Increasing market share

Health Progress, May/Jun 2001 by Zuckerman, Alan M, Johnson, Tracy K

Second in a Series Examining Revenue Growth Strategies in rx Difficult Health Care Market

In an era of declining hospital margins and ongoing cost reductions, developing additional streams of revenue can provide an attractive approach for improving financial health and ultimately furthering mission and community outreach objectives. This article focuses on the first of five revenue enhancement strategies identified in part one of this series ("Returning to Revenue Growth," Health Progress, March-April 2001, pp. 19-21, 79.)

After years of shrinking acute care demand and fierce competition for fewer patients, throughout the 1990s the health care industry emphasized system consolidation and nonacute services development. But several compelling reasons now exist to reemphasize the strategy of strengthening core services and increasing 'the hospital's or system's share of the acute care services market:

Acute care services remain a significant line of business for most health care systems.

Admission rates and emergency visit rates have recently begun to increase after several years of flat or declining utilization.' Population growth and aging will continue to increase demand for inpatient services-barring a sea change in medical practice and the delivery of health care services.

Advances in technology and system development support the diffusion of more sophisticated services into the community hospital and outpatient setting.

HOW TO INCREASE MARKET SHARE

Demonstrating quality of care, increasing patient satisfaction, broadening referral streams, expanding service lines, and marketing centers of excellence can all contribute to increasing market share. Specific strategies that have demonstrated proven returns in many markets include physician recruitment and medical staff development, improved and enhanced emergency services and capabilities, and subspecialty service development. These approaches for increasing market share will be financially successful as long as they build on existing capabilities, redeploy underutilized assets, minimize capital and start-up investments, and result in reimbursement that exceeds the marginal costs of providing the service (i.e., generates contribution margin).

Physician Recruitment and Medical Staff Development The crash and burn of large physician practice management companies and the significant operating losses experienced by hospital-owned physician practices have left physicians and hospitals somewhat disillusioned with the integrated service delivery model. Some systems have divested part or all of their physician practices, and physicians and medical practice groups are returning to the private practice model to stem financial losses.' As alliances shift and realign, opportunities exist to create new relationships with primary care physicians and specialists to broaden a hospital's or system's referral base and service mix.

One way to identify opportunities to expand the physician base is by completing a medical staff development plan. This analysis determines the health care organization's need for physicians by specialty based on the service area population, the underlying health needs of the community, and the program-specific targeted market shares that reflect overall strategic goals. A comparison of this need with existing medical staff supply will identify physician specialties that are underrepresented. The study can also identify geographic regions that are not well covered by primary care physicians affiliated with the health care system.

In addition to the obvious financial benefits of alignment of medical staff resources with health care organization goals, the medical staff development plan may also help address special issues of importance to many Catholic hospitals: Where and to what degree does ambulatory medical care need to be provided to the underserved? How can physician resources be used to support clinics and teaching? And what particular health needs in the community could benefit from better and more effective deployment of physician and other health care resources?

At one community hospital, a recent needs analysis revealed several opportunities for strengthening the medical staff. The hospital's projected physician need, based on targeted market share gains, and its expected supply of fulltime equivalent physicians by specialty are shown below in Figure 1.

Clearly the hospital's primary care physician network was not well developed for the primary or secondary service areas. In addition, the existing groups in obstetrics/gynecology were not able to achieve the market share targets envisioned by the health care system. Medical staff deficits (including expected retirements) were projected in medical cardiology, general surgery, orthopedics, neurology, and neurosurgery.

Many approaches to recruit physicians and develop the medical staff exist, all of which need to be carried out within legal and regulatory guidelines, including:

Assisting an existing practice with the recruitment of associates