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How to take your service line prioritization efforts to the next level

September 26, 2017

    In today's challenging market, service line prioritization by strategic planners is more important than ever. In addition to acting as conduits for health system growth, service lines offer health systems a differentiation opportunity in an increasingly choice-driven market.

    However, traditional metrics to assess service line potential—current market and projected growth to name a few examples—often fail to give a complete picture of market opportunity. Using these indicators alone to prioritize service line growth options can lead planners to identify false-positives or miss high-value opportunities.

    Instead, planners should supplement these metrics with more specific data to plan and grow more effectively. Read on to learn how you can take your service line prioritization efforts to the next level.  

    1. Investigate the driving forces behind your market share values

    Market share values alone rarely specify what market share is actually obtainable. Can you get more? Have you maxed out? While getting a sense of a health system's overall market share is helpful to understand where your institution sits relative to competitors, these overall metrics fail to indicate what about that market share is obtainable for you. A low value for market share in a certain service line may seem like a tempting growth opportunity, but, without comprehensive data on factors such as outpatient competition or physician referral network capacities, these numbers can cause strategic planners to chase market share they may not have the ability to influence in the first place.

    2. Supplement your projected growth rates with information about market density

    In general, the higher the growth rate for a service line, the greater the future opportunity. However, an organization's ability to take advantage of this growth rate has many caveats, and your growth rates may not be specific enough to direct action. In a market with several different providers, multiple organizations pursuing the same niche may result in investment that doesn't pay off.

    Even in a market with less competition, planners need to estimate what proportion of projected volumes will go to hospital-based facilities compared to other access points. Overall growth rates are rarely site-specific, making it difficult to gauge whether or not a high projected growth rate indicates opportunity in the inpatient or outpatient setting, let alone in an ambulatory surgery center. For example, it may come as no surprise to see that outpatient services are poised for high growth, but freestanding providers are already outcompeting health systems. Accounting for these nuances is why we conduct fragmentation analyses as part of our service line prioritization projects.

    3. Consider longer-term episodic contribution in addition to per-case revenue margins

    Understanding per-case profitability is important from a day-to-day management perspective, but relying on these figures alone for prioritization can overlook patient revenue contribution across the longer episode. Focusing only on per-case margins for profit prioritization may neglect patient journeys that are more profitable over the entirety of the patient journey. For example, some joint replacement procedures may have higher case-based margins than, say, an injection for back pain, but patients needing the latter might actually have favorable revenue contribution profiles over time across various physical therapy and follow-up sessions.

    We recommend service line prioritization assessments to look at both per-case margin as well as episode and condition-based 'wallet size'—that is, the cumulative financial contribution of all services related to a procedure or condition over time. This comparison allows planners to better assess trade-offs when determining which sub-service lines to focus patient acquisition efforts.


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