Strategic service-line planning building competitive advantage: senior financial executives play a critical role in developing an organization's service-line plans

Healthcare Financial Management, Dec, 2003 by Elizabeth Greenspan, Susanna E. Krentz, Molly K. O'Neill

Rising costs and increasing competition are forcing healthcare organizations to look for ways to increase market share. One solution is to develop and position the services they offer through service-line planning--the development of a business plan for a specific service line (e.g., cardiac care, orthopedics) within the broader portfolio of services offered by the hospital.

When selecting service lines for strategic focus, management generally weighs a service line's competitive position, financial performance, and impact on the healthcare organization and community. Service lines that are considered to provide the most strategic value include cardiac, cancer, neurosciences, orthopedics, pediatrics, and women's services.

A practical challenge in developing strategic service-line plans in defining the scope of the service line with a more programmatic perspective. Using a patient-flow/consumer-driven perspective is strongly recommended over a typical physician specialty-driven definition. This perspective may require redefining the service line's components, generally requires a greater degree of interdisciplinary focus that crosses inpatient and outpatient sites of care, and may need to address both acute and post acute activities.

Service-line planning is an important tool for understanding the current competitive positioning of an organization's important service lines. Selecting service lines for strategic focus gives the organization a better framework for resource-allocation decisions. The process also calls for the assessment of strategic options specific to the service line and the determination of the best courses of action. Well done. a service line planning process is likely to challenge sacred cows and the status quo. Because most service lines are multidisciplinary, traditional boundaries must be overcome. The planning process needs to make clear who is responsible for managing and implementing service line strategies and how implementation responsibility and accountability will be established.

A service-line planning process will not succeed if it is not implemented within the context of the overall vision/strategic direction of the organization. The right people need to be involved to ensure that business perspectives and political considerations are adequately considered. Two extreme perspectives can also cripple a service-line planning effort: that nothing can be done to improve the hospital's position in a service line on the one hand, and that there is a magic bullet that will easily change the hospital's position on the other. Finally, if a healthcare organization does not allocate sufficient resources to implement the resulting service-line plan, it will forfeit any goodwill gained in working with physicians and other stakeholders.

Partners HealthCare System

Partners HealthCare System is an integrated delivery system in eastern Massachusetts. Member organizations include Massachusetts General Hospital (MGH), Brigham and Women's Hospital (BWH), Dana-Farber Partners Cancer Care, McLean Hospital and four community hospitals located outside of Boston. Partners Community Healthcare Network comprises more than 7,900 primary care and specialty physicians.

In preparation for the FY00 budget cycle, Partners' financial leadership analyzed the value of several specialty areas (cardiac services, orthopedic services, oncology services, and psychiatry and mental health) to the organization. In FY00, three of these four specialty areas were responsible for the majority of Partners' volume and an even more significant percentage of revenue.

Based on this analysis, the System Integration Committee (a group of Partners' senior administrative and medical leadership charged with developing programs that promote system integration) adopted as one of its goals: "To establish business plans for two systemwide services focused on growing top-line revenue through competitive market share growth and systemwide collaboration."

New market share could be obtained by serviceline planning that would:

> Focus on growth within an overall systemwide business plan

> Leverage systemwide strengths

> Reduce the potential for internal competition through collaboration

> Build on clinical expertise to improve quality systemwide

> Identify areas where operating efficiencies could be improved

> Improve financial performance

Service-line planning was designed to achieve new business growth rather than consolidate clinical services across operating units. The underlying question: Would service-line planning serve as a catalyst for system integration? The cardiac program was selected to lead off the planning initiative for three important reasons:

> Cardiac services are high profile in terms of volume and revenue.

> A history of collaboration existed among senior clinical and administrative cardiac leaders at BWH and MGH in the areas of contracting, clinical trials, legislative response, and technology transfer.

> Cardiac services were less ambiguous to organize from a planning and financial perspective because institutional roles were clearly defined (e.g., cardiac surgery performed only at the academic medical centers) and clinical leaders were easily identified.