The Medical Group Management Association’s most recent MGMA Stat poll asked healthcare leaders: Do you utilize external resources to develop your organization’s service line strategy? If so, which resources do you utilize? In response, 33% answered “yes,” while 67% answered “no.” Respondents who answered “yes” stated the resources most utilized are:
- Consultation services
- Benchmarking services
- Assessing community needs
This poll was conducted on August 20, 2019, with 744 applicable responses.
In recent decades, hospitals have explored evolving from a department-centric management and budgeting process to a service line strategy (SLS). Service lines can be defined in a variety of ways but are most commonly viewed by disease process (e.g., cancer) or by patient population (e.g., women’s services). Large integrated health systems may have multiple service lines, such as Heart Institutes and Cancer Centers of Excellence. The organization can also choose to focus on one niche, such as Cancer Treatment Centers of America.
Physician practices may want to consider adopting an SLS if they believe they can fill a need and meet the goals of the SLS, such as:
- Improve patient care experience through a lifetime of care, not just during the episode of care
- Improve patient health
- Reduce costs.
Similar to hospital service lines, multispecialty groups may develop an SLS around one or more specialties (e.g., orthopedics and women’s health services), or a single specialty practice may develop an SLS along a single disease process (e.g., IBD patients in a GI practice).
But the transition to developing an SLS can be difficult. It requires a change in organizational culture, reporting relationships, budget processes and a deep understanding of any service gaps in the community.
Organizational culture
In practices that have strong organizational cultures and traditional governance structures, the development and brand recognition of an SLS may only come to fruition as a more robust marketing plan, and nothing more. Practice leaders need to be willing to change the governance structure and culture of the practice to align departments and resources for the service line to reach its full potential. The shift begins with a detailed strategic plan that outlines:
- What services will be offered? Are they already offered within the community, and if so, how will the new service line differ from the competition?
- Who will manage the service line? Do shared service departments have indirect or direct reporting relationships to the service line Manager? How much authority does the Manager have?
- Where will services be rendered? Are you partnering with other groups/providers to expand your service area or do you need to consolidate services to one location to reduce costs?
- How is the service line funded and who controls the budget?
- Will you align with other groups for services/locations that you don’t currently offer?
- What evidence-based guidelines will you follow to assure that you can improve the health of this patient population?
- What benchmarks will you use to measure your success?
Reporting relationships
In a service line strategy, reporting relationships are no longer by department. Various clinical services managers may report to a non-clinical manager. In a fully integrated service line model, all support services personnel report to the service line manager. In many organizations, it may be difficult to set up a fully integrated model, since many support services, such as imaging services, could be required to support multiple SLS. Instead, a partially integrated model may be more realistic. In this model, key support services personnel would report directly to the service line manager and would have indirect reporting relationships with other departments such as imaging and lab.
Budget process
Service line budgets should be designed as separate business units or cost centers in which all revenue and expenses are attributed to the service line. The service line manager is responsible for managing the budget and has the flexibility to reassign resources as needed. Part of the budget process includes the ability for the service line manager to participate in possible risk sharing arrangements with payers.
Gaps in service offerings in the community
Service lines may be more successful if there’s a gap in service offerings in the community and the target patient population is large enough to justify the financial and leadership commitment. Questions to consider:
- Are there analytics available to help identify unique new markets, such as a growing senior population that may support an expanded joint replacement service line?
- Are there gaps in current offerings; for example, does the current joint replacement program lack coordination from home health, physical therapy and rehab services?
- Will this new service line support additional service lines; for example, if the new joint replacement program will justify a new ambulatory service center (ASC), can the new ASC offer new services to the community, such as an outpatient pain management program)?
Medical practices should explore a service line strategy as a way to improve operations and patient care through standardization and best practices, maximizing resources and reducing redundancy while creating brand identity and patient loyalty.
Additional resources:
- “6 Considerations to Guide Service Line Strategy” (Becker’s Hospital Review)
- “Uncover the right strategies for service line growth: Five trends changing service line economics” (Advisory Board)
- “Why is Service Line Management Hard to Do Right?” (Compass Clinical Consulting)
- “Understanding Finances in a Service line Model” (MGMA Fellowship paper)
- “How an Urgent Care Service Line Can Benefit a Multi-Specialty Practice” (MGMA Fellowship paper)
- “Half of healthcare organizations report adding ancillary services in the last year” (MGMA Stat)
Would you like to join our polling panel to voice your opinion on important practice management topics? MGMA Stat is a national poll that addresses practice management issues, the impact of new legislation and related topics. Participation is open to all healthcare leaders. Results of other polls and information on how to participate in MGMA Stat are available at: mgma.com/stat
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