Measuring service line competitive position. A systematic methodology for hospitals

To mount a broad effort aimed at improving their competitive position for some service or group of services, hospitals have begun to pursue product line management techniques. A few hospitals have even reorganized completely under the product line framework. The benefits include focusing accountability for operations and results, facilitating coordination between departments and functions, stimulating market segmentation, and promoting rigorous examination of new and existing programs. As part of its strategic planning process, a suburban Baltimore hospital developed a product line management methodology with six basic steps: (1) define the service lines (which they did by grouping all existing diagnosis-related groups into 35 service lines), (2) determine the contribution of each service line to total inpatient volume, (3) determine trends in service line volumes (by comparing data over time), (4) derive a useful comparison group (competing hospitals or groups of hospitals with comparable size, scope of services, payer mix, and financial status), (5) review multiple time frames, and (6) summarize the long- and short-term performance of the hospital's service lines to focus further analysis. This type of systematic and disciplined analysis can become part of a permanent strategic intelligence program. When hospitals have such a program in place, their market research, planning, budgeting, and operations will be tied together in a true management decision support system.