staffing Quality improvement Utilization management Equipment selection New program development Payment for services related to performance in quality, cost, program development, patient satisfaction American College of Healthcare Executives

47. Example: Management Services Agreement Base Fee $335K Includes Orthopedic trauma services, orthopedic spine services, total joint services Physicians responsible for coordination of services that promotes quality, efficient patient care, utilization review and fostering quality assessment programs Incentive compensation: over $700K at risk SCIP quality measures Patient Satisfaction Cost Savings American College of Healthcare Executives

48. Clinical Institutes Clinical and business structure designed to integrate hospital and a group of physicians to pursue service line development Amalgam of above strategies Creates a separate entity designed to develop service line Most staff remain under hospital; institute staff mostly ‘virtual’ American College of Healthcare Executives

49. Institute Model • Management • Services • Agreement Health System Institute Independent Physicians • Professional • Services • Agreement • Medical • Services • Agreements Dept. of Surgery Dept. of Medicine American College of Healthcare Executives

50. Institute Example Total Joints Hospital Business Development Orthopedic Surgery-Upper Extremities Sr. VP Business Development Medical Directors Orthopedic Surgery-Lower Extremities Admin Secretary Institute Advisory Board Sports Medicine Institute Director Neurosurgery- Simple/Complex Spine Nurse Navigator Data Analyst (Research) ½ time Spine Center Occupational Health