Critical care medicine as a distinct product line with substantial financial profitability: the role of business planning.
OBJECTIVE
As academic health centers face increasing financial pressures, they have adopted a more businesslike approach to planning, particularly for discrete "product" or clinical service lines. Since critical care typically has been viewed as a service provided by a hospital, and not a product line, business plans have not historically been developed to expand and promote critical care. The major focus when examining the finances of critical care has been cost reduction, not business development. We hypothesized that a critical care business plan can be developed and analyzed like other more typical product lines and that such a critical care product line can be profitable for an institution.


METHODS
In-depth analysis of critical care including business planning for critical care services.


METHODS
Regional academic health center in southern New Jersey.


METHODS
None.


METHODS
As part of an overall business planning process directed by the Board of Trustees, the critical care product line was identified by isolating revenue, expenses, and profitability associated with critical care patients.


RESULTS
We were able to identify the major sources ("value chain") of critical care patients: the emergency room, patients who are admitted for other problems but spend time in a critical care unit, and patients transferred to our intensive care units from other hospitals. The greatest opportunity to expand the product line comes from increasing the referrals from other hospitals. A methodology was developed to identify the revenue and expenses associated with critical care, based on the analysis of past experience. With this model, we were able to demonstrate a positive contribution margin of dollar 7 million per year related to patients transferred to the institution primarily for critical care services. This can be seen as the profit related to the product line segment of critical care. There was an additional positive contribution margin of dollar 5.8 million attributed to the critical care portion of the hospital stay of patients admitted primarily through other product lines or the emergency room. This can be seen as the profit related to the "hospital service" segment of critical care. This represented a total contribution margin of dollar 12.8 million, approximately 24% of the institution's entire contribution margin. This information was subsequently used to develop strategic plans to promote this product line.


CONCLUSIONS
We were able to define the critical care product line, and we were able to demonstrate profitability through an analysis of revenue and expenses related to critical care services. Our experience suggests that the concept of critical care as a product line, in addition to a hospital service, may lead to a useful analysis of this new discipline. This plan provided a rational foundation for development of the operating and capital budgets for the health system.
Bekes
Carolyn E
CE
Robert Wood Johnson Medical School, Camden, NJ, USA.
Dellinger
R Phillip
RP
Brooks
Daniel
D
Edmondson
Robert
R
Olivia
Christopher T
CT
Parrillo
Joseph E
JE
D000046:Academic Medical Centers / Q000458:organization & administration; D002017:Budgets / Q000458:organization & administration; D002201:Capital Expenditures / Q000706:statistics & numerical data; D003132:Commerce / Q000458:organization & administration; D003363:Cost Control; D003422:Critical Care / Q000458:organization & administration*; D003627:Data Interpretation, Statistical; D004636:Emergency Service, Hospital / Q000458:organization & administration; D005377:Financial Management, Hospital / Q000458:organization & administration*; D005544:Forecasting; D006302:Health Services Research; D006752:Hospital Planning / Q000458:organization & administration*; D006801:Humans; D007902:Length of Stay / Q000706:statistics & numerical data; D008511:Medicine / Q000458:organization & administration*; D017059:Models, Econometric; D017146:Models, Organizational; D009515:New Jersey; D010351:Patient Discharge / Q000706:statistics & numerical data; D010360:Patient Transfer / Q000458:organization & administration; D010561:Personnel Staffing and Scheduling / Q000458:organization & administration; D010564:Personnel, Hospital / Q000600:supply & distribution; D010934:Planning Techniques; D011357:Product Line Management / Q000458:organization & administration*; D016730:Program Development; D012017:Referral and Consultation / Q000458:organization & administration; D013038:Specialization