Tara Tesch
Alexis Levy

The service line model benefits nearly all stakeholders involved in healthcare delivery. But how is its success measured?


At a Glance

Important issues in service line management and performance include:

  • Defining a service line
  • Understanding the benefits
  • Measuring performance
  • Communicating with key audiences

As health care becomes more complex and specialized, providers are realizing that they cannot "be all things to all people" and are focusing their financial and human capital resources on a smaller set of programs and services. The service line model provides an opportunity for healthcare systems to create an infrastructure around specific services with the goal of differentiating the program in the market, resulting in volume and share growth as well as reduced costs and improved outcomes. Although this service line model is attractive in theory, many healthcare systems fall short of realizing its full potential.

What Is a Service Line?

The success of a service line model depends first on the organization's having a clearly understood definition of a service line. Although this sounds simple, there is no standard definition; service line selection and investment by healthcare systems vary dramatically from organization to organization.

Without a firm definition, an organization is prone to losing focus; all programs and businesses become service lines. As a result, human capital and financial resources are strained and there is duplication and fragmentation of effort (which is what a service line is trying to avoid).

Given this variability, the following guiding principles can help develop a common organizational understanding of service lines and serve as a starting point for selecting service lines that warrant investment.

Service lines are patient centered. Programs that reap the most benefit from a service line model are those that involve care delivery at sites across the entire care continuum.

In traditional hospital management structure, care is organized by skill (lab, imaging, medicine, surgery) or by facility (physician office, hospital, outpatient center, nursing home). The service line model places less emphasis on where care is delivered; patients can access the service line from any point in the care continuum (see Exhibit 1).

Exhibit 1

exhibit-1-Measuring Service Line Success

In the patient-centered service line model, the points of emphasis for the patient are primary care, disease management, and prevention/education and wellness. More emphasis is placed on coordination of care-looking for opportunities to create protocols, standardize processes, and leverage IT-so that the patient experience is consistent regardless of where care is delivered. Furthermore, as a greater proportion of care is provided on an outpatient basis and with value-based incentives from payers to keep patients out of the hospital, addressing health care from this continuum approach is increasingly important.

Patients can identify with the service. In addition to this patient-centered orientation, the service line needs to be the reason that the patient is seeking healthcare services. For example, patients understand that they have a cancer diagnosis or a heart condition, or need a joint replacement. Other functions such as imaging, lab, and rehabilitation are provided in support of the service lines; for example, a patient receives rehabilitation services because he or she had a hip replacement, which would fall under a potential musculoskeletal/orthopedic service line.

Coordination of services improves quality and efficiency. Service lines should be focused on programs that can make a meaningful impact on the organization not only from a financial perspective but also based on quality and outcomes measures. An organization should take the time to quantify the potential "lift" it could gain from investing in a service line in terms of margin per market share point or additional outpatient procedure performed, as well as understand how difficult it would be to obtain that incremental business.

Services can cut across different sites of care, but simply because a service is delivered in multiple locations does not necessarily mean it is a service line. In some instances, services may represent supporting businesses that benefit from coordination and centralization, but are not necessarily patient centered. A lab is an excellent example of a service that benefits from centralization across a system; however, lab services are driven by clinical programs or services lines-for example, a patient needs lab work due to a specific diagnosis.

Why Organize by Service Lines?

The service line model benefits nearly all stakeholders involved in healthcare delivery. For patients, it can provide a more organized, coordinated, and higher-quality patient experience. Also, patients benefit from the focus on aspects of care designed to keep them out of the hospital.

For physicians, the benefits include a coordinated and standardized approach, which ensures efficiency. Also, the emphasis on prevention and disease management is consistent with the trend toward value-based contracting and creates opportunities for physicians to partner with the hospital in pay-for-performance efforts.

Benefits for the healthcare organization include opportunities to foster alignment with physicians, improve efficiency, reduce duplication of services, and achieve market differentiation.

Payers also benefit from a coordinated approach, which reduces the need for duplication of services. And the emphasis on wellness, primary care, and disease management reduces the need for more costly inpatient admissions and procedures (see Exhibit 2).

Exhibit 2

sidebar-1-Measuring Service Line Success

Measuring Service Line Performance: Importance of Quality and Cost

Health care in general has seemed slow to embrace the transformational changes experienced by many service industries over the past 25 years-a consolidation and reorganization focused on addressing the evolving needs of its consumer base. Online banking, as well as online and kiosk airline check-in, are just a few examples of how these industries are providing their services more efficiently and less expensively than before.Although there are significant scale opportunities and technology breakthroughs (which have transformed other industries), health care could still be considered an untransformed cottage industry. Despite overall historically strong financial performance, hospitals' critical success factors are beginning to shift, albeit slowly, toward cost and quality performance benchmarked to national standards-an area that will have a material impact on providers moving forward.

In the past, the measure of success for hospitals and health systems has focused on overall acuity, margin, and market leverage-the elements that defined the "haves" from the "have nots." However, providers are now using quality and cost to distinguish themselves and the value they add to the market.

Increasingly, payers and consumers are also using quality and cost measures in negotiating payment and selecting services. As a result, a "have" hospital today may be an underperformer tomorrow if it performs poorly on cost and quality. Likewise, a "have not" of today may become an overachiever tomorrow if it can lead the market in cost and quality outcomes.

What to measure. Many sources publish "best practice" metrics in measuring and benchmarking overall hospital and physician performance, and a growing inventory of measures is tailored specifically to select service lines. These measures typically build from existing margin and growth targets and add renewed focus and importance to quality, safety, and service.

On a service line basis, these metrics should be further refined to reflect how the care is provided. For example, service lines that occur outside the acute care setting should have measures that are tailored to be more retail-focused in nature (transaction speed, customer service, access, cost per procedure) than those predominately provided in the inpatient hospital setting.

With pay for performance and quality-based incentives for clinical integration, there are reputable sources of leading indicators for benchmarking success, available at the service line level or that can be customized to providers' specific service lines. Government-based organizations such as the Agency for Healthcare Research and Quality, the Centers for Medicare and Medicaid Services, and the Centers for Disease Control and Prevention have identified key indicators that drive accreditation and reimbursement. Business coalitions and national quality-based organizations such as Leapfrog, the Institute of Medicine, and the National Committee for Quality Assurance have also provided a starting point to define relevant and customizable performance indicators.

In addition, many national associations and organizations that are focused on particular specialties and/or disease states, such as the American Diabetes Association, American Heart Association, American Academy of Family Physicians, and American College of Surgeons Commission on Cancer, are measuring and reporting key outcome metrics and quality indicators for providers to benchmark their performance (see Exhibit 3). Benchmarking performance at the service line level will become increasingly vital to long-term success and will remain a continuous process that will assist organizations in understanding their strengths and identifying areas for improvement. By tracking progress against its benchmarks (see Exhibit 4), a healthcare organization can readily see how often it achieves targets.

Exhibit 3

exhibit-2-Measuring Service Line Success

Exhibit 4

exhibit-3-Measuring Service Line Success

How to measure. Ultimately, to ensure success in benchmarking performance, an organization must fully embrace a culture of accountability at all levels (governance, senior leadership, medical staff members, middle management, and staff). The infrastructure should also be in place to measure and manage performance against benchmarks in a coordinated fashion that is meaningful and consistent. Advancing a culture of accountability requires not only a framework or a systematic methodology based on proven best practices but also technologies that make the framework practical to use (quantifiable) and implement on a regular basis (see Exhibit 5).

Exhibit 5

sidebar-2-Measuring Service Line Success

Lessons Learned in Establishing Successful Benchmarks

Although benchmarking is not new, the focus on evidence-based outcomes, quality, and cost at a service line level is still in its early stages. The following are lessons learned from leading organizations that have pioneered efforts into more transparency and accountability in measuring service line performance:

  • Focus discussions and development of benchmarks around the patient to remove potential political barriers.
  • Collaborate with providers in defining success; engage stakeholders early and often.
  • Get outside assistance to supplement internal knowledge and introduce requisite expertise, if needed.
  • Set realistic expectations around the time required to launch new benchmarking programs (and infrastructure/resources required to support).
  • Rely on well-established and recognized quality indicators to ensure active provider buy-in; these measures should be actionable and relevant to all parties involved.
  • Identify and cultivate champions to direct and oversee the program.
  • Inform, educate, and communicate throughout the process.

Communicating the Message with Key Audiences

One of the keys to success in establishing an effective benchmarking program is transparency throughout the process, actively sharing and communicating all the details that led to decision making. If hospital and physician leaders are fully informed when they review the data, they typically will draw similar conclusions and are more apt to alter behavior.

Another way that service line programs can guarantee success is to involve physicians from the start, integrating them into governance and leadership positions. Because physicians control delivery, management, and utilization of services, their involvement is critical for hospitals and health systems to achieve buy-in and support not only in quality benchmarking but also in achieving strategic, operational, and financial success for the program. Physician service line leaders are the conduit to the broader medical staff as well as to referring physicians-a key stakeholder group on which many programs depend for continued growth and success.

Benchmarking and Behavioral Change

In service line benchmarking, quality outcomes are derived from continuous measurement-and communication of those measures. Ownership and availability of accurate data and timely outcome reporting drive the value of this feedback. Actionable and evidence-based quality outcome measures translate into behavior change-and consistent behavior changes will ultimately result in the cultural change required to ensure long-term success in implementing service line-based performance improvement.


Tara Tesch is a director, healthcare strategy practice, Navigant Consulting, Inc., Chicago, and a member of HFMA's First Illinois Chapter (ttesch@navigantconsulting.com).

Alexis Levy is an associate director, healthcare strategy practice, Navigant Consulting, Inc., Chicago, and a member of HFMA's First Illinois Chapter (alevy@navigantconsulting.com).

Publication Date: Tuesday, July 01, 2008

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