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Business as usual is no longer an option for hospitals and health systems. An increasingly competitive marketplace, changing payment methodologies and ongoing pressure to deliver consistent, high-quality care is forcing hospitals to change their thinking about traditional models and the short- and longer-term plans for the portfolio of services they provide. For many organizations, trying to sustain a position as an "all things for all patients" business entity is no longer a viable long-term strategy.

As patients, employers, government and insurers increasingly emphasize value over volume, boards and CEOs will find themselves confronted by difficult decisions involving the deployment of increasingly scarce resources, including capital, physical space, talent, and clinical and management time.

In the boardroom, many trustees lack a useful framework for examining the strengths, performance and potential of their organizations and, as a result, often only view them in an enterprisewide form. Clinical service lines can be an increasingly useful way of evaluating and prioritizing important investment decisions.

Partnered Leadership

A service line model defines clinical services across the continuum of care and beyond the walls of the hospital. In the current climate of value-based purchasing, service line leaders no longer are limited to the acute care setting. Mature models and leaders are focused on pre-hospital and post-discharge settings to prevent complications and avoid unnecessary and unreimbursed readmissions. The goal is to deliver the best clinical care to a defined patient population, deploy resources effectively, expand market share, enhance employee and patient satisfaction, eliminate waste and rework, and manage costs.

In the past, service lines were led by a nurse or manager with operational focus and responsibilities that included clinical departments, accommodating multiple physician requests and working with a medical director to assist with physician issues. Typically, the functional nature of such models was hospital-centric. Today's clinical service line requires partnered leadership and should consist of a physician and an RN with an MBA and a team with expanded clinical and operational responsibility for:

  • pre-hospital processes and outpatient services
  • inpatient service line nursing and departments
  • post-discharge clinics for chronic disease management
  • emergency room programs and systems to avoid unnecessary readmissions and one-day stays
  • integrated information systems to allow connectivity to multiple sites of care; connectivity to providers who often provide testing in their offices or joint venture arrangements reduces the expense and patient impact of duplicate testing and services.
  • partnerships with post-acute services that demonstrate quality outcomes
  • top decile performance in quality, financial and patient experience metrics
  • community outreach and business development

A successful clinical service line structure allows organizations to manage a portfolio of services in a way that optimizes resources, improves patient experience, enhances physician and hospital alignment, and improves profitability. Successful organizations have a clear sense of goals, objectives and accountability for well-defined performance metrics relevant to each service line. Implementation requires strong communication skills and channels across all service lines, education and issue resolution in a matrix environment. Every member of the C-suite needs to actively demonstrate commitment and support for the model to achieve success.

Of course, not every organization that has gone down the service line path has achieved its potential, and there are pitfalls to avoid. Typical barriers to service line success are:

  • Unclear roles, responsibilities, objectives and lack of performance metrics. A clearly defined vision and business plan assigning responsibilities and measurement of expected outcomes on a service line report card ensure a clear direction and accountability for success.
  • Competing or unclear priorities between operational and service line leaders. A service line leader can't be buried in the daily "operational weeds," assigned to multiple hospital committees and projects, with no time to implement the service line plan. Successful service lines have C-suite involvement and direction with regular reporting to a board strategy committee to assure alignment with organizational goals.
  • Unclear success factors. A culture of transparency and strategic agility is the foundation for strong service line performance. Trustees should expect to understand what resources are needed and the existing barriers to achieving success.
  • Unknown or unmanaged resource constraints. Service line and operational leaders need to closely coordinate program development and required resources. For example, a surgical director independently approving the use of new devices or implants outside of a service line-negotiated contract can impact profitability significantly.
  • Failure to define service line DRGs and codes properly. Service line leaders need to understand and accurately define their service lines to measure performance against external benchmarks, accurately compare with past performance and model future forecasts.
  • Failure to secure physician and senior leadership support and engagement. Trustees should expect the CEO to hold senior leaders accountable for successfully operating in a matrix environment and engaging physicians early on in service line planning.
  • Empowering the naysayers instead of setting alignment expectations up front. There is no room for "we've tried this before" in this environment. Hospitals need leaders who are receptive and challenged by looking for ways to redesign and deliver care in a different way.

10 Questions

Before adopting a service line management model, trustees should consider fully their organization's readiness and resources in this area. Here are 10 questions trustees should ask before building a service line model:

1. Do we have physicians interested in developing an innovative model for alignment? Implementing models that better integrate physicians in service line development and performance offers opportunities for shared risk, new program development and improved outcomes by aligning incentives across the care continuum. With the rapid advancement of medical treatments and technology, physician engagement and partnership with the service line leader are critical to the analysis and decision of when to adopt or not adopt new clinical innovations.

2. Do we have the full support of the C-suite and a willingness to let go of traditional structures? Implementing culture and organizational change can be challenging for most hospitals, and resistance often comes from senior management who grew up in traditional structures. Start by providing education on how the new models can provide better value, and encourage communication to help overcome resistance. In some cases, a change in management may be required to successfully build your clinical service line model.

3. Do we know our hospital aysician data, and are they measured, nd phtrended and reported transparently? Establishing key service line metrics that can be shared at all levels of the organization sets clear expectations and goals. Knowing and openly reporting data at the individual unit and physician level are great motivators for needed change. Timely access to data and resources to develop service line reports and a balanced scorecard or dashboard of service line results are essential to success.

4. Do we have Lean or another performance improvement methodology to identify waste, facilitate process improvement and redesign care? In the era of ever-changing reimbursement, facilities must have a rapid, systematic and rigorous approach to evaluating clinical and operational processes to ensure quality outcomes, optimal efficiency and value for patients.

5. Do we have clinical leaders who can facilitate change and demonstrate strategic agility? Service line leaders must possess the skills to course correct and quickly implement strategy changes when indicated. New technology and changes in medical staff may bring additional value to the service line or be a missed opportunity if leaders are not adept at evaluating and implementing strategies in a timely manner.

6. Can our strategy be scaled rapidly across other clinical spaces? Hospitals may choose one or two key areas to begin clinical service line strategy, but the infrastructure and processes developed should allow for streamlined implementation in other clinical spaces as opportunities are identified. Systems to connect the dots of distinct services to move toward accountable care and population-based models also will be important in the future.

7. Do we have the appropriate infrastructure to support service line leaders in their roles so they can execute approved plans? One of the single biggest failures in service line strategy is because leaders are lost in the daily operations and unavailable to work with physician partners to implement established business plans. Evaluate existing support departments and determine what functions can be centralized and what needs to be allocated to the clinical service line to assure top performance and return on investment.

8. Do we have the ability to track and trend the patient experience in real time through information technology systems, rounding and real-time feedback? Today's service line leaders need a strong IT infrastructure that allows them to identify issues and potential problems on a concurrent basis. For example, the ability to monitor physician supply use in real time alerts leadership if established vendor or clinical protocols are being ignored, thus avoiding unexpected changes in profitability or outcomes.

9. Do we have the mechanism to coach and train new physician leaders to help them be successful in leadership roles? Most physicians do not understand hospital reimbursement and the nuances of operations, and they may not have experience in managing others' performance improvement. To ensure successful partnerships, hospitals need to provide ongoing education in delivery system transformation and leadership development to engage and support physician champions.

10. Do we have the ability to successfully implement and manage new payment models that would be attractive to payer groups? Aligning hospital and physician incentives through new models such as bundled payment creates opportunities to share savings with physicians, build narrow networks and make changes to ensure service line success.

Prepared for the Future

With the changes under way in care delivery and other market dynamics, a service line portfolio approach can add value to the patient experience, improve clinical outcomes and enhance cost-effectiveness. Organizations that can align their resources successfully, form effective partnerships with their physicians around evidence-based best practices, eliminate rework and duplication, reduce lengths-of-stay, prevent avoidable admissions, and demonstrate transparency with a focus on value over volume will navigate the future successfully as it unfolds. A strong clinical service line strategy can help hospitals transform their services and staff, creating a culture of value and enhanced patient experience.

Peggy J. Crabtree, R.N., M.B.A. (, is vice president, and Stephen D. Gelineau, M.S. (, is senior vice president, The Camden Group.

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