Elasticity in healthcare demand, fo sho

The Star Tribune continues to do a great job of covering the changing dynamics of the healthcare industry. The lead story on the front page of Sunday’s issue, “Minnesota health care: Condition Critical,” is a terrific primer on the various reasons for, and the impact of, the financial struggles of local hospitals and health systems. The quote that may capture the most important change comes from David Wessner, CEO of Park Nicollet Health Services:

“We’re seeing that demand is far more elastic than it was in other years.”

This, in a nutshell, is one of the primary reasons for the financial suffering hospitals are experiencing this go-around, as opposed to previous recessions. The old saw used to be: “It doesn’t matter what the economy is doing, people still get sick.” That, of course, is still true. The difference this time is that because more and more people are having to pay for care out of their own pocket through high-deductible plans, more people are thinking twice about seeing a doctor, renewing prescriptions or getting a test for a chronic condition. The severity of the recession means more people will be tight with their money, lowering patient volumes further. In addition, more people will be without insurance at all (no job, no insurance), and government budget reductions will hit health subsidies for the poor. Both of these factors effectively raise the rate of the uninsured, causing more financial stresses for hospitals.

The key question for healthcare leaders: which force has the most impact on this drop in patients? The shift to consumer-driven health coverage, and the subsequent focus on costs by consumers? Or the economic downturn, and the focus on costs by consumers? The answer has huge ramifications. If it’s the economy, then much of the pain will end when the economy recovers (whenever that happens). But if it’s the trend toward consumer-driven health coverage, which most likely will only continue to grow, then leaders are facing a potentially permanent shift in how patients seek and use healthcare services.

For healthcare marketers, how does the answer to this question impact your strategies? How will you deal with greater elasticity in demand for care? How do you communicate the value of your offering when out-of-pocket patient dollars are at stake? Will consumers become increasingly suspicious of recommendations for additional diagnostics or testing? Is there anything you can do now to help your audience deal with the economic pressures they’re facing? How does price-based marketing fit in healthcare? Should it? Lasik eye surgery is one thing, diabetes care is quite another.

As often occurs, there seem to be way more questions than answers.