Improving Service Line Performance with Healthcare Business Intelligence

Originally published April 29, 2008

A popular place for healthcare providers to begin developing business intelligence applications is with service line analysis. After all, most of the organization is already organized into service lines. Doctors and most other clinicians are hired into and practice in specialties. Facilities, equipment, supplies and medications are lined up this way as well. Insurance coverage is provided for specific types of services, and claims are generated, adjudicated and paid for these specific services. Most people inside as well as outside the organization understand service lines.

Despite this strong alignment along service lines, many provider organizations such as hospitals, physician practices and others struggle to get a clear, comprehensive picture of the performance of their service line portfolio. There are a number of obstacles to getting this picture. These obstacles can be political, procedural and technical in nature. Without such a picture, though, a provider organization can experience significant slippages in its day-to-day financial, clinical and operational performance. In addition, strategic investment decisions are likely to be severely hampered without a view into the trends and emerging patterns – both within as well as across service lines.

Business intelligence can help. First of all, business intelligence and analytics can help to get a comprehensive picture of the standard financial and clinical performance measures. But, perhaps more importantly, business intelligence can help the organization to build on these standard measures to find trends and patterns within each service line, across service lines and even across dimensions other than service lines.

Let’s start with a definition.

What are Service Lines?

Every business has “lines” of some sort. Manufacturers have product lines. Retailers have departmental groupings called “softlines” and “hardlines.” Insurers have lines of business. Accountants, attorneys, doctors and consultants organize themselves into practices, which are essentially service lines. Even governmental institutions have “lines of business,” but these are known as bureaus, departments and divisions.

Healthcare providers, being service businesses, have service lines as well. Different types of providers have different types of service lines. For instance, hospitals tend to have surgical lines of business such as cardiac surgery, orthopedic surgery, colon and rectal surgery. Other service lines in hospitals include emergency medicine, intensive care and birthing centers. Physician practices have different types of service lines, usually focused on the type of anatomical specialty being practiced (e.g., cardiology, endocrinology or hematology) or the group being served (e.g., family practice, geriatrics, gynecology or pediatrics). Still other service lines focus on the patient’s activities (e.g., aviation medicine, military medicine or sports medicine).

These are the traditional service lines. There are also some emerging service lines such as retail clinic services, medical tourism services and integrative medicine services.

Each of these types of service lines has a standard set of measures of success including financial success, return on investment, service level success, marketing and branding success, and clinical quality success.

Service line performance analysis is a highly complex and ongoing process, which makes it a particularly ripe area for the application of business intelligence. Leaders such as service line directors, financial managers, practice administrators and chief operating officers, as well as strategy and marketing managers need a variety of information from a number of sources in order to plan, develop and grow the organization’s service lines.

Using Business Intelligence for a Variety of Decisions

Your organization needs analytics at every stage of development of its service line portfolio. Some examples include:

  • Choosing service lines to invest in. Demographic trends help you to choose service lines that are right for your hospital or practice. For instance, if your patient population is getting younger, then you may want to add (or increase) investment in pediatrics.

  • Determining the level of investment. Market information is needed to conduct feasibility studies, prepare financial and market projections, and measure projected direct and indirect return on investment.

  • Setting goals for your lines. Financial information helps you gauge the direct and indirect impact of each new or existing service line on your bottom line. Marketing, sales and service information helps you identify direct and indirect market share and growth benefits of the service line.

  • Allocate resources more effectively. Staffing, equipping and supplying your service lines can be done more effectively with information about the performance of the line and through the ability to drill into the details of that performance.

  • Maintaining profitability. Performance trends help you on both ends of the profitability spectrum. On the revenue side, they help you position and market yourself to your “feeders,” (i.e., referring organizations). Also on the revenue side, analytics help you understand changes in payment and reimbursement patterns so you can adjust your operations to improve them. On the cost control side, this type of information helps you negotiate better contracts with vendors of equipment, supplies, labor and services.

  • Changing direction for your lines. Information about the competition and patient demographics helps you understand if you are delivering your services through the right channels (e.g., campus-based delivery vs. retail clinic-based delivery).

  • Retiring a service line. Trend data helps you decide whether or not to get out of a service line. You may find that your market is shrinking or your services are not meeting goals. Conversely, your service line may be growing, which makes it a potentially salable asset.

Typical Service Line Measures

Every organization and every service line portfolio is different, but there are some standard performance measures for hospitals and physician groups. These include:

  • Profit & Loss (P&L) Measures. Outpatient revenues, inpatient revenues, reimbursement rates, adjustments, write-offs, costs of labor, materials, overhead, direct contribution margins, (i.e., within the service line) and indirect contribution margins (i.e., benefiting another complementary service line).

  • Investment Measures. Facilities purchases, equipment purchases and cost of various forms of capital.

  • Operational Statistics and Ratios. Cases, clinic visits, discharges, patient days, average length of stay (ALOS), case mix index (CMI), emergency room (ER) visits, admissions and productivity measures.

  • Marketing Measures. Brand strength, consumer perception/engagement, satisfaction (patient, provider, prospect) and referral rates

  • Clinical Quality Measures. JCAHO and HEDIS scores.

In addition, to effectively analyze service line performance requires the ability to look at the data from a number of perspectives. For instance:

  • Across time (year, month, day)

  • Across the organizational structure (region, facility, campus)

  • Across specific service activities (diagnosis related grouping – DRG, diagnosis, treatment)

  • Across payers (payer type, payer, plan)

  • Across demographic categorizations (age, postal code)

  • Across providers (provider type, specialty, physician)

Slicing and dicing the data this way leads to the ability to find opportunities and uncover problems along the entire life cycle of the service line.

Next Steps

Regardless of where your organization is in terms of development of its service lines and in the development of its business intelligence and performance management capabilities, it just plain makes sense to exploit your data to the fullest to make both more successful. Your organization as a whole and your service lines in particular will be more profitable, more marketable and more exciting as a result.

Thanks for reading!

  • Scott WanlessScott Wanless

    Scott is the Healthcare Analytics Director for Cipe Consulting Group. He has more than 30 years of experience in business intelligence strategic planning, analytics application development and business analysis across numerous industries including hospitals, physician groups, healthcare payers, laboratory research, insurance, lending, manufacturing, retail and state government. Scott can be reached at scott.wanless@cipeconsulting.com.

    Editor's note: More healthcare articles, resources, news and events are available in the BeyeNETWORK's Healthcare Channel featuring Scott Wanless and Laura Madsen.

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