In building budgets and developing strategic plans, healthcare leaders often struggle to understand and predict the ripple effects of various factors, such as changes in case mix, patient volumes, charge codes, or physician choices about preferred medical devices or supplies. 

The result can be budgets that fail to meet organizational needs, or strategic plans that flounder due to inadequate resource allocation. Service lines support an intuitive structure for organizing initiatives within defined clinical areas or patient populations, which provide visibility into operational trends, capacity, and growth opportunities. Implementing a robust service line planning approach can help healthcare leaders avoid many budgeting challenges with more accurate and efficient modeling of new initiatives, efficient top-down volume planning, and more precise workload projections. 

Mary Washington Healthcare takes a service line management approach to budgeting that incorporates cost accounting and clinical utilization data, allowing its leaders to drill into organizational metrics at various levels. Based in Fredericksburg, Va., the nonprofit health system includes two hospitals, four emergency departments, and more than 80 outpatient facilities and wellness services. Service line planning gives the institution’s leaders valuable insights to better understand current performance and better predict and plan for the future, said Sheila Seal, Director of Decision Support at Mary Washington Healthcare. 

Effective growth planning 

Leaders at Mary Washington Healthcare use service line planning to help assess growth opportunities. An initial evaluation typically includes looking back at growth initiatives the health system took in recent years, as well as broader market data. In evaluating specific service line initiatives, leaders seek to understand the five-year compacted annual growth rate, and where the organization fell within those growth rates. 

In one recent initiative, the health system sought to grow the obstetrics and gynecology service lines at its smaller hospital. The plan involved bringing in specialists from Mary Washington’s other facilities to treat patients at the hospital. 

Defining the right targets to achieve the desired growth was key. A traditional approach would have been to target growing discharges for those service lines the following year, but Seal said that would not facilitate the growth the system wanted to achieve. The goal was refined to increase births rather than discharges. To increase births, they first needed to look upstream within this service line in order to grow women’s health services and encounters and bring in more potential obstetrics patients. 

Health system leaders used Strata’s OnePlan to set inpatient targets using the Sg2 service line metrics. They were able to pull in volume projections from gynecology, obstetrics, neonatology, and normal newborn services to help build the plan. Collecting these data helped inform strategic decisions around related and interdependent service line initiatives. 

Knowing when to drill down 

In some cases, it is helpful to drill further into the data, such as looking at a specific diagnosis-related group (DRG), physician, or even down to the encounter level of detail. 

In growing its cardiology service line, for example, Seal’s team drilled into the data to look at specific cardiology DRGs that required more staff and more expensive medical equipment. To achieve growth targets, they knew they would have to increase the health system’s staffing and supply expense plans to account for growth in those more complex cases.  

“We built out and targeted specific DRGs that we knew were going to increase based on new services we were providing,” Seal said. “Traditionally, we would not go to the DRG level on the inpatient side very often, but this was a significant enough expense per case that we felt it was warranted to drill down to that level.” 

Having more robust data for a comprehensive plan also helps to garner the buy-in of physicians and other clinicians ultimately responsible for executing on the growth plans. They see the health system will provide the resources and support needed to reach clearly defined goals. 

“The nice piece is that I have that flexibility to go down to the level of detail that I need depending on what major changes I know will affect the plan,” Seal said. “You can drill down into a subsequent layer of detail so that you can impact change in a very precise manner.” 

Accounting for clinical variation 

When looking at high procedural areas such as surgical services, there is significant variability in how specific providers practice, including how long their cases take. Looking at the data at an individual clinician level helps in more accurately defining staffing or supply needs. 

“When we’re planning anything for the operating room or our outpatient ambulatory surgery center, we plan cases by provider,” Seal said. “We know the providers roll up to different service lines and different expense structures. Going to the provider level helps you to get a more precise plan, especially when you’re looking at those high procedure levels.” 

In some cases, the health system may consider changing the types of procedures done at a surgery center, such as implementing a new type of implant. For those instances, Seal said it is helpful to drill down to the procedure or Current Procedural Terminology (CPT) level. 

When Mary Washington implemented an initiative to phase out a higher cost orthopedic implant in favor of a more cost-effective option, Seal was able to adjust the CPT code volumes in the plan accordingly. 

“That’s something that you can refine as you build your plan,” Seal said. “You have that flexibility to go down to the level of granularity that you need in order to make the plan as accurate as possible.” 

More accurate volume planning 

Service line planning also helps in predicting patient volumes and managing hospital capacity. Seal said her team is able to use the Strata system to look at current and projected volumes in individual units and identify where adjustments may be needed. 

“It’s less of an issue at the smaller hospital, but my medical units on the larger hospital are typically always full,” she said. “Sometimes I have to move the patient equivalent days or move patients out of one unit to one that’s not full.” 

Planning for emergency department (ED) volumes can be challenging because there is variability in where those patients go after they leave the ED. Some may be released, while others are moved to inpatient, observation status, or outpatient services. 

The service line planning tool allows teams to filter based on the CPT codes that are driving ED visits, and look at specific care sites, patient mix, or other factors. At Mary Washington, an examination of ED patients that were moved to observation status revealed that some of the patients should have been admitted to inpatient care. The analysis prompted the health system to adjust its processes and future projections. 

“It allows us to make adjustments so that we can more accurately determine what we think our true volume is going to be,” Seal said. 

Conclusion 

A major benefit of service line planning is that it helps you understand interdependencies and how the different operational functions flow together. For example, how a change in CPT code or device type might affect future charges, staffing needs, or follow-up care in other areas. 

“The main thing is understanding how the pieces flow,” Seal said. “You want to make sure service line planning is not just something that you’re using for the budget, that it’s going to help you make decisions related to staffing, supply chain, or other needs.” 

The service line planning approach also is helpful for continuous improvement efforts. Seal said she pulls down assumptions by DRG, inpatient, outpatient, and service line and monitors those throughout the year to better plan for the following year. 

“I monitor it all year to see how close the plan is to reality,” she said. “That allows me to learn and figure out what I can do to make the plan for next year more realistic. It is an ongoing process of learning year after year.” 

In addition to making it easier to develop more accurate plans, Seal said the system has allowed her team to become more efficient over time. In the beginning, developing plans requires trial and error to identify the best metrics to measure and how to slice them, but it gets easier the more you do. Developing service line plans that used to take multiple days now can be done in a few hours, she said. 

“My advice is to start small, such as with a smaller hospital or physician group,” Seal said. “You don't have to get to that level of granularity for everything right away. You can start small and build confidence as you build an understanding of the different levers and of the system.”