We have written extensively on the issue of low-volume cardiac surgery and the challenges faced by these programs in today’s competitive environment. There are many options available to these programs to boost their volume, ranging from reinvestment in program development efforts all the way to divestiture or closure if all else fails. For hospitals that commit to keeping their low-volume program both operational and thriving (please refer to Can Low Volume Cardiac Surgery Programs be Excellent? and Low-Volume Cardiac Surgery “Excellence”), it is important to appropriately analyze your unique circumstances and opportunities, both to understand the reasons for non-optimal volume, and to ascertain reasonable potentials to increase volumes to appropriate levels in the search for optimal program performance and perhaps, its continued existence. While there are many potential program-specific as well as underlying market conditions that contribute to volume achievement, let’s talk about the concept of market “leakage.”
The Definition of Market “Leakage”
In an attempt for hospitals to successfully address the low-volume issue, one of the many strategies that can be applied in these situations requires analyzing and addressing the “leakage” issue. Leakage can be defined as the difference between the size of the market and a hospital’s share of that market. If a hospital’s market produced 100 cardiac surgeries in a specific year, and its share of that same market is 78, or 78 percent, then 22 patients, or 22 percent went to another provider (either in- or out-of-the-market), or “leaked” from the hospital’s market and potential share. Assuming the overall size of the market is reasonable, and there is additional market share to be had, trying to increase market share is a reasonable growth strategy. Note that if there are only 75 to 100 total cases in a given total market, and two hospitals are competing over the same market, then neither program will ever attain sufficient market share to reach moderate to high-volume status. One of these two hospitals probably needs to divest their program. It is important to stress that leakage can be external – originating in the marketplace outside the hospital system entirely, or internal to the hospital system itself. Realistically, internal leakage is the more critical priority as it is under the direct control (or at least influence) of the hospital and its medical staff.
Understanding Market Leakage
Understanding the underlying reasons behind leakage and basing any development strategies on a thorough analysis of your situation is critical. That being said, it is often complex, information-poor and multi-factorial, challenging the hospital to understand the true reasons behind its market position and what changes may be necessary to address any underlying issues. Here are a few thoughts about leakage.
- Understanding the issue begins with information. Acquiring appropriate, accurate and timely market share data is critical to understanding the market. State-specific mandated databases, commercial databases, Medicare-only databases or other sources can be used – each with pros and cons. Our experience emphasizes the criticality of defining cardiac surgery appropriately. (Please see Second in a Series: Low-Volume Cardiac Surgery Programs – Looking “Behind” the Numbers.) Lumping and splitting within the broad category of cardiac surgery can get you in trouble and suggest inferences that are misleading. For example, some canned databases define cardiac surgery as one broad category, which negates the real differences in market size, physician and program capabilities (and thus market share) between CABG and valve surgery. Knowing how many patients go to what hospital for what specific surgical procedure serves as the necessary basis for critical analyses.
- Recognize the legitimacy of some leakage. There are, what I would call legitimate clinical and nonclinical reasons for some leakage. The two most prevalent and logically justifiable are based on technology and program capability and managed care restrictions or exclusive contracting situations. Here are some examples:
- If your hospital cannot meet the minimum volume/quality standards to provide a specific service, such as endovascular valve replacement, patients from your market area should legitimately be referred to another provider who can meet these specific clinical needs and outcome standards.
- If a major employer in your market has an exclusive center-of-excellence-type agreement with, say, the Cleveland Clinic, then eligible patients will bypass your hospital and go there, no matter what the local hospital’s capabilities may be.
- If your hospital lacks a specific cardiac physician subspecialty (e.g., cardiac valve repair vs. replacement capabilities).
Do not forget that achieving 100 percent market share for any clinical service is unrealistic under almost all market circumstances.
- Analyze your hospital’s (and other’s) true capabilities. Once you know who went where and for what, you can ask the question, “Why did they go there and not stay here and come to our hospital.” Part of that answer is program capabilities and reputation. A program assessment will need to ascertain relative strengths and weakness, including service offerings, physician staffing capabilities, overall performance (costs position, quality outcomes, patient experience, etc.), and other factors. Reputation in the market is best assessed with community surveys. Both activities are often best left to an independent third-party content expert.
- What is the competition doing? Once you understand your internal capabilities and your relative strengths and weaknesses, you can assess the competition in a similar fashion. All hospital’s function within a competitive milieu unless they are sole community providers. Understanding the competition is not easy, but it is critical to assessing leakage. Interviewing physicians, major payers, large employers and other providers can often provide insight into you (and your competitor) hospital’s capabilities and reputation.
- Do not forget to analyze referral sources. While it seems self-evident, virtually all cardiac surgery patients are referred by cardiologists. They are the basis for any program volume. Interviewing cardiologists (as well as key referring primary care physicians who are familiar with the referral environment) can often pinpoint issues specific to “internal” leakage. The number and subspecialty of local cardiologists plays an important part in the volume of referrals. If a program gains or loses cardiologists in a specific subspecialty, logically, referrals to cardiac surgeons may fluctuate. Additionally, referrals from cardiologist to cardiac surgeon may be based on clinical issues (competency, sub- specialization, outcomes) as well as non-clinical issues such as personality, communication, availability/timeliness of consults, and a host of others – some of which can be both challenging to identify and address. Realistically, employed versus independent physicians do not necessarily solve the overall leakage program by corporate requests to keep patients within the hospital’s network; internal leakage is more pervasive than some imagine.
- Multifactorial interactions. Internal or external leakage is typically not caused by a single issue, but is multifactorial and interactive, with multiple issues that will need to be diagnosed and treated.
Successfully addressing market leakage can be seen as an issue requiring both appropriate program diagnosis and definitive treatment. For external leakage, appropriate information and assessment can size the market and help define the issue of its provider market shares, composition, competitor advantages and disadvantages and the patient’s ultimate disposition. Internal leakage can be assessed by program capabilities and deficits, cardiac physician subspecialization, overall staff capabilities and referral patterns. Realistically, each of these interdependent factors can be responsible for some portion of the overall leakage equation. Careful and comprehensive analysis is called for and definitive action, no matter how problematic, challenging and potentially requiring an extensive time commitment, will need to take place to maximize program potential, development and success in a specific market.
Low-volume cardiac surgery programs cannot be “rehabilitated” by solving any leakage problem in a vacuum, but within the overall context of the market, can be a vital part of successfully addressing a going-forward strategy.
If you are interested in learning more about strategies to deal with your low-volume cardiac surgery program and a program assessment for cardiovascular services, please contact CFA at (949) 443-4005 or by e-mail at firstname.lastname@example.org.