Leveraging Data to Drive Product Line Strategy

and New Revenue

Brian Walker

Senior Vice President

SRK

Today’s Agenda

1. Changing Industry Requires New Strategies

2. To ACO or not ACO?

3. Total Customer Value

4. Churn Rate

5. Strategic Halo

6. Physician Impact

7. Promotable Products

8. Question and Answers

Help academic medical centers, community hospitals and multi-hospital systems throughout the US maximize data and build revenue through:

Strategic ConsultingMarketing Planning and TacticsGateway to Revenue CRM

Collaborate with ACHE, SHSMD, HFMA & HealthLeaders to drive industry research, collaboration and education

Meet SRK: Healthcare Industry Thought Leaders

4

How SRK is helping hospitals improve enterprise strategy to build revenue

• Balancing Acquisition and Retention Strategies

• Breaking Down Silos and Understanding the Interdependence of Product Lines and Services

• Better Insight on Customers and Physician Behaviors as well as their Total Financial Contributions

• Embracing the True Meaning of CRM Across the Organization

• Short-Term and Long Term Revenue Strategies

Creates data driven strategies to help clients find and maximize brand experience and revenue opportunities

Chief advisor on tactical integration, target segmentation and Marketing planning

Urbanathlete, political junkie and dad

Email: bwalker@srksolutions.com LinkedIn: www.linkedin.com/in/brian25walkerTwitter: www.twitter.com/catalyst4growth

Meet Brian Walker: Senior Vice President

Recent Industry Perspective fall 2010

What do Other Industries and Companies do well that we can Adopt?

• “Strategic Halo”• Intelligent Profile• Upstream Feeder• Lag Time• Conversion Rate• Promotable

Products• Cross-Sell Value

• Total Customer Value

• Control Group Lift• Downstream

Utilization• Churn Rate• Acquisition Costs• Physician Impact

Evolving Healthcare Market Demands New Metrics

• Community benefit

• Marketing ROI

• Customer analysis

• Value

• Service line analysis

• Clinical opportunities

• Budget/ Revenue scenarios

• Geographic analysis

• Targeted physician referral strategies

• High-margin opportunities

• Payment segmentation

• Strategic tactics

• Campaign measurement

• Data-driven creative

• Growth opportunities

• Service line trending

How can we leverage these metrics to build enterprise consensus and strategy?

Google “What’s an ACO?” and you’ll get over 300,000 results. Unfortunately, you’re also likely to get close to that many different answers.

ACOs have emerged as a result of recent healthcare reform with a goal of building a model which reduces costs while improving patient care quality.

Good ACO blog: http://franktiedemann.com/

To ACO or Not to ACO…

Our Changing Industry: Meet the ACO

To ACO or Not to ACO. . .Whether or not ACOs become the prevailing model of delivery, wheels of change have been set in motion . . . . key principles of accountable care management will drive change and transformation:

•Moving from volume to value based payments

•Coordinating care across the continuum

•Creating integrated, accountable physician enterprises

•Expanding wellness, chronic care, post acute, retail capabilities

•Building a critical mass of services across defined geographies

•Relying on networked technologies, advanced informatics

•Differentiating on market value – access, quality, cost, relationships

Total Customer Value

Total Value: What is it, Why Does it Matter?

• Total Customer Value is looking beyond a single transaction to take a more robust look at the value of patients over time to build revenue strategies and understand loyalty

• Rare that any industry would look only at the transactional value of a customer as businesses must retain and grow customer revenue to be successful

• Total Customer Value is– Revenue of year one PLUS– 2 years downstream – all services

13

Total Value Client Takeaway for AKMC

Transactional Value

New CV Patients (2006)

• 194 New Patients

• $187,769 Revenue

• $968 Rev Per Visit

• $101,820 Margin

Total Value

Same Patients – Downstream (2006-08)

• 1,117 Visits

• $780,024 Revenue

• $698 Rev Per Visit

• $375,598 Margin

Source: SRK

Total Value Approach Shows Chest Pain Revenue Is 4 Times the Value of the Original Visit and Direct Margin is 3.6 Times

New Chest Pain Patient is Worth $4,021 over three years

But…

14

Churn Rate

Churn Rate: What is it, Why Does it Matter?

• Key metric that shows the ratio of new versus existing customers in any given timeframe

• Can be used to look at the health system overall or by individual facility, product line, even down to the DRG level

• Churn rate helps prioritize acquisition versus retention marketing strategies

• A healthy churn rate is at least 15%+ (New customers)

16

Churn Rate Takeaways

0%5%

10%15%20%25%30%

Hospital A Hospital B Hospital C

Actual Client CV Churn Rates - % of New Patients 2008

Churn Rate

“Hospital A” developed aggressive acquisition

strategies on DTC and MD programs

“Hospital B” focused activity on

experience and loyalty programs

“Hospital C” used HealthGrades

Rankings to target both new and

existing patients

17

Strategic Halo

The Historical View: A Product Line is the Sum of it’s DRGs and ICD-9 Codes

The Silo Model

New Realities Require Enterprise View

Downstream

Downstream Feeders

Feeders

The SRK “Strategic Halo”: Product Lines are Interdependent

Product Line

“Strategic Halos” and their Value

• Data “road map” of services that shows what services patients use before and after the core service being studied

– Creates a clearer picture of clinical integration– Allows for clear segmentation strategies for

cross selling based on customer experience– Expands the view of the financial value of a

customer– Reframes physician liaison efforts

Actual Client Data: A Slight Majority of Provena CV Patients “Enter” From Other Clinical Areas

SRK 2010

Gastroenterology7%

Pulmonary

10%

Orthopedics15%

Endocrinology

18%

Four Feeder Product Lines Represent 50% of“Existing Business" Upstream Business at PSJH

CV Patients

Total Visits

2009CV Patients

Gastroenterology10%

Pulmonary

14%

Orthopedics16%

Neurology

10%

But the Mix of Feeder Product LinesChanges at the Sister Ministry PMMC

CV Patients

Total Visits

2009CV Patients

Plus They Saw “Feeder” Services at Procedure Level Plus Demographic Variables

SRK 2010

Gastroenterology

Pulmonary

Orthopedics

Endocrinology

Alle-Kiski Medical Center Four Services “feed” 35% of CV Visits from Existing Patients Upstream

CV Patients

Total Visits

CV Patients

35% Total Visits

Gastroenterology

Pulmonary

Orthopedics

Endocrinology

Alle-Kiski Medical Center CV Entry Patients Provide 18% of the Visitsto These Four Product Lines Downstream

CV Patients

Total Visits

CV Patients

18%Total Visits

Bill EnglertVice President of OperationsAnd Business DevelopmentAlle-Kiski Medical Center

“Its so simple and makesso much sense.”

Strategic Halo Use Across the Enterprise

Finance: What’s our profitability of a patient or a product line?

Operations: Is our customer experience strong enough to support retention?

C-Suite: Do we have the right products around our central product line?

Physician Relations: Which physicians are driving our “feeder” service lines and benefitting from our “downstream” services?

Strategic Planning: How can we use this data to become an Accountable Care Organization?

Marketing: Where are cross-sell and loyalty opportunities to boost effectiveness and maximize CRM programs?

30

Physician Impact

Drill down for opportunity: Cardiology

32

Typical distribution analysis and customer value

33

Churn Rate Analysis Starts the Insights

34

25% are new, but at lower revenue than existing

And see which physicians are driving new admissions

35

And see which physicians are driving new admissions

36

Top performers here range from 31-45% “new”

Downstream analysis shows New customer value increases by 53% from initial visit

37

The physician data profiles the PCP base

38

And the admitting MDs by visits and revenue

39

Plus the hospital can now understand the dynamics between Admitting and Attending MDs

40

As well as look at which physicians are “receiving” downstream business

41

Identify Revenue Opportunities

Promotable Products: What is it, Why Does it Matter?

Promotable Products is based upon the concept of a “lost leader” used in retail to drive a transaction with the hope of incremental sales

Promotable Products: How can you leverage in healthcare?

Identify services within product lines that can be driven through consumer events such as screenings and educational programs

Strategic ConceptEvents should drive profitable services

Historical ConceptScreenings and seminars are a community benefit

Promotable Products: Make the business case first, understand demographics, then develop tactics(Example: PVD screenings)

45

Lag Time: What is it, Why Does it Matter?

At last a metric that both marketing and the CFO can agree upon and benefit from!

Lag Time: Measures how long it takes a prospect to convert to a patient or how long it takes you to drive an existing customer back into your health system

Other industries use this metric to set expectations with management and integrate other strategies as well as future tactics CFOs can benefit from Lag Time to better predict financial impact and cash-flow from marketing and other tactics

Conclusions and Takeaways

Key Takeaways: What You Need to do Now…

• Build short term revenue and margin• Adopt new metrics• Sharpen data driven strategies and financial reporting• Understand product line interdependence• Maximize opportunities for retention• Become an experience brand

Key TakeawaysWhat You Need to Prepare For…

• Be strategic and focused on near-term growth as well as on creation of future customers, products, and channels.

• Establish critical relationships and linkages across the value chain (clinical operations, finance, purchasing, IT, physicians, partnerships, etc.) to orchestrate alignment to customer needs and service line growth goals.

• Develop a results-oriented service line marketing function that delivers on revenue growth and profit goals.

1

2

3

Service line and marketing leaders must adopt a P & L mindset, transition from promotions-oriented tactics to growth-oriented strategic leadership and promote customer-centered practices.

Looking to ACO…Ask the Right Questions

• Address those elements that will change the success requirements:

– How will changes in policy and reimbursement affect service line demand and financial performance?

– What will be the key levers of profitability and where does the service line stand in relationship to those requirements?

– How will the service line build and achieve distinct competencies in accountable clinical management?

– What needs offer the best opportunity for profitable growth?

– What are the future opportunities for integration of physician, ambulatory, post acute, rehabilitation and retail health services in the service line management model?

Interested in Learning More?

• See how “revenue ready” you are by taking our assessment at www.gatewaytorevenue.com

• Schedule a 1-1 hospital data assessment or executive workshop: bwalker@srksolutions.com

• Schedule a 1-1 Gateway to Revenue online product demo: bwalker@srksolutions.com

• Participate in upcoming free educational webinar programs: http://www.srksolutions.com/Webinars.cfm

• American College of Health Care Executives Cluster Program:– Kiawah Island, South Carolina, April 4-7, 2011

http://www.ache.org/seminars/seminar.cfm?PC=KEYMA

THANK YOU