New rules for service line growth
Shay Pratt, Marketing and Planning Leadership Council
The next 10 years will bring unprecedented growth in Medicare enrollment and with it a spike in inpatient medical demand, making profitable service line share that much more valuable.
Moreover, hospitals face several mandatory payment changes, such as value-based purchasing and readmissions penalties, which place increased risk on quality and utilization performance. Profitable service line volumes will be essential to offset the economic impact of these forces.
Nevertheless, service line growth faces a number of barriers.
- The sputtering economy continues to soften demand for key procedures such as joint replacements and advanced imaging.
- New technologies and treatments in areas such as cardiovascular services, general surgery, and bariatrics have reduced procedure volume or shifted those services to freestanding outpatient settings.
- Payers are increasingly scrutinizing the appropriateness of procedures like spinal fusion and withholding payments for those they deem unnecessarily aggressive. Most alarmingly, CMS recently announced a Prepayment Review of an 11-state pilot, which will scrutinize the medical necessity of surgeries like spinal fusion and electrophysiology procedures before paying for them.
Even though impediments to service line growth continue to emerge, markets are as competitive as ever. Hospitals and health systems across the country continue to strategize about new service line development opportunities. Moreover, for many hospitals, their grip on referral streams is tenuous at best, with many affiliated (even employed) physicians continuing to split referrals with other providers.
Three imperatives for service line growth
This slow-growth market is prompting hospitals to recalibrate their service line growth strategies, deemphasizing the identification of latent demand and focusing more on competing for market share.
Progressive organizations are shaping their service line strategy to target three key objectives:
Prevent referral leakage: With demand softening across a number of product lines, hospitals are focusing efforts to close gaps in the referral chain within the primary service area to increase share in high-margin surgical care. In particular, planners and marketers are concentrating on low-cost solutions, such as improving customer service to medical specialists and ensuring appointment availability in services such as neurosciences.
Compete upstream for specialty outpatient share: In light of several service lines’ pronounced outpatient shift and the general mandate from health care reform to broaden the scope of service lines, organizations are engaging specific patient populations in specialty care well in advance of acute care needs.
Promote regional growth: Perceiving limited levers to grow volumes in their primary service areas, many organizations are looking beyond their immediate region to evaluate growth opportunities in secondary markets. This strategy includes both deploying physician liaisons to new territories and striking innovative partnerships with other specialty providers for mutual advantage.
Marketing and Planning Leadership Council members, join us at the national meeting, The New Blueprint for Growth, to learn more about adapting service line strategies to a shifting market. Not a member of the Marketing and Planning Leadership Council? Learn more on our website.