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Cardiology
in Review:
The Past, Present, and Future of Health Care’s
Crown Jewel
by Kristi Montgomery
It’s the business road to success – rapid market growth and increased demand for service coupled with unprecedented technological breakthroughs. But wait! What if the road includes an obstacle course of increased competition, skyrocketing costs, and decreasing revenue? Sound schizophrenic? Then welcome to the world of cardiology, where opportunities abound and threats lurk at almost every turn.
Bob Smith, Director with Tiber Group, a Chicago-based healthcare consulting firm, heads up the firm’s cardiovascular practice division and agreed to a candid interview about cardiovascular services. The following is his perspective on the industry.
If you look at the evolution of cardiovascular services in the 1990s, we had a growth business on all fronts. The incidence of cardiovascular diseases increased; accompanying comorbidity such as diabetes, hypertension, and obesity coupled with an aging population made for a larger but sicker patient population. At the same time more people were presenting for care, there were a number of diagnostic and treatment breakthroughs that resulted in tremendous program growth. It used to be that most cardiovascular services were confined to tertiary settings. In the ‘90s, as technological advances yielded improved diagnostic and therapeutic capabilities, smaller hospitals were able to get into the cardiovascular business and compete more effectively with full-service programs by offering services that they couldn’t provide in the previous decade. Taking services into the community setting improved access to care and allowed for earlier disease diagnosis. During this same time, we saw many interventional breakthroughs as well. Percutaneous and transcatheter interventions became standard in the ‘90s. These interventions were further supported by advances in devices such as stents, which were experimental then but now are standard with angioplasty. Although tertiary centers lost some low acuity business when services were redistributed to community settings, they were able to grow and thrive because earlier diagnosis meant more patients in need of interventional procedures, procedures that are typically only done at facilities with open-heart surgery programs. Overall, these advancements in the ‘90s, both diagnostic and therapeutic, certainly impacted the complexity and patient mix of cardiovascular services. The changes were dramatic, but this was only the beginning.
From a strategic perspective, the single biggest issue looming on the horizon is an anticipated regulatory change. Specifically, there is a growing expectation that the American College of Cardiology and other governing bodies will soon adopt a position that supports provision of primary angioplasty at facilities that do not have on-site open-heart surgery programs. Data repeatedly show that primary angioplasty is superior to thrombolytic therapies, and that less than one percent of patients who receive primary angioplasty experience complications requiring emergency open-heart surgery. The prevailing belief is that primary angioplasty is safe, effective, and good for the community and should be available under specific guidelines and parameters even if open-heart back up isn’t available. When this regulatory change occurs, we can expect many smaller facilities to jump at the opportunity to develop stand alone interventional cardiology programs, and in the process, take a significant chunk of profitable business from incumbent open-heart franchises. Up until now, the barrier for many facilities to developing interventional programs was the need to also provide open-heart surgery. Take away the open-heart surgery requirement and stand-alone interventional cardiology will become a viable and attractive strategy for organizations looking to bolster their bottom lines.
Obviously, some organizations will benefit from the changes, while others will suffer financially. Programs that currently do 200-250 open-heart cases or less will need to closely monitor the financial feasibility of continuing the service. Many of these programs are losing money right now, and when you start to siphon off the interventional business, it will be very difficult for them to survive. Another economic factor that will impact institutions: declining reimbursement rates and inadequate reimbursement for new technology. All of these factors will significantly affect cardiology profit margins, and when you consider the fact that many hospitals have depended on these margins to offset costs of other programs, you begin to get an emerging picture of tremendous change in the near future.
As bleak as this sounds, cardiology is a growing business. The aging baby boomer population is just now beginning to show up on the radar screens; because of this and the nature of heart disease, the market is definitely poised for significant future growth. It just means that organizations have to do things differently by looking beyond cardiology to develop new business strategies. Think of it in terms of the stock market. If you have a portfolio that’s heavy in technology stocks and the market changes, you have to recalibrate and diversify your portfolio. It’s no different in today’s healthcare environment. The job of a cardiology service line manager is to stay abreast of all this and make the tough decisions necessary to run a profitable business.
Smith identified several attributes that are key to successful cardiology service lines.
1) Strong medical staff leadership is critical. Cardiology service lines that don’t have strong medical leaders and champions generally flounder. They may be successful in the short-term, but their ability to respond, react, and stay ahead of the curve through challenging times is seriously impacted. Cardiology service line managers need strong physician leaders who are willing to go toe to toe with their physician peers to challenge the status quo and support unpopular decisions. It is incumbent on service line managers to foster strong relationships with physicians, share information and keep them in the loop on all facets of the business. Doing this proactively with physicians builds trust and makes the difficult times easier to navigate;
2) Facilities are becoming increasingly important for many reasons. If the goal is to do better, faster service and achieve significant economies of scale, you can’t have services dispersed all over the hospital. This creates logistical problems that impact quality and profit margins. Efficient, well-designed facilities help with both physician and clinical support staff recruitment. As reimbursement gets slashed, physicians are looking for better “workshops” where ease of practice is the norm. They evaluate where to settle based in part on the environment in which they practice. Ease of practice and state-of- the-art facilities are also important in attracting clinical support staff, where already critical shortages are expected to worsen in the future;
3) Attracting and retaining physicians and clinical support staff is an ongoing process. It’s difficult to operate a 24/7 operation if you can’t attract and retain staff. Constant turnover and inadequate staffing causes burnout. Successful service line managers need to be tuned into human resource issues that affect quality, performance, and profit. On the physician side, it’s important to evaluate your physician mix. How many of your cardiologists and surgeons are over the age of 55? Do you have a succession plan in place to handle pending retirements? Many hospitals don’t monitor this. And in a time when specialists are in high demand and in short supply, the strongest cardiology service lines are the ones that are able to respond appropriately to these challenges; and
4) Volume is a distinguishing factor in success. You can do everything right – great facilities, strong staff, good leadership, etc., but if you don’t have the volume to support the operation, you face an uphill battle and your ability to sustain a successful program is threatened.
Smith believes that while there is no “one size fits all” model, organizing cardiovascular services into a service line structure makes good business sense. In the business world, it is standard to look at quality indicators, profit margins, market mix, growth and profitability targets, and revenue streams. Reliable cost accounting systems are in place and functional information systems are recognized for the value they bring to the business. In healthcare settings, good data and information systems may or may not be in place. Managers may or may not know the importance of key business indicators to decisions. Knowing what questions to ask and where to find answers is important. For example, if your organization is making a strategic investment in a $50 million dollar heart institute, do you know how much incremental volume you need to realize an adequate return on your investment? Where does your business come from, both geographically and from physician referrals? What percent of cardiovascular net revenue goes toward total overhead? What are the anticipated changes in the industry and how will these changes impact your business? Having a dedicated person to oversee and be accountable for these and other issues is a good strategic move; however, Smith emphasizes the need to find and cultivate service line managers who are able to critically evaluate situations and opportunities and make tough, sometimes unpopular decisions.
Running a cardiovascular service line by consensus is impossible. The manager must be able to build the business, be fact based, make decisions, show why a decision was made, and then move on. The biggest pitfalls in cardiovascular service lines today are 1) the inability to make difficult but necessary business decisions; and 2) poor relationship building with physicians. Smith points out that many organizations have yet to realize the value that a good service line manager can bring to an organization and, as such, compensation is not consistent with the demands of the position. Additionally, many organizations struggle to cede sufficient operating control to their cardiology service line managers – control that is necessary to make a significant impact.
Smith’s analysis for the future of cardiology is cautiously optimistic. The biggest strength is that this is a growing business, with the aging baby boomer population poised to overwhelm the industry. Technological advances will continue to move towards noninvasive diagnostic and less invasive therapeutic modalities. This in turn will increasingly drive business to outpatient settings. As a result, hospitals will be left treating the “sickest of the sick”, which will adversely impact their ability to maintain historical inpatient margins. Low volume providers will struggle to maintain adequate cost/quality/volume relationships. It will be difficult to continue to provide high quality service if growth prospects are minimal and costs exceed revenue. The mistake too many organizations make is they plan for the future based on the past. They assume historical cardiovascular growth and margins will continue in perpetuity. They won’t. The negative margin trends experienced over the last several years are likely to continue. That said, there is a growing opportunity for community-based programs that in the past have been unable to do full service interventional cardiology. Aging baby boomer demand will tax the healthcare system and there will be a shortage of facilities and caregivers. Physician and clinical staff shortages are a challenge, but building better, faster, easier to navigate programs will provide competitive recruiting advantages.
Faced with all this, Smith believes cardiology service lines have two choices:
- Hunker down and try to defend what you have without adequately changing to accommodate future trends, or
- Accept the inevitable and make the strategic decision to be a cardiovascular service leader and participate proactively in the evolution.
Strong leadership from knowledgeable cardiology service line managers is imperative to the process. Smith’s words of wisdom for cardiology service line managers are:
- Stay focused on your strategy. Invest the necessary time to develop a comprehensive strategy for the future, taking into account global and local market considerations, and then “stay the course,” even when competitor moves tempt you to be reactive rather than strategic;
- Keep a very close eye on costs;
- Develop a mechanism to regularly share data (outcomes, cost, profit, and any other metrics that are important), with physicians. Having an open book approach with physicians will make it easier to effect desired change; and
- Don’t shy away from making tough, politically unpopular decisions that you know will benefit the service line in the long run. The most effective cardiology service line managers are confident, visionary, strategic thinkers who possess great business acumen.
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