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© The Ireland Corporation, 1998-2003. All Rights Reserved.
Service Line Management Primer
by Richard C. Ireland
Healing is an art.
Medicine is a science.
Health Care is a business.
Over the past few years, service line management has become the business design of choice for hundreds of hospitals nationwide. Service line management has evolved over the past twenty years as hospitals have looked for ways to become more agile, move closer to their customers, strengthen relationships with physicians, become more profitable, and get beyond cost cutting and reengineering to develop more innovative and effective ways to serve their patients.
The reasons for this remarkable change in how clinical services are managed varies widely, but there are a few common themes. From an extended study of hospitals that have espoused this management model, key strategic themes have emerged as consistent with geography, organizational size, and implementation strategy notwithstanding. At hospitals such as Anne Arundel Medical Center, Annapolis, Maryland, Summa Health System, Akron, Ohio, Evanston Northwestern Hospital, Evanston, Illinois, Waukesha Memorial Hospital, Waukesha, Wisconsin and many others, these themes have shaped highly successful service line enterprises and form the platform from which a successful service line culture has been built.
This article examines the context, current terminology, strategic themes, and advantages of a service line model.
BUILDING A CONTEXT FOR SERVICE LINE MANAGEMENT
The product line idea was developed by industry, most notably Procter and Gamble, General Electric, and General Motors, as a way to decentralize decision making and strategic planning to make it more effective, improve cost management and productivity, improve communication and collaboration, and most importantly, to get its product line management teams closer to understanding the needs of their customers. While the strategic business unit approach has undergone change, it is still very strong.
The “product line management” concept emerged in the healthcare industry in the 1980s as an organizational effort to deal with prospective reimbursement, a tight economic environment, declining revenues, along with intense competition which drove the need for improving the way hospitals did business. However, accountability was limited and product line management responsibility was heavily focused on marketing and public relations.
Interestingly, during this time nursing looked at product line management as a major challenge and began to promote their potential role as product line managers. Indeed, one of the central themes of the articles that appeared in the nursing literature in the mid to late 1980s was that nurses needed to develop business acumen.
(Johnson, et. al. 1987)
Many of the gains from product line management were erased with the advent of a new wave of change that began to splash over the healthcare industry in the late 1980s. Hospitals became overwhelmed with the rise of managed care, integrated healthcare systems which spawned mergers and remergers, total quality management, restructuring (again) and redesign (or reengineering), and so on. The need to contain and reduce costs became critical as did the need to build volume - thus profits.
While many hospitals maintained their service line orientation throughout the 1990s, the concept has been latent, only to visibly begin to reemerge around 1997.
According to a 1997 study conducted by the Health Care Advisory Board, consumer choice, unbundling of provider risk, and an increase in clinical product competitors that touch virtually every clinical area are also major factors in the service line movement.
Clinical product companies that are focused on a single, or limited range of specialties, are pervasive. They tend to use an integrated product line model that includes diagnostic, wellness, and treatment services. Many-like Salick Cancer Centers and Cancer Treatment Centers of America-are branded. And many are more ambition than reality, a few have bitten the dust, many are only clinging to profitability, several have formed strategic relationships with hospitals and healthcare systems, and a handful seem to be doing quite well. So it is a mixed bag. The clinical service line offers an effective way to easily counter this competition.
Organizational readiness for service lines has increased dramatically. Gatekeeping, patient triage to the lowest cost setting, seamless hand-off, patient channeling, and capitation, the darlings of the 1990s, lost their cache beginning in 1997. Health plans shifted from channeling to choice and now the strategy is to guide patients to the best care setting. Hospitals began to renew their patient focus.
This reemerged service line management model defines a hospital’s clinical services and allocates organizational resources – human, financial, and strategic – to these service lines and clearly assigns accountability for performance to a Service Line Leader. Why? To deliver the best clinical care, deploy resources more effectively, grow the business, enhance employee and patient satisfaction, and manage costs.
The results are very impressive. Service Line organizations report remarkable gains in strategic growth, significant operational efficiencies, strong physician alliances, effective cost management, heighten or enhanced employee/customer loyalty, and significant advantages in attracting and retaining employees.
Since 1997, hospitals have experienced phenomenal growth, albeit low profit growth, and now face an interesting dilemma. In many areas, they have moved from surplus to shortage and profitable growth is the challenge. Cost reduction and reengineering (redesign), while very important, are producing diminishing returns. A new focus was needed and senior managers have been turning to the service line model.
A FOCUSED BUSINESS DESIGN
This new service line platform integrates clinical and support services on a matrix management grid. The idea is to create a horizontal integration of clinical services along a traditional continuum of care and a vertical integration of support services. Also built into this platform are education and wellness programs, retail models, business development (attracting and winning business directly), strong focus on physician relationships (administrative, economic partnerships and service), all with an increased emphasis on creating enhanced quality and value for patients.
Because the service line is closer to its costs and operational dynamics, its customer, and its competition, hospitals and health systems are decentralizing the accountability for strategic, operational, and financial performance from the corporate or executive office to the clinical service line. This shift in accountability to the service line maximizes hospital capacity by focusing on the best use of space and resources and provides more flexibility, or agility, in managing growth.
We caution that the clinical service line is not the same as the strategic business unit and product line touted by business and industry. The industrial model, except in the broadest sense, does not seem to fit health care very well. Rather, the service line is a tightly integrated, overlapping network of semi-autonomous clinical services. The traditional department structure in many hospitals has evolved into centers of excellence, especially for cardiology and oncology, and ultimately into a clinical service line. In some cases, the service line is a free-standing facility and, in this case, begins then to look more like a free-standing hospital.
SERVICE LINE TERMINOLOGY
Understanding the lingo of service line management is a key success factor and can create unnecessary misunderstandings if not defined early in the process.
Some important definitions in the Service Line Management lexicon are provided below. Taken from a long-term study of Service Lines in place across the country, these definitions comprise the cumulative knowledge of hospital CEOs, CFOs, Chief Nursing Officers, Service Line Leaders, and Consultants.
Service Line. A business enterprise that bundles needed resources to provide specialized, focused care and value to a patient population. The most common Service Lines include Cardiovascular Services, Orthopedics, Rehabilitation, Women’s Services, Children’s Services, and Oncology Services. Service Lines can be “virtual” in that all components are not usually under one roof; services are horizontal and cross departments/disciplines. Indeed, the focus in not on the facility but the services. A Service Line may be created around a business that is already well established or the concept can be used to focus upon a new service or niche.
Service Line Leader. Unlike the “product line manager” of the 1980s, the Service Line Leader owns the clinical business and is fully accountable for its performance. In some health systems, the Service Line Leader is viewed as a “mini-CEO” who is the business leader and strategist. Financial performance, employee and customer satisfaction, quality of care, physician relationships, and strategic advancement are the Service Line Leader’s purview. It is important to note, however, that the Service Line Leader’s business plan must be aligned with the strategic direction of the organization as a whole.
Successful Service Line Leaders have a high level of business acumen, are strategists and risk takers, and revel in growing the business. They may or may not be clinicians; a number of Service Line organizations have chosen non-clinical leaders with business acumen and relationship-building skills.
Service line leaders need to have a 25,000 foot “big picture” perspective on the healthcare enterprise and a 200 foot focused perspective for managing their service line.
Service Line Medical Director. Unlike the traditional medical staff leader who is focused upon quality and peer review, the Service Line Medical Director focuses upon operational and strategic issues as well as quality improvement. The physician leader chosen for this role is more often appointed rather than elected. In some organizations, the physician leader role is played by a department chair who has a dual role in quality/peer review as well as operations/strategy. All of the organizations surveyed compensate medical directors for their roles and have job descriptions in place. The commitment ranges from less than 10 hours per month to full time. The service line medical director is a change agent who can bring together colleagues, build support, address operational performance issues, and work collaboratively with the Service Line Leader to achieve strategic goals. In addition, this physician must be an excellent clinician in order to influence peers and keep the Service Line team focused upon clinical excellence. Exceptional clinical skills must be supported by customer service skills as well.
Support Center Leader. Support departments – Housekeeping, Food Services, Plant Operations, Human Resources, Financial Services, Central Processing, Ancillary Services – are vitally important to the provision of outstanding clinical care. The Support Center Leader understands that service to the internal service line customer is a number one priority; if one isn’t serving patients directly, one is serving someone who is.
The successful Support Center Leader seeks internal customer knowledge, is not territorial or turf-bound, and continually tests processes to find innovative ways to deliver service. Support Center Leaders and their team members often serve as ad hoc members of Service Line teams to keep abreast of key issues affecting performance. This role is often overlooked in the development of successful Service Lines; without strong relationships with support departments, Service Lines will flounder.
Resource Deployment. A defined process must be used to determine what resources to allocate to a Service Line. A well designed deployment process is an objective way to make these decisions. What should be owned by a Service Line? What should be assigned to a Service Line? What is best managed centrally by the Support Center? For example, assignment of unit-based housekeeping staff to a Service Line assimilates the housekeeping staff into the team. Problem-solving and team dynamics change when departmental walls are removed. Marketing, on the other hand, is most often an organization-wide function that supports all business units and is best managed on a centralized basis. Physical therapists can be “owned” by the Rehabilitation Service Line. These issues must be addressed by each organization based upon what is needed to best serve the patient, not what a service line leader may want within his or her bailiwick. A cookie cutter does not exist to resolve deployment issues.
Internal Service Bureau (Agency). Most Service Lines are multi-million dollar businesses; hence they need significant support and expertise available to the Service Line on a daily basis. Service Line organizations must make decisions about how to deploy marketing, finance, and public relations resources to these business units. Some choose to assign an expert to one or more Service Lines; others create an Internal Service Bureau of experts who reside in a centralized department but provide day-to-day support for the Service Lines. Some Service Lines “own” those resources, such as a Business Director hired by the Service Line Leader to provide financial and business development expertise. In this case, there is a clear “dotted line” relationship with the support centers.
Service Agreement. A mutually understood agreement between Service Lines and Support Centers sets forth expectations between the two and is based on trust. Expectations can be related to timeliness of service, frequency, cost and resources allocated. A written Service Agreement can be used successfully; however, it is sometimes used as a hammer to enforce standards or as a one-way commitment. Only a few hospitals use written agreements. For example, the OR can’t expect timely service from Central Processing if OR staff are not clear about instrument needs or case timing. In the most successful cases, the Service Agreement identifies expectations for both sides as well as specific outcomes and also provides for a review of the agreement.
The most successful agreements are based on mutual understanding and benefit and trust.
These definitions paint a picture of a dynamic environment with a clear sense of focus: do what needs to be done to provide exceptional care and service. Reach across territories and turf, form cross-departmental teams, coalesce resources, engage physicians, seek customer knowledge. As hospital leaders continue to look for better and new ways to deliver care, it is likely that Service Line Management will become a model of choice.
STRATEGIC THEMES IN SERVICE LINE MANAGEMENT
Top Ten Strategic Themes
The following strategic themes show up consistently in our research and consulting work with service line organizations.
The patient is first. In Service Line organizations, clarity about the focus upon the patient abounds. Everyone … from the CEO to the front line staff … understands that the organization must put the patient first in order to be successful and gain customer loyalty. Service Lines focus their resources and energy upon understanding and meeting the needs of their patient populations. It is part of their culture.
Service line philosophy is pervasive with clear support from senior leaders. Senior leaders in strong Service Line organizations have a shared management philosophy that communicates every person’s role. From the top to the bottom, every staff member defines his or her role in relationship to the patient: taking care of the patient directly or serving someone who is.
Accountability and Responsibility are clear. As business owners, Service Line Leaders know where the buck stops. Performance expectations and targets are clearly defined; key constituents know who the “go to” people are. Job descriptions evolve over time as the role deepens within the organization, but it’s always documented.
Driven by a strategic planning culture. The strategic plan is a living document, with the Service Line plans as the planks in the organization’s strategic planning platform. The plan is reshaped frequently as market forces and customer needs dictate.
Investment in Service Line Branding. Branding of the Service Line in the context of the health system’s brand strategy is clearly defined. Each Service Line has a brand strategy that is articulated as part of its business plan. Most, in our experience, are designed to reinforce the organization/system brand and image.
Collaboration across Service Lines is expected. Service Lines must
avoid becoming fiefdoms for empire-building leaders; if one Service
Line fails, the organization fails. If one service line is successful,
all service lines and departments benefit. Collaboration across Service
Lines assures that cross marketing occurs, that patients flow seamlessly
across Service Lines, and the lessons learned are shared. Service Lines
are tightly integrated. Organization-wide initiatives such as education
are planned across service lines to bring the right resources and expertise
to the table.
Innovative choices in Service Line Leaders. Service Line Leaders
are entrepreneurs, movers & shakers, strategists. Many Service
Line organizations choose these leaders for these skills, not just
for their clinical expertise. Leaders of clinical businesses may
come from clinical, finance, business development, nursing or other
arenas; traditional choices often fall by the wayside.
Silos and Turf are “Out”, Trust and Social Capital are “In”. In a Service Line organization, the traditional barriers that isolate departments and fragment care are set aside. Relationships are forged – formally and informally – in order to deliver the very best care and service. Social capital, mutually beneficial relationships forged on trust, is one of the key benefits of a service line culture.
Unified Physicians and Service Line Leaders. These leaders act as business partners to attain the strategic and operational objectives of the organization. They build relationships to bond the medical staff with the administrative structure, developing a shared vision for the health system. Physicians know who runs the service line and what his or her responsibilities are.
Role of Support Center Leaders is clearly defined. Successful Service Line organizations clearly define the role of the Support Center Leader, who is held as accountable for resource deployment and with Service Line Leaders for the overall strategic advancement of the service line and organization.
Targets are set and results are measured. With heightened emphasis on business performance, stellar Service Line organizations set goals, measure effectiveness, and embrace change. They believe that what gets measured gets done. Targets/outcomes are clear, concise and understood at all levels of the organization.
“Turn on a Dime” mentality emerges. The successful Service Line organization can rally the “troops” – physicians, management, board, and staff – to change direction quickly to meet market demands. The silos and hierarchy that can impede action are minimized.
Matrix relationships are understood. Dotted line relationships are fairly common in the Service Line’s “virtual” environment. These relationships can clutter the organizational chart and confuse key players. The best Service Line organizations make sure that matrices are clear and that key players don’t have “too many masters”.
THE ADVANTAGES OF SERVICE LINE MANAGEMENT
The review and assessment of hospitals that have successfully implemented Service Line Management lead to the development of key hypotheses about strategic advancement and performance of Service Line Management organizations. The following hypotheses were shaped by face-to-face interviews with top leadership who orchestrated the business model in their organizations, physician leaders, and service line managers who are in the trenches every day.
- In a world of employee shortages, particularly nursing, the
service line offers a more effective way to attract and retain professional
staff. Many of the hospitals that we have worked with tell us that,
even though they still have problems, the service line model seems
to make it easier to attract and retain employees. They feel that
the
service line environment give people more control over their professional
practice and input into the management and planning process.
- Hospitals with a service line model for clinical services will
financially outperform those without service lines. While anecdotal,
the hospitals we’ve studied report increased revenue, market
share, and higher patient, employee, and physician satisfaction. Many
are in the annual top100 hospital list developed by Solucient (formerly
Sachs-HCIA) or U.S. New & World Report’s annual list of top
hospitals.
- Communication among and between service lines is greatly enhanced,
reducing errors, and adding value to patient services. Service lines
promote a high level of collaboration across the organization, significantly
reducing the silo effect while facilitating a strong bias for action.
- The service line model creates closer, more collegial relationships
with physicians resulting in a stronger commitment to the hospital.
Physicians in our study report a high level of overall satisfaction
with the service line concept.
- The Service line model is an effective pathway to developing a truly integrated healthcare delivery system.
It is interesting that the current generation of service line management has evolved naturally within the hospital organization. There is no central authority, major study, or body of current literature on service line management. The hospital executives that we have talked with and interviewed say that it was simply the right thing for them to do. All are very committed to a service line model as their central business focus. For this reason, we are convinced that service lines are here to stay and will evolve naturally within the dynamics and driving forces of the healthcare industry.
Copyright ©2002-2003 Ireland Corporation. All Rights Reserved.
Do not publish or copy without prior written consent.
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