Hospitals around the country are focused on growth, for obvious reasons. With reimbursement increasing at 2-3 percent annually and costs for nurses and drugs increasing at 5-6 percent a year, growth is essential to survive.
In our experience, growth can best be achieved by focusing on your physicians – growth in their businesses, growth in their skills, and growth in the numbers that are loyal. The following seven questions are offered for consideration as you focus on your physicians as a prime vehicle for growth.
- Can you increase patient volume for your physicians, increasing “same store sales”? This is a multi-faceted issue, with core tactics including: physician liaisons driving referrals to specialists, branding to build patient interest in services, physician referral lines, joint promotion along service lines, to mention a few. The answer will vary by market, but the question is core to any good growth strategy.
- Can you increase the catchment area from which you draw? Geographic growth, or making inroads into new markets, is essential for growth. Placing loyal primary care physicians in these new markets or soliciting referrals from existing primary care physicians will increase your access to patients.
- Do you have an adequate primary care base? Translating growth goals into primary care referrals and growing the primary care base to the size needed is frequently a core growth tactic. Based on the number of referrals generated by PCPs in your market, or based on the national manpower models which allow you to contrast the required number of PCPs vs. specialists, you can gain an understanding of the referral base needed.
- Can you increase the rates you are paid? This type of growth requires market and negotiating power, power which comes from consolidation and brand strength. Physicians can play a key role in this approach, as hospitals that have acquired large numbers of primary care and specialty physicians will tell you. They are better positioned to demand higher rates.
- Do you offer the most profitable services? Defining the most profitable services can be tricky. National data will push you toward surgical and cardiac services for inpatient, imaging and surgery for outpatients. However, the reality of your market may vary from national norms, especially if the managed care reimbursement does not follow national patterns. Defining the profitable services will help you to define investment priorities for growth. But, there is a corollary question…
- Do you have strong physicians in those services targeted for growth? Once you have made a judgment on the service line priorities, you must critically evaluate the organization’s and medical staff’s capabilities. We commonly see two types of problems. One is gaps in medical staff capabilities – basically, a key skill is absent. With some finesse, that can usually be addressed through recruitment. The more complicated discussion comes if you have a weakness in an existing physician. If you are not able to address the problem, you need to change your priorities because you are unlikely to be successful growing a service with significant weaknesses.
- Do you have a retail medicine strategy? This question is related to the longer-term, but it is clear that hospitals must learn to build products that consumers will pay for out of their pockets. This may be in retail operations where services are not covered by insurance. Likewise, it may be for services purchased by patients under high deductible plans. In any case, the ability to deliver services that are valued by patients will be increasingly crucial. And, working with your physicians as you develop those services will be crucial, as well.
This discussion is not intended to be all-inclusive, but, rather, is designed to help you begin the thought process. The seven questions presented have served Healthcare Strategy Group well as we have worked with clients to develop effective growth strategies.