Wal-Mart annihilated mom-and-pop retailers and enamored rural customers by offering bargain prices and convenient one-stop shopping.
Starbucks Coffee Co. rang up sales by hawking its beans from new venues, such as airports.
Hospitals, too, can build market share and pump up profits by taking some pointers from top corporations. Learn how by attending the ACHE's seminar titled "Bottom Line Growth: Fortune 500 Strategies." The session is scheduled for 10 a.m. and 2 p.m. Monday, March 8.
Robert Kiely, president and chief executive officer of Middlesex Health System, which operates 140-bed Middlesex Hospital, will outline the process his Middletown, Conn.-based management team followed in its quest to identify and capture lost revenues. He will be joined by L. Rita Fritz-Unruh, a partner with Growth Inc., a Barnegat, N.J.-based consulting firm. She'll describe the firm's model for boosting revenues.
Hospitals haven't traditionally focused on expanding top-line revenues, but Fritz-Unruh says that's the wave of the future. "Growth done well has to do with the patient," she says. "I honestly believe the only way you can grow is by giving people better service."
Like many hospitals over the past decade, Middlesex has coped with increasing reimbursement pressures by slashing expenses.
What worried Kiely was the hospital's stagnating market share. Based on fiscal 1996 data, its share was holding steady at about 64%.
The problem came to light through the hospital's obstetric services. In 1994, Middlesex opened a state-of-the-art birthing center, a natural investment for a sole community hospital serving one of the state's most affluent counties. Why then, Kiely wondered, was one of every two women leaving town to have her baby? To keep patients coming, he knew he needed to do more than cut expenses. Otherwise, Middlesex risked becoming "the most efficient organization that had ever driven itself out of business," quips the ACHE fellow.
In 1997, he enlisted Growth Inc. Applying the firm's methodology for assessing market opportunities and sizing up the competition, Middlesex managers identified $70 million worth of business it was failing to capture, including $27 million in the hospital's primary service area alone. Teams comprising hospital managers, physicians and community leaders honed the most promising growth strategies, building on existing strengths and resources, particularly in the outpatient arena, which accounts for 59% of hospital revenues.
In radiology, for example, Middlesex had been turning away business it couldn't accommodate. Managers figured they could generate another $500,000 in revenues by spending $250,000 to hire more staff and expand hours of operation. Other money-making ideas included seeking laboratory service contracts with area nursing homes, opening a joint-venture magnetic resonance imaging facility, pursuing a private-duty nursing service and recruiting obstetricians to the area.
Although the hospital's birth rate remains flat, managers continue to study ways to breathe life into that service.
Because of a lag in market-share statistics, Kiely doesn't know how many points the hospital has gained in the first seven months of implementing 30 separate revenue enhancers. But the bottom line speaks for itself: In 1998, Middlesex generated $2 million in extra revenues and added $300,000 to its $4 million bottom line. This year, it expects to bring in $3 million of additional revenues and add $500,000 to net income.
Kiely acknowledges multiple motivations, including a strong financial one. "But beyond that, hopefully you're improving your overall reputation in the community," he says.