HCM325-M3-J

EXHIBIT 6.1 Healthcare Service Lines and Marketing

Since the 1980s, many hospitals have adopted the service line manage-ment concept, which has long been established in other industries. Service line management appeared attractive to hospitals looking for ways to become more agile, move closer to their customers, strengthen relation-ships with physicians, become more profitable, and move beyond cost cutting and reengineering to develop more innovative and effective ways of serving their patients. A service line is a tightly integrated, overlapping network of semiau-tonomous clinical services and a business enterprise that bundles needed resources to provide specialized, focused care and value to a patient population. Common service lines are cardiovascular services, orthopedics, rehabilitation, women’s services, children’s services, and oncology services. Service lines can be virtual in that all components may not be under one roof; some services are horizontal and cross departments and disciplines. A service line may be created around a business that is already well estab-lished, or the concept may be used to focus on a new service or niche. The product line concept was developed by organizations in other industries—most notably, Procter & Gamble, General Electric, and General Motors—to decentralize decision-making; make strategic planning more effective; improve cost management and productivity; improve commu-nication and collaboration; and, most important, help their product line management teams better understand the needs of their customers. The product line management concept emerged in the healthcare industry in the 1980s in response to prospective reimbursement, a tight economic environ-ment, declining revenues, and intense competition—all of which drove the need to improve the way hospitals did business. In healthcare, this concept has probably been carried furthest by pharmaceutical companies, which organize their business enterprise by product lines. Many of the gains from service line management were erased with the emergence of managed care and other innovative financing structures in the late 1980s. Although many hospitals maintained their service line orientation throughout the 1990s, the concept was latent and reemerged only around 1997, when hospitals began to renew their patient focus. This revitalized service line management model defines a hospital’s clinical services; allocates organiza-tional resources—human, financial, and strategic—to those service lines; and clearly assigns accountability for performance to a service line leader. This service line platform integrates clinical and support services on a matrix management grid to create horizontal integration of clinical services along a traditional continuum of care along with the vertical integration of support services. Also built into this platform are education and wellness programs, retail models, business development tactics, and a strong focus on physician relationships—all with an increased emphasis on creating enhanced quality and value for patients. Because the service line is sensitive to its costs and operational dynam-ics, its customers, and its competition, hospitals and health systems are able to decentralize accountability for strategic, operational, and financial performance from the corporate or executive office to the clinical service line. This shift in accountability to the service line maximizes hospital capacity by focusing on the best use of space and resources and provides more flexibility in managing growth. Whether the service line concept is an effective approach to healthcare strategy development is still open to debate, and little hard evidence of the merits of this approach exists. Service line management does facilitate the marketing of services in many ways, and the close relationship between operations and marketing that can develop is an advantage. Around 2005, another wave of interest in service line management in healthcare emerged (Litch 2007). This renewed interest reflected a growing emphasis on quality control, integrated services, and physician collabora-tion. From a marketing perspective, the growing need to establish an advan-tageous market position appeared to drive the revival. The significance of service lines to customers is not clear. Ideally, ser-vice lines are designed to address consumer needs, but most consumers probably think about healthcare as a continuum of services that extend across clinical lines, not in terms of vertical silos of care. As service lines become more entrenched in healthcare, a better understanding of their meaning for consumers should be established. EXHIBIT 6.1 Healthcare Service Lines and Marketing (continued) Copying and distribution of this PDF is prohibited without written p