The following post was written by Sarah Montijo, MHA, Director of Business Analytics and Consulting Executive for Halley Consulting Group.
Sit in almost any hospital leadership meeting focused on growth or strategy, and you will likely hear the phrase market share—the percentage of admissions the hospital captured relative to the market basket, or total admissions for a given area. The competitive landscape of healthcare makes monitoring your market share trends, and understanding what and who is impacting those trends, a must.
Gone are the days when hospital CEOs could focus strictly on managing the hospital. Now they must also manage their market. These hospital CEOs, whom we often refer to as market managers, have to appreciate what drives their market share by understanding the relationships and affiliations that exist with physician practices in their community, and by forging relationships where they are currently absent. Market managers should consistently ask themselves three questions:
- Where is my market share?
- Who holds my market share?
- What are they doing with it?
To answer these questions, market managers should focus their attention on primary care physicians (PCPs). A typical PCP captures and retains 2,000 to 5,000 lives, also known as market share. Patients depend on their PCPs for most specialty referrals and comply with those referrals a vast majority of the time. Stated simply, PCPs have the ability to influence where their patients seek specialty and hospital care, and—perhaps more importantly—to influence where they do not seek care. Our experience has revealed two key trends:
- Many of the referrals PCPs make are based on the relationships they have with specialists, and
- Patients acknowledge the benefit of an integrated delivery system and are more likely to seek hospital care from the network that employs their physician.
Although PCPs typically do not generate capital themselves, they do generate market share. Hospitals and specialists with strong primary care affiliations have the opportunity to attract that market share, and the subsequent visits and procedures generate capital. Each referral that does not go to affiliated specialists and the hospital represents a lost opportunity to generate capital, or manage the risk pool.
As we further progress into the accountable
care arena, market management will become
increasingly critical to healthcare systems.
Just How Important Are PCPs?
We analyzed the referral behaviors of primary care providers in a study we conducted with athenahealth titled, ReferralView: A First Look at National Referral Patterns from Primary Care Offices. We found that family practitioners have an 11% referral rate for specialty consults and a 14% referral rate for diagnostics. The figures for internal medicine are similar: 11% for specialty consults and 18% for diagnostics.
Let’s look a little closer at the data by zeroing in on how the numbers might affect a particular specialty. We’ll use orthopedics as an example. Family medicine physicians have a 0.9% per-visit referral rate to orthopedics. This means that if a given family medicine physician has 4,000 visits annually, he or she will generate approximately 451 referrals, of which 37 will be to an orthopedic surgeon. Health systems can use their own data to determine what those 37 new patient orthopedic visits equate to in terms of imaging, surgical, and therapy dollars.
A Changing Industry
As we face changes and challenges in the healthcare industry—among them accountable care, primary care shortage, evolving dynamics in the physician workforce, and alternative care methods (such as retail clinics and virtual clinics)—we must be thoughtful and deliberate in our strategies to align with the right primary care providers. Without a strong primary care base, and without a solid primary care strategy, too much is left to chance. And, in an industry that is perhaps more competitive today than it has ever been, leaving market share to chance is a risk no hospital can afford to take.
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