Hospitals need to adopt a service mix to optimise revenues and profits. Today, there is absolutely no understanding on the concept of optimising revenues and profits by hospitals because revenues are viewed in terms of the infrastructure provided.

That is, the patient is charged based on the infrastructure and equipment owned by the hospital without identifying which department is generating the most profits and from where the revenue flows are coming in.

A healthcare management workshop was organised by Healthcare Resource Network in Bangalore to provide participants with an integrated framework for marketing hospitals services in a competitive environment.

The objective of the workshop was to increase the growth of the healthcare sector and bring down the cost to the consumer. Issues including services in the hospital industry, optimising service mix, branding of services and patient retention strategies were deliberated using live studies during the session.

A Srivathsan, director, Kritical Health Systems and Services Pvt. Ltd. in his analysis on the service management in the healthcare sector said, "Hospitals have not yet evolved an accounting system and are still contemplating on following the 'Transfer Price Mechanism' which will be able to help them pin down the profitability of each department. The current system is not conducive to gauge from where the revenue flows are coming in."

"We intend to make hospitals view revenues and profits from a "customer's frame". The customer of a hospital has a 'lifetime cycle' or a 'lifetime association' both with a medical professional and the medical facility, which is approached and accessed to treat any small ailment or critical disorder. Therefore it is vital for hospitals to forge a strong bond with the patient," opined Srivathsan.

The revenues generated by the speciality departments depend on the reputation of a doctor, which determines the patient inflow. Within a department, the expected revenue generated is calculated per procedure. Usually the revenue generation is high in cardiology departments at hospitals mainly because of procedures like angiogram and angioplasty etc.

Every hospital's criterion is to allocate resources based on the either outpatient or in-patient needs. But these days' hospitals tend to look at pathology and radiology departments as disparate departments because of the volume of consumables used and the high level of patient inflow.

The hospitals needs to use a service optimisation plan to enhance the overall being of the hospitals which benefits the doctor, patient and hospital. It needs to look at innovation and service management in terms of earnings from the customers, pointed out Srivathsan.

Under the present circumstances of competition in the healthcare sector, 70 percent occupancy is considered more profitable than 90 percent occupancy. It is observed that hospitals with 90 percent occupancy, will be using up more of their resources and earning less since most of the beds will be offered on concession rates. With 70 percent occupancy, the hospital can use the remaining 30 percent by introducing daylong medical check-ups.

According to Srivathsan, studies conducted in hospitals, across the country revealed that lengthy stay by patients were usually seen in neurosurgery and cardiology where critical surgical procedures increased hospitalisation compared to specialities like general medicine, ENT, paediatrics, ophthalmology and dentistry. The increased stay, in-turn led to higher revenues, which could be re-invested back to improves the services.

A break-up of the total bill also revealed that in-patient beds constituted 10-12 percent of it, pharmaceuticals (20 per cent) pathology, (13 per cent), radiology (8 per cent), operation theatre charges (16 percent) and doctors' fees (20 per cent).

It was also noticed that pathology labs and radiology departments which are equipment intensive generated revenues from its consumables. In the pathology labs, consumables are charged at 5 - 10 percent and in radiology it is 15-20 per cent because of the use of radiology films, which are expensive. But in the case of the other medical speciality departments where use of medical instruments is limited, then the manpower costs are higher.