2020 perspectives on healthcare

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Effective management
in hospitals:
Se rvice Line Management

Introduction

S
ervice Line Management is one of the latest approaches to improving hospital management, and is being
strongly promoted by Monitor. Based on our experiences in implementing Service Line Management, we
believe that it has potential to be a powerful approach for the health service. However, while many hospitals
have attempted to implement Service Line Reporting (SLR) as a pre-cursor to SLM, fewer have embedded the
Service Line model successfully. Through helping hospitals overcome these barriers, we have identified a number
of potential actions to guide the leaders of any hospital embarking on the service line management journey.

What is service line management?

Our view is that SLM comprises the four key elements set out by Monitor1 (below) plus a fifth and frequently
overlooked element – that of business management capabilities. Together they form an integrated framework.

1. Organisation structure Trusts identify their service delivery units and move towards an organisation structure
based on service lines.

2. Strategic and annual planning process A planning process is established. This enables clinicians and managers
to identify the opportunities and threats in their specialist area and work towards agreed objectives.

3. Performance management A system is put in place to link each service’s objectives to team and individual
performance. This is monitored through a cycle of performance review meetings at each level of the trust.

4. Service-line information Service line-reporting (SLR) provides timely, relevant information, giving the financial
and operational picture for each service line.

5. Business management capabilities A structured approach is taken to develop the knowledge, skills, and
behaviours required to maximise the benefits of the new organisational design that reflects the change in roles
for clinical leaders, managers, and information and financial support staff.

Our experience supports Monitor’s view that SLM has the potential to bring about at least four important benefits2:

• Better patient care By bringing clinicians to the forefront of service development and promoting a culture of
continuous improvement, SLM improves services and results in better patient experience.

• Providing the big picture Looking at cost and profitability as a portfolio of service lines, rather than for the trust
as a whole, means trusts can make informed decisions about how to manage existing services, prioritise new
developments, or plan investments.

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• Empowering clinicians to take the lead SLM puts clinicians at the heart of service-line operations. They can
take charge of the development, performance, and quality of their services, reshaping service delivery to meet
direct patient needs.

• Maximising scarce resources The robust reporting systems that underpin SLM give clinicians and managers the
information they need to maximise the productivity of scarce resources and increase overall efficiency. 3
Only a minority of hospitals have fully adopted SLM. Although the potential benefits of SLM are clearly articulated,
the challenge is to increase both the speed and breadth of implementation and its impact on performance.
The escalating need to deliver higher standards of care in a financially challenging environment increases this
imperative.

What are the obstacles to implementing service-line management?

There are a number of pitfalls which can hinder the successful implementation of SLM within a hospital. These
include:

• Over-focus on communicating the financial benefits of Service Line Reporting – the development of SLR was
predominantly concerned with helping hospitals to understand the profitability of different service lines. Whilst
this is an important aspect of SLM, it created a situation where the change to service lines was seen as ‘Finance
led’. For implementation to be successful, SLM needs a Finance Director who is prepared to champion a
major change in a hospital’s approach to financial management as well as a set of financially interested clinical
leaders. This narrows a hospital’s potential pool of ‘early adopters’ and role models. Where Patient-Level
Costing systems have already been implemented, frequently the information has not been widely used or
understood by clinical teams. As a result, data quality may have remained poor, undermining levels of trust in
the new ‘reporting driven’ approach which SLM depends on. The financial aspect of service line reporting is
only one part of what should be a balanced approach to performance, incorporating safety and quality, patient
experience and access, operational efficiency, and staff capacity and capability. Unless a rounded view of
performance is adopted, poor decisions may be made and staff groups may be alienated by the process.

• Lack of organisational design expertise – SLM requires a fundamentally different organisational structure and
set of underpinning processes for most hospitals and this is a complicated endeavour. There are a large
number of design choices in any organisation and the complexity and interdependency inherent within
most healthcare provider organisations mean that implementing a new organisational design requires
particular expertise as well as time, effort, and consultation to maximise the likelihood of success. Half-
hearted efforts or simplistic redrawing of boxes on an organisation chart without considering the critical links
and interdependencies, the supporting governance processes, and the re-aligning of clinical and corporate
support services all act as a barrier to successfully embedding SLM. The ability to define service lines at a
meaningful level for clinical groups, whilst at the same time attempting to construct a manageable number of
business units is one such tension that has to be managed.

• Insufficient support for new Clinical Directors – successful SLM requires a whole new set of skills, knowledge
and behaviour across much of the organisation. A lack of investment in the necessary capabilities means
that even if Clinical Directors are convinced of the benefit, and an effective organisational structure and
underpinning processes are in place, there are three major challenges where Clinical Directors often need
support: leadership development, business management and the provision of timely, reliable information
covering all aspects of performance. Capability gaps in any of these areas will limit the effectiveness of SLM,
and may lead to Clinical Directors feeling insecure and becoming defensive in their reactions to the new
reporting outputs.

• Unclear definition of performance expectations and a lack of incentives – effective SLM typically provides a
completely different view of organisational performance – often the first complete view of performance at
a level of detail that teams can engage in. As a result, it takes time and effort to understand what is within

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a service line’s direct control, what lies within their sphere of influence and what is beyond their control
or influence. Agreeing targets or plans and then carrying out performance reviews without this shared
understanding between the Executive team and the Service Line leadership team can lead to unproductive
conversations and an unwillingness to ‘own’ the plan or establish any clear incentives. All this diminishes the
potential of effective SLM.

• Poor data quality – a lack of confidence in the data that is used to monitor and manage service lines
undermines the whole endeavour. Even after data quality has improved, memories are long and small
anomalies can lead to a tendency to doubt the data and deflect attention from the core performance
challenges. The use of Patient Level Costing systems to support SLR and act as ‘enabler’ of SLM can be
particularly challenging due to the level of data quality that is required to produce a credible ‘product’.

What action can Executive teams take?

The level of organisational and behavioural change needed to achieve successful implementation of SLM is
significant and should not be underestimated. Change is needed both at the organisational and individual level.
Work on adult learning suggests that for a behavioural change to have most chance of being made and sustained
requires four levers to be pulled simultaneously:

Role models and Communications to

leadership
Credible individuals amongst the
leadership of the organisation who
demonstrate the new skills,
knowledge and behaviours required
Changed
mindset &
behaviours
The right skills
and capabilities
The organisation needs to
invest in building the skills,
knowledge and behaviours
required to operate effectively
in the new structure
foster understanding
and commitment
The case for change needs
to be made in a clear and
compeling way that connects with the
individual and explains the
implications for them
Aligned processes,
structures, and systems
The formal elements of the trust’s
organisational design need to
support and incentivise the new ways
of working required for SLM

Figure 1. “Levers for successful change programmes”. Adapted from Drew et al.,
Journey to Lean: Making Operational Change Stick (Palgrave Macmillan: 2004).

In light of the barriers to change and the behavioural analysis set out above, a hospital’s leadership team play
a crucial role in shaping the implementation of SLM, and hence in its ultimate success. Using the four levers of
change set out above, a hospital’s implementation plan should include:

1. Communications to foster understanding and commitment

a. Conduct a stakeholder analysis to understand the level of support and assess the willingness to adopt
SLM among both management and clinical staff – including: Clinicians, Specialty Managers, Directors of
Operations, Matrons, Information Departments, as well as within the finance and support areas. In a number
of cases it may well be the front line operational stakeholders who will embrace the benefits of SLM as it
plays to their natural, patient-focused ‘multi-disciplinary teams’, whereas Finance team members may see it
as a threat to financial control or an extra burden to support a larger number of service lines with ambitious,
demanding and empowered Clinical Directors and their teams. This stakeholder analysis should be used to
drive the hospital’s communications strategy and should be revised periodically to track progress.

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b. Focus on communicating the holistic benefits of service line management – the perception of service line
management as a Finance-driven concept needs to be addressed. Drawing on case examples from other
hospitals where the benefit of SLM has been as much about tackling poor infection control or hand hygiene,
emergency readmission rates, and patient experience as it has about supporting financial decision-making
would be one aspect of this. Also explaining how services have reinvested their financial gains in improved
patient care or state of the art clinical practice will also build support and understanding.

c. Position the newly available performance data as a tool to enable better decision-making, not a weapon for
identifying poor performance. There is a danger that new performance data is not seen as “interesting” but
instead as a threat or mechanism for central management to take tighter control over a hospital’s clinical
performance. It is therefore important to strike the right balance and communicate how the new performance
management mechanism will empower service-line managers with greater decision-making responsibility,
thereby enabling them to make more informed (and better) decisions. This will require strong positive
messages at the outset to build the confidence of the Specialty Business Unit (SBU) leaders while they adapt
to the new system.

2. Role models and leadership

a. Establish a core team of senior leaders who are strongly committed to implementing SLM. Without the vocal
support of the Executive team for SLM, there is a risk that the resistance of Senior Managers and Clinical
Directors of new Business Units will undermine the change programme during the time it takes for them to
get used to the new data reporting.

b. Leverage the most influential early adopters – through stakeholder analysis, potential role models should
have been identified. Once this is established (subject to regular updating and revision), a systematic plan
should be established for how these individuals can be deployed most effectively to convince, support, and
coach others on their journey. This could include clearly identifying ‘exemplar’ specialties (acknowledging the
cultural barriers to adopting others’ best practice)

c. Support the role models and leaders to take service line management to the next level. This is crucial to
the development component. This may involve providing additional support or encouraging networking
and knowledge sharing with hospitals where SLM is already in place. In addition to supporting the ethos of
continuous improvement around service line management, it might also act as a reward and incentive to the
early adopters and fast followers.

3. Aligned processes, structures, and systems

a. Ensure the trust’s business performance management process is ‘fit for purpose’ – providing regular and
robust management information that brings together data on activity, finance, safety and quality, patient
experience, operational efficiency, and staff capacity. Ensure that the process is sufficiently resourced not
only to provide the management information but also to work with service line teams to identify and tackle
data quality issues, help interpretation, develop new metrics, and help structure effective performance
conversations. In particular, it may be necessary to produce detailed data on certain areas (e.g., the specifics
around patient complaints or incidents), in order to build levels of trust in new quality metrics.

b. Consider how incentives can be used to improve performance. There are numerous ways in which individuals
and teams can be motivated to deliver improvements. This may not immediately have a direct financial
component such as an SBU being able to reinvest all of their own accrued surpluses, but can be more broadly
linked to SBU performance. For example, SBUs which make cost savings will be looked upon favourably
when the time comes to allocating overall accrued surpluses towards further capital expenditure. Incentives
also need to be fair across both support and service delivery areas – for example by imposing similar annual
efficiency improvements for both. A system without incentives designed to encourage virtuous behaviour will
not deliver the expected benefits, as the key participants will fight against the new approach.

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c. Acknowledge and manage ‘difficult links’. There is a risk that ‘silo working’ could develop (or deepen) through
the new service line structure and this risk needs to be acknowledged and mitigated. Service line teams will
frequently need to share resources (e.g., beds) with other service lines and they will also depend on clinical
support and other support services to deliver their outcomes. Improving the level of dialogue across units,
especially during strategy and planning processes can dramatically improve the usefulness of the plans and
promote a sense of shared ownership. Additionally, the new organisational design can be used to mitigate
this risk by linking the business units through senior managers. For example, there could be conflicting
interests between the surgical business units and the Theatres & ICU clinical support area, but being managed
by the same associate director could avoid any problems.

d. Balance the number of autonomous units with a sense of scale and ability to manage. It is a fine balance
between a large number of very specific service lines (e.g., at sub-specialty level) and a smaller number of
more aggregated service lines. Even if a move is made to smaller, sub-specialty service lines (e.g., Breast
surgery vs. General Surgery), it is important that the relative time and effort spent supporting the running
of the business units is proportionate to the ‘value at stake’. It is also important not to be too rigid in the
approach and to be prepared to adjust mid-course if aspects of the design are clearly not working. For
example, it may be easier to start with aggregating medical activity into a “General Medicine” SBU, while
separating surgical activity into distinct business units because they are more easily defined. The General
Medicine SBU can then be sub-divided at a later stage once the practical implications become more deeply
understood. Eventually SLM needs to go to sub-specialty level to become a useful tool for the management
team to see where the opportunities are to improve efficiency / performance, although initially this would be
very tough to do.

e. Treat financial / accounting data with due caution – there are many ways to apportion shared costs, and
ultimately, the actual method for allocating these across SBUs may be somewhat arbitrary. Additionally, where
accounting data is unsupported by other operating metrics (e.g., staff numbers) it can be difficult to establish
the veracity of the financial numbers being reported. To avoid this having an undermining impact on SLM, it is
important that the reward / consequence mechanisms are designed to take this into account and accounting
data is not used too literally when assessing performance.

4. The right skills and capabilities

a. Sponsor / support the leadership development of Clinical Directors. The leadership challenges of effective
SLM should not be underestimated. Firstly, there is managing the broader consultant body as a ‘first amongst
equals’. This has parallels with how the most effective professional service firms and academic institutions
develop their internal leaders. Secondly, Clinical Directors need to have a detailed understanding of
their business not dissimilar to that of a business manager. This may require a new skill set analogous to a
‘mini-MBA’ to enable them to be effective business leaders. Finally, Clinical Directors need effective multi-
disciplinary leadership teams, possibly including a Matron, a senior NHS manager, a senior therapist or
other allied health professional. This is likely to require a less ‘command and control’ style of leadership and
decision making than may be the case with their clinical work. In some cases, the right answer may be to
encourage partnerships between Clinical Directors and General Managers to act together as a driving force,
and the Executive Team should be open to alternative SBU leadership models to suit their own staff’s skills sets
and interests.

b. Raise the bar on analytical and business management expectations. By definition, Clinical Directors are
professionals who are highly trained and have demonstrated significant commitment to professional
development. They deserve (and should demand) to be supported by equally professional business and
analytical support. This in many instances may require very major up-skilling, some of which may only be
possible by a new breed of specialty managers. It will be important to identify these role models and promote
their impact on SLM, as well as helping trusts to source or build this capability.

c. Support HR Directors to lead the organisational design to support SLM. As largely people-driven
organisations, it is vital that HR & OD Directors are able to support the Executive Team and Boards effectively

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with the challenge of organisational development and talent management. Too frequently this is an
undervalued position and the Chief Executive can play a role in increasing the importance and development
of individuals in these posts.

Conclusion

As outlined above, Service Line Management is potentially a very effective approach to improving hospital
management. However, successful organisational change of the type and scale required to deliver the benefits
of SLM needs equal attention to each of the four major change levers. All parts of the organisation should be
affected by the move to service line management and so it is vital to lay out a balanced set of actions across
communications, leadership, organisation design, and skill building to address the barriers to change. The journey
towards successful implementation of SLM is likely to be lengthy, potentially involving a number of iterations
before the system is fully working and for benefits to be realised. However, it is a journey worth starting as the
transparency, engagement and accountability it can deliver will be vital in the coming years as hospitals are
required to deliver higher quality for less.

For other related articles see:

http://www.2020delivery.com/Knowledge/Knowledge.aspx
including “Outline approach to implementing service line scorecards”

Footnotes
1
Service Line Management: An Overview – Monitor, March 2009
2
Ibid.
3
In our experience, SLM has been particularly useful at highlighting wasteful practices, previously
unidentified as their consequences were unmonitored e.g., not recording all treatments being conducted, or
prolonged retention of patient notes