service line ins and outs – making the strategy work 2009 ache congress on healthcare leadership

© New Heights GroupAmerican College of Healthcare Executives

Service Line Ins and Outs – Making the Strategy Work

2009 ACHE Congress on Healthcare Leadership

Bill Vanaskie - COO, Maricopa Integrated Health System, Phoenix, AZCecily Lohmar - Principal, New Heights Group, Huntersville, NC

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Session Objectives

• Understand the challenges in implementing service line management in healthcare and its implications on the organization

• Learn how to determine the most appropriate approach to service line management for your organization

• Identify strategies for addressing the key barriers to successful implementation of service lines

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The Challenges

• Fully understanding the strategy and implications

• Focusing on the right structures and services

• Engaging physicians

• Integrating service lines with traditional structures and functions

Source: 2008 survey of strategy executives sponsored by New Heights Group/ Healthcare Forum for Strategy

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Understanding the Service Line Strategy

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The Fundamentals

• An organizational model borrowed from other industries (think P&G, Saturn) More closely aligns operating units with the

customer base (patients)

Traditional hospital model aligns with staff and physicians

• Has been adapted for use in healthcare In its adaptation, basic intent has been forgotten:

• To design, organize, and manage a distinct area of the enterprise to create a product of greater value

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NursingNursing ProfessionalServices

ProfessionalServices

SupportServices

SupportServices

Quality andMedical Affairs

Quality andMedical Affairs FinanceFinance

ProgramPlanning

andExecution

ProgramPlanning

andExecution

HumanResources

HumanResources

ChiefInformation

Officer

ChiefInformation

Officer

Cardiac/Surgical

Cardiac/Surgical

Women’sHealth

Women’sHealth

MedicineOncology

MedicineOncology

Ortho andNeuro

Ortho andNeuro

Case Management

Services

Case Management

Services

PsychiatricServices

PsychiatricServices

EmergencyServices

EmergencyServices

RadiologyRadiology

LabsLabs

MedicalRecords

and Archives

MedicalRecords

and Archives

PharmacyPharmacy

TherapeuticServices:•Rehabilitation•Respiratory Therapy

TherapeuticServices:•Rehabilitation•Respiratory Therapy

In HouseAgency

In HouseAgency

MaterialsManagement

MaterialsManagement

FoodServices

FoodServices

EnvironmentalServices

EnvironmentalServices

Patient Escortand Security

Patient Escortand Security

PropertyManagement

PropertyManagement

Facilities andEngineering

Facilities andEngineering

ClinicalEffectiveness

ClinicalEffectiveness

HospitalEffectiveness

HospitalEffectiveness

MD Staff Officeand

Research

MD Staff Officeand

Research

TreasuryTreasury

InternalAudit

InternalAudit

FinancialPlanning

andAnalysis

FinancialPlanning

andAnalysis

FinancialOperations

andAdmitting

FinancialOperations

andAdmitting

ProgramAdministration

ProgramAdministration

Marketingand

Communications

Marketingand

Communications

PhysicianSupport

and Outreach

PhysicianSupport

and Outreach

Planning andMarket

Research

Planning andMarket

Research

OrganizationDevelopment

OrganizationDevelopment

HR Planningand

Communications

HR Planningand

Communications

PersonnelAdministration

PersonnelAdministration

InformationSystems

InformationSystems

President and ChiefExecutive Officer

President and ChiefExecutive Officer

Corporate DevelopmentCorporate Development

Office of GeneralCounsel

Office of GeneralCounsel

FoundationFoundation

StrategicPlanning

StrategicPlanning

NursingDevelopment

NursingDevelopment

BiomedicalEngineering

BiomedicalEngineering

Chief Operating OfficerChief Operating Officer

AmbulatoryCare

Services

AmbulatoryCare

Services

The traditional healthcare silos established to support the staff, not the patients

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President and CEOPresident and CEO

VP of Corporate DevelopmentVP of Corporate Development

VP of Managed CareVP of Managed Care

VP of Systems and FinanceVP of Systems and Finance

VP of Medical AffairsVP of Medical Affairs

Executive VP and COOExecutive VP and COO

VP of Human ResourcesVP of Human Resources

VP of Facilities DevelopmentVP of Facilities Development

VP of Support ServicesVP of Support Services

VP of Patient Care ServicesVP of Patient Care Services

Director of Cardiology Services

Director of Cardiology Services

Director of Oncology Services

Director of Oncology Services

Director of Behavioral Health Services

Director of Behavioral Health Services

Director of Women/ Children Services

Director of Women/ Children Services

Director of Long Term Care

Director of Long Term Care

Service lines bring a different mix of staff together to support patients

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When is a Service Line Strategy For You?

Organizational Needs

Functional Service Line

Strategic Orientation Departments Services/patients

Competitive Orientation

Low High

Control over resources, costs, and performance

Low Moderate

Continuum of care Low High

Rapid decision-making

Low High

Flexibility Stable Changing

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What is Your Objective?

• Greater focus on “mission critical” services - those services of most

importance to organizational success (core service lines)

• Strategic ‘watchdog’ to monitor and respond to market changes

• Enhanced operational efficiency

• Greater alignment with physicians

• More appropriate allocation of organizational resources – human

and capital

• Expedited decision making; enable organization to assess

vulnerable areas and adjust rapidly to changes in submarkets

• Keep up with the other guy

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What Constitutes a Service Line?

• In practice, no consistent definition applied. Delivery settings (rehabilitation) – do stroke patients go through

similar continuum as sports patients? Demographic populations (women’s) – are needs of young

women at all similar to those of older women Revenue centers (surgery) – is the continuum of care even similar

for trauma as it is for pediatric ENT?

• A patient population that travels through the same continuum of care; typically defined by group of diagnoses (cardiovascular) Beginning to see subgroups of service lines develop (thoracic,

vascular)

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Selecting the Service Line Model That’s Right for You, Not Them

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Service Line Models - The ContinuumIm

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Ability to Create/Add ValueAbility to Create/Add Value

HighHigh

HighHighLowLow

LowLow

Hybrids adapted for healthcare

Service line organizationService line organizationConsumer industry modelsService line managementService line management

Service line leadershipService line leadership

Service line marketingService line marketing

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Service Line Marketing

• Focus: marketing only• No authority/ accountability

across functional areas or departments

Pros ConsEasy to implementMinimal culture change neededCreates market perception of coordination

No ‘there, there’No mechanism for delivering on market imagePotential to backfire – promise more than deliver

SERVICE LINES

Marketing

NursingAncillaries

Operations

ITBudgetManaged Care

Finance

CEO

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Jones Hospital Marketing Leadership Management Organization

Culture

Entrenched in traditional culture

Strong traditional culture; focus on departments, not patient groups

Traditional culture, but starting to focus on market vs. internal departments

Market oriented culture; adapts easily to change

Strategic Orientation

Operational vs strategic orientation

Begin thinking strategically about service lines

Achieve dominance in key service lines

Manage the healthcare dollar and patient experience

Management Leadership

Equate service lines with advertising

Strong, oriented around functional departments

Management team understands and ‘thinks’ service lines

Very strong, visible, active

Physician Leadership

Little to none Potential, but not yet identified

Yes Yes, strong

Market Dynamics

Competition not strong; visibility is primary need

Strategic thinking needed to reverse volume trends

Key service line competitive; consumer expectations rising

Competitive, need for differentiation strongConsumer expectations high

Information Systems

Limited ability to analyze individual service line performance

Basic financial and market performance available at service line level

Full P&L available by service line

Information systems must cross campuses and departments

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Critical Success Factors – Service Line Marketing

• Do

Validate that your product is worth marketing

Prove you can deliver on any promises

Try to get at least one physician behind your efforts

See a longer vision – is this the endgame or a means to a different end?

Seek to understand your service line market before your campaign• Don’t

“Dump” this in marketing’s lap; leadership must still own service and

strategy

Market without measurable performance objectives – volume, payer mix,

etc.

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Service Line Leadership• Service line leaders are champions and thought leaders

• Matrix relationships across organization

• Support by planning, marketing, finance, recruitment, other staff functions

Pros ConsCulture change not significantGood stepping stone to advanced structureCreates momentum and visibility Provides physicians with ‘go to’ person

No authority to affect operational changeReliance on matrix relationships challenging in a silo cultureRisk losing physician interest without operational changeOperations ‘trump’ strategy

CEO

Planning/Marketing Finance Nursing Ancillaries

Service LinesService Line Support

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Carnegie HospitalMarketing Leadership Management Organization

Culture Entrenched in traditional culture

Strong traditional culture

Traditional culture; not resistant to change

Culture adapts easily to change













Yes Yes, strong

Market Dynamics





Information Systems





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Service Line Management

• Service line managers have accountability

over operational departments affecting

their service line

• Service line managers both operational

and strategic leaders

• Typically report directly to COO or CEO

• Senior leadership active support critical

VP, HR Dir, Cardiology

VP Facilities Dir, Oncology

VP Patient Care Dir, Women's

COO

CEO

Pros ConsSingle accountability for performance enables greater focusMore responsive to change, and more aware of market needsPhysicians and consumers have clear ‘go to’ person

Significant culture change within organizationDifficult to manage both service line and functional departments

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St. Somewhere Health System

Marketing Leadership Management Organization

















Yes Yes, strong

Market Dynamics





Information Systems





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Executive Director

Director, Cardiac Nursing

Director, Invasive Cardiology

Director, Preventive Cardiology

Administrative Assistant

Project Manager,Mobile Cath Lab

5WT, 5G, 5ET, CCU, 6D, 6T, CVSU, CV

Outcomes

CATH, EP, CNIL, CPIU, Pre-Post Care,

CVOR

Preventive Cardiology, Heart Failure Clinic,

Lipid Clinic, CV Research

Administrator,WS Cardiology

Kimel Park, Kernersville,

Yadkinville, Wilkes

Medical Director, Lipid Clinic

Cardiovascular Service Line Management

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Service Line Organization

• Complete organizational redesign • Functional departments become support to service lines;

no independent identities• Multiple campuses run by site administrator who ensures service line

needs are met on site• Senior leadership take on dual roles – site administrator and service

line leader

Pros ConsShift entire culture often easier than mixing traditional and service linesPlaces emphasis on patient experience rather than departments; fosters strong consumer orientationAligns service-specific patient care requirements across continuum

Culture shift difficult for manyPhysicians – dual relationship with service line leaders and site administrator Structure only possible in a few organizationsDifficult to hold particular department accountable for achieving broader goals

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Health SystemLeader

Health SystemLeader

CardiologyCardiology PediatricPediatric OncologyOncology OB / GYNOB / GYN AmbulatoryAmbulatory Behavioral Health

Behavioral Health

PROSPROS

• Service line teams are important in obtaining institutional support from key players

• Avoids ambiguity over authority and accountability

• Technical specialists with knowledge in one area are brought together

• Scarce or expensive resources can be best utilized

• Aligns service specific patient care requirements across the continuum

• Service line teams are important in obtaining institutional support from key players

• Avoids ambiguity over authority and accountability

• Technical specialists with knowledge in one area are brought together

• Scarce or expensive resources can be best utilized

• Aligns service specific patient care requirements across the continuum

CONSCONS

• Information systems overhaul needed to support change

• Service line managers’ lack of authority over physicians and functional departments limits ability to increase revenues and control costs

• Relies on integrated systems to manage the flow of information

• Changes medical staff structure• Matrix structure often confusing• Outpatient services can be difficult to fit in to

service lines and system structure• Culture change VERY difficult

• Information systems overhaul needed to support change

• Service line managers’ lack of authority over physicians and functional departments limits ability to increase revenues and control costs

• Relies on integrated systems to manage the flow of information

• Changes medical staff structure• Matrix structure often confusing• Outpatient services can be difficult to fit in to

service lines and system structure• Culture change VERY difficult

23


All Saints Medical Center

Marketing Leadership Management Organization

















Yes Yes, strong

Market Dynamics





Information Systems





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Focusing on the Right Things: Portfolio Analysis

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Components of a Portfolio Analysis

• Hard components: Market assessment Financial assessment

• Soft components: Operational Quality

• Softer still Physician leadership Physician interest

The foundation

Used in rating services and determining actions and priorities

26


Market Assessment

Market Size

Projected Market Growth (Growth in

Use Rates 2003-2009)

Service Lines Primary Primary Secondary Tertiary PrimaryCARDIOLOGY - MedicalGASTROENTEROLOGY - MedicalGENERAL MEDICINE - MedicalGYNECOLOGY - MedicalNEONATOLOGY - MedicalNEUROLOGY - MedicalNORMAL NEWBORNS - MedicalOB/DELIVERY - MedicalONCOLOGY - MedicalORTHOPEDICS - MedicalOTHER OB - MedicalPSYCH/DRUG ABUSE - MedicalPULMONARY - MedicalREHABILITATIONTRAUMA - MedicalUROLOGY - MedicalOTHER - Medical

Market Share% of Hospital

Total

ALOS CMIRegional

Draw

Compare case mix index against comparable facilities – are we seeing the same patient types?

Percent of total volume indicates organization’s reliance on service

Comparing ALOS against regional/national norms provides some indication of operating and quality performance

27


Market Assessment

Market Size

Projected Market Growth (Growth in

Use Rates 2003-2009)

Service Lines Primary Primary Secondary Tertiary PrimaryCARDIOLOGY - MedicalGASTROENTEROLOGY - MedicalGENERAL MEDICINE - MedicalGYNECOLOGY - MedicalNEONATOLOGY - MedicalNEUROLOGY - MedicalNORMAL NEWBORNS - MedicalOB/DELIVERY - MedicalONCOLOGY - MedicalORTHOPEDICS - MedicalOTHER OB - MedicalPSYCH/DRUG ABUSE - MedicalPULMONARY - MedicalREHABILITATIONTRAUMA - MedicalUROLOGY - MedicalOTHER - Medical

Market Share% of Hospital

Total

ALOS CMIRegional

Draw

Reviewing regional draw shows how far beyond service area service draws from; relevant for some orgs only.

Market size measured by use rates to control for population size; compare against regional and national rates to see if discrepancies exist. Review trends.

Future opportunities can be found in use rate changes due to ‘normalization’, demographics, technology and other external forces.

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Financial Indicators

Service LineCARDIOLOGY - SurgicalOPEN HEART - SurgicalGENERAL SURGERY - Surgical

BARIATRIC SURGERY-SurgicalENDOMETRIOSISGYNECOLOGY - SurgicalONCOLOGICAL SURGERY - Surgical

NEUROSURGERY - SurgicalOB/DELIVERY - SurgicalOTHER OB - SurgicalORTHOPEDICS - SurgicalTRAUMA - SurgicalUROLOGY - SurgicalOTHER - Surgical

Organ. Reliance

ContributionMargin Profitability

Contribution margin measures financial performance before overhead and indirect expenses.

Organizational reliance measures percent of total net income attributed to that service line.

Other measures may include payor mix, % government

payor

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Service Line Summary

Market Size

Projected Market Growth

(Growth in Use Rates

2003-2009) Percent Contri-

Service Lines ALOS CMIRegional

Draw Primary Primary Secondary Tertiary Primaryof Net

Incomebution

MarginIncome

Per CaseCARDIOLOGY - Surgical 4% 5.4 3.3782 64% 457 86% 81% 66% 9.3% 15.5% 39.0% $2,371OPEN HEART - Surgical 2% 7.2 5.5691 60% 176 93% 88% 83% -11.4% 19.5% 47.0% $6,754GENERAL SURGERY - Surgical 11% 4.9 1.9717 71% 1,344 78% 47% 62% -11.4% 23.1% 40.9% $1,483

BARIATRIC SURGERY-Surgical 0% 3.2 2.1498 80% 62 92% 67% 67% 15.3% 2.6% 45.7% $3,584ENDOMETRIOSIS 3% 2.0 0.9003 70% 408 79% 51% 50% -11.4% 7.7% 52.9% $1,585GYNECOLOGY - Surgical 1% 1.5 0.8573 64% 81 68% 48% 81% -14.1% 1.5% 52.1% $1,549ONCOLOGICAL SURGERY - Surgical

1% 3.8 1.4744 76% 149 71% 52% 53% 6.2% 2.2% 44.0% $1,487

NEUROSURGERY - Surgical 5% 4.2 2.1697 65% 539 90% 89% 76% 6.2% 9.6% 32.3% $1,219OB/DELIVERY - Surgical 3% 3.5 0.7130 85% 416 78% 21% 17% 19.4% 1.0% 37.9% $261OTHER OB - Surgical 0% 1.5 0.7156 75% 12 58% 0% 25% 26.5% 0.1% 43.8% $693ORTHOPEDICS - Surgical 12% 3.4 1.6266 63% 1,264 85% 65% 75% 0.0% 11.1% 31.5% $613TRAUMA - Surgical 0% 12.5 4.5105 39% 24 83% 55% 100% -11.4% 0.8% 32.7% $1,461UROLOGY - Surgical 2% 2.7 1.1441 65% 266 72% 51% 90% -11.4% 3.8% 44.4% $1,235OTHER - Surgical 0% 1.9 1.0980 63% 39 77% 60% 50% -16.7% 0.1% 37.2% $300

% of Hospital

Total

Market Share

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Pulling it Together

• Rating scale developed for each indicator evaluated

• Services measured against each other• Score provided for each rating• Provides evaluation of both current and future

opportunities• Serves as decision making guide, not

recommendation itself

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Service Line Rating - Surgical

High 3Medium 2

Low 1

Key

Market Size

Service Lines ALOS CMIRegional Draw Primary Primary Secondary Tertiary Reliance

Contri-bution

Profit-ability

CARDIOLOGY - Surgical 31OPEN HEART - Surgical 30GENERAL SURGERY - Surgical 30

BARIATRIC SURGERY-Surgical 25ENDOMETRIOSIS 27GYNECOLOGY - Surgical 20ONCOLOGICAL SURGERY - Surgical 24

NEUROSURGERY - Surgical 26OB/DELIVERY - Surgical 19OTHER OB - Surgical 20ORTHOPEDICS - Surgical 30TRAUMA - Surgical 20UROLOGY - Surgical 26OTHER - Surgical 18

% of Hospital

Total

Market Share

Total Score

Projected Market Growth

(Growth in Use Rates 2003-2009)

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Understanding the Results

• Highest scores – these are the ‘mission critical’ services: The 20% that drive your revenue

They should be getting the disproportionate share of your resources to

grow/thrive

This is where you service line emphasis should be

• The middle range: Invest after investment in above, only if you can improve position

Be very selective; maintain skepticism

What is the opportunity to improve operating performance?

What is the opportunity to improve market position? Is this realistic?

• The lowest scores: Can you divest/outsource to minimize your losses but maintain service?

Objective is to keep it viable if truly needed in community, but investment is

minimum

33


Engaging Your Physicians

34


Why Is This An Issue?

• Why can’t we get physicians engaged? • Once we get them engaged, why do they

disengage?

36


Why Physicians Disengage

• Data disillusionment

• Process paralysis

• Focus on the hospital not physician

# 1 Reason:Physician sees NO ACTION

If service line leaders aren’t given the ability totake some action, or if this is not structured into

implementation in some way, you are almostguaranteed to lose the physicians

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04/21/23 Slide 38

Factors that motivate physicians and hospital managers

A Physician A Hospital ManagerIs autonomous; makes decisions alone Uses teamwork; is probably involved in line reporting

Is collegial; values and celebrates differences Is collaborative; values a common culture

Works one-on-one Works primarily in groups

Is patient oriented Is organization oriented

Is empathetic Is objective

Is crisis oriented Is a long-range planner

Is quality oriented Is cost oriented

Enjoys immediate tangible results Must often delay gratification and enjoy process

Is accustomed to controlled chaos Has a planned schedule with inherent flexibility

Sees people as material or objects Sees people as resources to be managed

Is a doer and decision maker Is a delegator; gets things done through others

Is reactive Is proactive

Is authoritarian in practice style Delegates authority; deals with people as equals

Has a specialist orientation Has a generalist orientation

Is a classical scientist Is a social scientist

Is discipline oriented Is socially oriented


Engagement Models

• Service line management teams

• Medical directorships

• Physician advisory groups

• Management services agreements

• Clinical institutes

Increasing complexity

39


Service Line Management Teams

• Physician/Service Line Leader• Physician/Nurse Clinician/Service Line Leader

Team co- manages the service line.

Size, complexity of organization drives need for duo or trio team.

40


Team Roles and Responsibilities: Duo

Physician/Medical Director• Utilization management• Physician engagement• Physician recruitment/

retention• Evidence based practices• Quality initiatives

Service Line Leader• Marketing• Program development• Financial performance• Service line metrics• Staffing ratios• Patient satisfaction

Very effective model. Requires committed physician with specific job description

41


Team Roles and Responsibilities: TriadPhysician/Medical Director• Utilization management• Physician engagement• Physician recruitment/• retention• Evidence based practices Service Line Leader

• Marketing• Program development• Financial performance• Service line metrics

Nurse/Clinician Director• Evidence based practices• Quality metrics• Staffing ratios/practice

patterns• Patient satisfaction

Most effective in larger, more complex organizations, academic centers

42


Medical Directorships

• Plan before you write!• Organizational strategy

Type of organization and degree of responsibility dictates job

description what is the overall organizational plan/strategy

Detail areas of responsibility and specific actions expected

Accountability clearly defined, e.g. cost, quality, throughput

etc.

Relationship to other formal structures like Med Staff listed

and defined

Reporting relationships both up and down

• Compensation must be at Fair Market Value

43


Advisory Groups

• Physician advisory groups must report to a person with authority to effect change Hospital role to facilitate meetings, provide necessary

information, solicit input

• Groups geared around specific tasks Strategy and program development Operations and utilization management Quality improvement and evidence based guidelines

• Key to effectiveness of advisory groups is hospital’s willingness to respond to recommendations

44


Selecting Your Advisory Group

• One physician group or multiple groups represented?

• Referring physicians or service line specialists?• Expectations on loyalty or none?• Quality criteria?• Expectations on confidentiality?• Expectations on competition?

45


Management Services Agreements

• Contractual relationships with a group of physicians• Depending on depth of agreement, may include

group management of: Unit/provider staffing Quality improvement Utilization management Equipment selection New program development

• Payment for services related to performance in quality, cost, program development, patient satisfaction

46


Example: Management Services Agreement

• Base Fee $335K

• Includes Orthopedic trauma services, orthopedic spine services, total

joint services

Physicians responsible for coordination of services that promotes quality, efficient patient care, utilization review and fostering quality assessment programs

Incentive compensation: over $700K at risk• SCIP quality measures

• Patient Satisfaction

• Cost Savings

47


Clinical Institutes• Clinical and business structure designed to integrate

hospital and a group of physicians to pursue service line development

• Amalgam of above strategies

• Creates a separate entity designed to develop service line

• Most staff remain under hospital; institute staff mostly ‘virtual’

48


Institute Model

Health System Institute

•Management Services Agreement

•Professional Services Agreement

Dept. of Medicine

Dept. of Surgery

Independent Physicians

•Medical Services Agreements

49

Institute Example

Hospital Business Development

Institute Advisory

Board

Medical Directors

Institute Director

Nurse Navigator

Data Analyst(Research)

½ time

Sr. VP Business

DevelopmentAdmin

Secretary

Total Joints

Orthopedic Surgery-Upper

Extremities

Orthopedic Surgery-Lower

Extremities

Sports Medicine

Neurosurgery- Simple/

Complex Spine

Spine Center

Occupational Health

© New Heights Group

Engagement ModelsPros Cons Comments

Management Team

Fully engage physician champion

Buy in from throughout organization often easier

Doesn’t necessarily address other physicians

Complexity of managing with two or three individuals; personalities, style, etc.

Matrix even more challenging

Very effective when changes in medical staff practice patterns are needed

Same for triad model when changes in nursing orientation needed

Medical Directorships

Flexibility to tie service line leadership into directorship responsibilities, or create specific medical director for service line

Incorporate accountability for service and quality goals across service line

Facilitate communication with administration

Model the relationship for peer physicians within the service line

Unless specific to service line, physician may not champion service

Service line could get ‘lost’ in other responsibilities

Medical director not always the ‘leader’ needed to effect change

Models are not mutually exclusive

American College of Healthcare Executives 51


Engagement Models

Pros Cons Comments

Advisory Groups

Seeks consensus around all service related actions/decisions

Enhances buy in by the providers

Involves time for meetings

Must include the “right” physicians or ALL the physicians

When used properly, can be very effective

MSAs Physician gain sense of operations, control

Incentives aligned

Difficulty getting physicians to agree

Selection of physician leader may or may not be champion

Rarely have all physicians involved, meaning some ‘losers’

Can be very effective when operational and/or medical staff changes needed to turn around service line

Clinical Institutes

Flexibility to explore all of the above

Maintain arms length distance from hospital

Complexity

Physicians still able to compete outside of institute

Exclusivity can alienate other physicians

Can be exclusive about physician participation through medical services agreements

Models are not mutually exclusive

52


Integrating Into Existing Operations

Business plansManagement structures (matrix)

Financial plans (budgeting)Reporting metrics

Evolving service lines

53


Does This Look Familiar?

Service Line Manager Department Manager

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Mission

Vision

Strategic Plan

The Hierarchy of Planning

OperatingPlans

FinancialPlans

FacilityPlans

Service Line Plans

Why are we here?

What do we want to be?

What are we going to do?

How will key service lines support strategy?

How do we get there?


Integrating Budgeting – Some Options

• Service line managers and department directors jointly develop budgets.

• Service line managers submit budget requests to key relevant department directors. The request is “rolled up” into the overall departmental budget at the discretion of department director.

• Department managers are charged with articulating how they will address service line needs in their budget. Support for service lines part of performance evaluation.

• Service line managers review department budgets against service line priorities and point out their consistency or inconsistency to leadership. Leadership makes the final decision.

• CFO as arbiter – Dept manager develops dept budget. Service line leader/manager presents needs to CFO. Final budget decision determined by CFO.

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Clinical Quality PreferredDirection

Threshold Target StretchFY 2007

Q4FY 2008

Q1FY 2008

Q2FY 2008

Q3

Core MeasuresAMI-Aggregate Score 50% 75% 90% 76% 71% 81% 71%CHF-Aggregate Score 50% 75% 90% 67% 50% 58% 83%

SCIP-Cardiac Aggregate Score 50% 75% 90% 67% 72% 89% 67%

American College of Cardiology Measures (ACC)ACC-Risk Adjusted Mortality (Rolling year) 1.19% 0.87% N/A 1.20% 1.20% 0.94% NYAACC-Incidence of negative catheterizations 34.5% 30.6% N/A 29.7% 37.8% 37.1% 29.5%

ACC-Complication stroke N/A 0.2% N/A 0.0% 0.0% 1.6% 0.9%

Society of Thoracic Surgery Measures (STS)STS-Risk Adjusted Operative Mortality (O/E)-Rolling Year Result CABG N/A 0.98 N/A 1.49 1.03 1.04 0.78

STS-Major Complication N/A 14.8% N/A 9.1% 18.0% 13.3% 18.0%

Service Excellence PreferredDirection


Q4FY 2008

Q1FY 2008

Q2FY 2008

Q3

Inpatient - Open Heart 70% 80% 90% 76% 46% 92% 75%Inpatient - Other 70% 80% 90% 64% 83% 71% 62%

Outpatient 70% 80% 90% 73% 31% 56% 49%

Finance/Volumes PreferredDirection


Q3FYTD 2008 Q3

FY 2008Annualized

FY 2009 Objective

FinancialsNet Revenue ('000s) 0% Growth 20,596 62,528 83,371

Contribution Margin ('000s) 0% Growth 10,611 33,193 44,257% of Net Revenue 51.52% 53.09% 53.09%Net Income ('000s) 0% Growth 3,176 11,292 15,056% of Net Revenue 15.42% 18.06% 18.06%

% Gov't/Non-Gov't Gross Revenue 59/41% 58/42% 58/42%

VolumesInpatient Discharges (including Open Heart) 1,061 3,095 4,127

Open Heart Surgeries 430 85 277 369 444Total Cardiovascular Procedures 59,035 15,559 46,107 61,476 61,917

Total Cath Lab Procedures 6,454 1,864 5,123 6,831 7,503Total Sleep Center Volumes 812 231 668 891 1,164

Cardiology Scorecard

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0

5

10

15

20

25

30

35

40

Outpatient Surgery Cardiovascular Medicine

Mill

ion

s

Total Indirect Cost

Total Direct Cost

Total Payments

Financial ReportingClarify Contribution vs. Profitability

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Some level of matrix management is inherent in service line management

unless you are restructuring entire organization around service lines

59


Matrix Management

• Matrix management is a deliberate organizational structure It IS NOT a loosely defined structure It IS a blending of project and functional management

• It requires a mature leadership team, especially at the top

• A matrix structure can not be assumed to work; it must be structured to work

• Varies by type of organization – no one matrix fits all organizations

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Matrix Challenges by ModelIm

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Matrix NeedsMatrix Needs

LowLow

HighHighHighHigh

LowLow

Service line marketingService line marketing

Service line leadershipService line leadership

Service line managementService line management

Service line organizationService line organization

The ‘lower’ the complexity of the service line model, the more reliant on the matrix structure

61


What Makes Matrix Models Succeed?Or, how do you do it right?

• Roles and responsibilities are clear throughout

• Everyone feels a sense of ownership

• Everyone feels a sense of empowerment

• All are moving towards a common goal/vision

Check each of these in your current matrix structure – what’s missing?

63


Evaluating Your Matrix Structure

• Do your support staff have a clear understanding of their roles and responsibilities in service line development? Is this written down in their job description or an add on?

• Do clinical staff have a clear understanding of their reporting relationships under the matrix? Who do they report to and for what? Does leadership support this fully? Do functional managers fully understand and support the matrix? Is their

relationship with matrix manager spelled out?

• Have you thought of everyone? Senior leadership often left out Ancillary staff as well as nursing

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Clarify – Write Down Full Reporting Structure

Service Line Responsibility for Operations – VP

System Service Line Leader

Reporting Structure Performance Appraisal

System Physician Leader

1. Orthopedics Nursing

Jack Smith Direct – Jane Doe Dr. Jones

2. Cardiology Inpatient Nursing Ancillary services Cath Lab -

Judy George Direct – John James Dr. Lind

3. Surgery Nursing – Dual Direct – (operations), (service line); Combined PA

4. Respiratory/Pulmonary

Ancillary services - Direct -

5. Behavioral Health Nursing – Dual Direct –(operations), (service line); Combined PA

6. Women’s Nursing – Dual Direct –(operations), (service line); Combined PA

7. Seniors Nursing – Dual Direct –(operations), (service line); Combined PA

8. Emergency/Trauma Services

Nursing – Dual Direct – (operations), (service line); Combined PA

9. Oncology Outpatient – \

Direct -

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Assigning Roles and Responsibilities

• As you define what’s in your service line, the matrix relationships will become clearer. Services that are clearly ‘in’ will likely be directly managed in a

management model, with a matrix back to functional manager Services that are indirectly ‘in’ the service line may be matrixed to

the service line leader/manager and directly managed by functional manager

Support services are typically a matrix relationship with that functional department unless the service line is large enough to warrant a full time person• e.g. neuroscience service line has 2 physician liaisons directly

reporting to service line leader and indirectly reporting to Director of Physician Relations

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Examples

• Direct Report Planning Analyst Physician Liaison

• Matrix Reporting Cath Lab Coronary Care Unit Cardiac Surgery Team Cardiac Diagnostics Marketing Financial Analyst

• Direct Report Planning Analyst Physician Liaison Cath Lab Coronary Care Unit Cardiac Diagnostics

• Matrix Reporting Cardiac Surgery Team Marketing Financial Analyst

Leadership Model Management Model

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Consider Partnership Agreements

• Cross-divisional partnership agreements can help minimize the disconnects under a matrix structure.

• Agreements identify expectations of the matrix relationship and outline basic operating principles for the relationship.

• Partnership agreements may address elements such as the following: Standard operating procedures, needs for flexibility Required lead times for reports, information, data, etc. Expected turnaround times/cycle times, response times Potential irritants and high-priority elements Means of communicating concerns, dealing with problems

and issues

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Parting Thoughts…

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If you are thinking of service lines….

1. Define your objective clearly – what are you trying to achieve through the strategy Do you understand the organizational commitment you are making?

2. Go through a portfolio analysis to determine what service line(s) make most sense for you The effort is worth it!

3. Determine the model that best fits your organization and needs Outline the organizational structure with all matrix relationships

4. Educate senior leadership and get buy-in and true commitment to plan Must “walk the walk” not just “talk the talk”

5. Identify service line team Leader/manager – internal or external candidate

Physician champion

Team members

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If you have already ventured into service lines

• Is it achieving the objectives you set forth? Do you have the right model? Is it consistent with your objectives?

Is your team fully on board?

Does your physician champion understand their role?

Are your matrix relationships clear across the organization?

Have you given it enough time and senior leadership support? Has your whole team made the commitment?

• Are you ready to evolve to next level? Questions to ask: Do you need to evolve?

Are people (leadership and line staff) thinking service lines or functional departments?

Do we have a champion in medical staff and senior leadership?

Review checklist • Has your position changed in key areas to support evolving to stronger management

structure?

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Questions?

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Bill Vanaskie, Maricopa Integrated Health [email protected] 344-1258

Cecily Lohmar, New Heights [email protected] 895 3410

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Some Interesting Reading

• Service Line Strategies for US Hospitals, The McKinsey Quarterly, July 2008

• Transforming US Hospitals, The McKinsey Quarterly, February 2007• The Secrets to Successful Strategy Execution, Harvard Business

Review, June 2008• Designing Product and Business Portfolios, Harvard Business

Review, January/February 1981• Promise-Based Management: The Essence of Execution, Harvard

Business Review, April 2007• Is It Real? Can We Win? Is It Worth Doing?: Managing Risk and

Reward in an Innovation Portfolio, December 2007• How to Make a Team Work, Harvard Business Review, December

1987

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service line ins and outs – making the strategy work 2009 ache congress on healthcare leadership

Documents