To know how your business is doing, you must know not only what your bottom line is but how much better it could be. How much total business is in your marketplace and are you getting the same percentage of it today as in the past? You know all about your slice of the pie but can you determine the size of the pie?
My agency developed a mechanism to measure our market share and now revisits it annually. Along with marketplace insight, it has shown us how regulatory and policy decisions affect our referrals and admissions. We can see patterns emerging from market conditions, competitive pressures, new sales and marketing programs and management decisions. Most importantly, we now know the size of our market opportunity and can better develop targeted marketing initiatives to grow our referral base.
Our original efforts were initiated in response to a decline in referrals and revenue. Management wanted to know if the lower numbers meant there were fewer patients in our area or if we were losing to increased competitive activity. Available data told us everything we wanted to know about the patients we admitted but nothing about the ones we didn’t.
We discovered that all area hospitals must report detailed, annual discharge information to a state regulatory agency. The data includes information about the setting to which each patient was discharged.
I obtained the data from the state and extracted discharges to home care.
Now we knew total discharges to home care (or hospice) to specific zip codes from each area hospital. It was a simple step to match those numbers against the total number of patients that we admitted and learn our market share. It turned out not to be possible, or necessary, to drill down to individual patient names. We were also unable to know which of our competitors got “our” patients but we know knew how large the pie was and how much of a slice we were earning.
Additional demographic data allowed us to analyze by payor, race, DRG, diagnosis, location, etc. Although the information was typically one year behind, we considered the value of the information significant enough that we were willing to live with this shortcoming and begin to turn the information into an action plan. We found that the exercise required good skills in MS-Access, Excel and PowerPoint.
Our first step was to calculate the overall increase in the Medicare population and use it as a baseline. We were sure to take Medicare Advantage enrollees into account in order to get an accurate number from data available on the CMS web site. Using our in-house Information System, which offers a robust query and reporting tool, we began to compare hospital data to our own.
Figure 1 depicts the total number of patients discharged to a home care setting from 2002 through 2006. Again, the data shows a steady increase in the number of patients available for admission.
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Our next step ( Figure 2) was to drill down to the specific number of these patients with Medicare as their primary payor.
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Finally, (Figure 3) we drilled down to view only patients in our primary service area.
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These three charts show similar trends, a fairly consistent growth in the number of patients available for admission to our agency. Hospital discharges to home care grew by over 20% and Medicare discharges to home care by a remarkable 35%. We hoped to see a corresponding increase in our admissions over that same time period.
The next step (Figure 4) was to analyze the data from our internal sources and compare our admissions to the hospital discharges.
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Clearly, our admissions were falling while available patients were on the increase. We found about a 16% decline in our admissions from the hospital segment over these five years. Next, (Figure 5) we looked at how the Medicare segment of our total admissions faired during this period of time and found a lesser decrease but still a decrease, approximately 7% over the time period observed.
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Our final analysis of this data set (Figure 6) looked at a segment located within our core service area.
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Again, pretty much the same picture! This segment measured a decrease of 6% over the five year study.
To summarize our findings so far, we saw a 30% increase in available patients in our core service area while our admissions decreased by 6%. Even if our admission rate had only kept pace with the increase in available patients it would have meant at least 2,000 more Medicare PPS episodes than we actually had, representing as much as $5,000,000 or more of additional revenue over that period of time.
Even a modest 6% decrease in admissions is cause for concern. However, with the ability to analyze missed opportunity the true scope of the problem began to reveal itself.
MARKET SHARE
As indicated earlier, basic market share in home care can be defined as the percentage of admissions compared to total number of available patients discharged to home care Keep in mind that we are still only looking at the segment of our business that comes from our hospital referrals within our core service area. For the purposes of this discussion, I will focus the actual market share analysis in this core service area.
Figure 7 compares hospital discharges to home care versus our agency’s admissions. Clearly we can see that as the overall market increased our rate of admissions decreased.
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Viewed as a market share diagram (Figure 
we can clearly see the erosion of our business over this five year period.
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At the beginning of the period, 2001 through 2002, the agency was admitting just over 40% of patients discharged to home care from area hospitals. Even as late as 2003, our percentage was keeping up. The net change through 2006 was a negative 31%, with a corresponding 25% market share loss.
Before we turn our attention to possible reasons and what initiatives we put in place to address this issue, let’s first take a look at one of the individual hospitals that make up some of these numbers.
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If, as they say, “a picture is worth a thousand words,” look at the same data as a market share diagram.
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To our dismay, we learned that we went from capturing nearly 6 out of every 10 home care patients from one particular hospital to a point where we were losing a significant number of patients to other agencies over the course of five years.
Though we had a sense that our referrals and admissions were decreasing, it was only with the added benefit of the data analysis that we learned how many referrals were actually available. We simply had no appreciation for the scope of the problem.
The tough work ahead of us was to analyze the data, determine the root causes and develop strategies and initiatives to address the problems. The data gave us a good place to start. What happened in 2004 to turn the tide? The only significant change we found during that time period was the introduction of point-of-care software running on laptop PCs. They were introduced to our clinical staff in the second quarter of 2004 and into 2005.
As clinicians worked hard to master the new documentation system, their productivity decreased and, as a result, managers scaled back their expectations. We actually began telling hospitals that we did not have the resources to admit as many patients as before. Hospital discharge planners reacted by routinely referring patients to other agencies, sometimes without checking with us first.
Agencies in a position to take every patient available got called first and we got less and less. Such a trend quickly becomes a habit and is very difficult to change. We did not need a market share analysis to tell us we had a problem but it did provide us a perspective that we had not seen before.
Certainly there were other things going on in the marketplace in those years, such as mergers and acquisitions and, more importantly, the entry of hospital based systems. We were confident, however, that we could have been able to compete successfully in that environment had we had this type of information available to us.
Armed with the new information, we developed a strategy to “find a way” to accept all referrals from our major referral sources. Our clinicians were now well versed on their laptop software and could handle more admissions. We looked to restructure our intake department to make it more customer service oriented and hired a VP of Marketing to manage the message to our referral sources. Another strategy was to direct more energy at physician offices, rehab hospitals and nursing homes.
Conclusion
Perhaps we became too complacent when business was good, though we were probably not unlike the rest of the industry. We developed literally hundreds of reports on the business to make sure that we had as much control over things as possible. We even developed marketing initiatives to address what we thought were weaknesses in our portfolio but we never had the luxury of actually knowing what amount and type of business was available. With the discovery of this data source and these techniques, we finally had the ability to see the full picture. We used that viewpoint to develop more effective programs to deliver to the marketplace the services that it needed.
Our latest annual market share analysis showed that we are making progress. Management is committed to continuing its annual analysis and responding with further adjustments as necessary.
