Marketing hospitals is stupid
That comment came from a discussion with an operations director at a health system, who was told by the senior vice president for strategy that “anyone spending time or money on marketing a hospital is stupid.” (The names in this story have been changed to protect the innocent and short-sighted.)
To give this a little context, the SVP had focused most of her efforts on business development, and specifically, on acquiring physician practices and building physician referral channels. So the comment was really about comparing the value of marketing to that of business development when it comes to business growth. In addition, it’s assumed that “marketing” was meant to equate “consumer marketing.”
Not surprisingly, we take a tad bit of exception to classifying an entire discipline as stupid. But for starters, let’s acknowledge the reality: when it comes to affecting immediate and substantial business growth, typically nothing can be as effective as acquiring physician practices, specialty practices, or merging hospitals and health systems. The surest way to increase market share or dramatically increase volumes is to lock-in independent referral sources, or acquire competitive businesses. In essence, organizations are “buying” new patients, and mergers and acquisitions are a time-tested way in any industry to grow business. In healthcare, one sign that hospitals and health systems recognize this power can be seen in the growing cache of business development titles. Often, what used to be senior marketing titles now include ‘business development,’ and business development is typically seen as a higher-level discipline than marketing throughout the industry.
Does that mean spending time, energy and money on marketing your hospital is, in fact, stupid? Er, not exactly. Let’s start with the well documented fact that the majority of mergers and acquisitions in business fail. For example, a BusinessWeek article titled “When CEO’s Go Courting, Watch Out,” cites research showing that 60-70% of deals fail, stating:
“Mergers tend to destroy value, not create it.”
One of the primary reasons for this is that trying to mush two corporate entities into one is not easy, and if not handled well, costs increase, efficiency drops, service and quality suffer, and customers flock to competitors. The same can of course happen in healthcare, so simply buying patients by acquiring a physician practice doesn’t guarantee a hospital will keep those patients. Systems become ineffective, doctors aren’t happy, negativity abounds, patients flee. Marketing communications, of course, can play a huge role in communicating the benefits of a merger, and can help specifically target patients with important information and service recovery efforts. Acquisitions reflect a hospital’s desire to obtain patients, but they don’t necessarily reflect what patients themselves want. Without effective marketing communications, it would be very difficult to maximize the impact of a key acquisition or merger.
Second, consumer marketing should help create demand, regardless of what acquisitions are made. Strategies such as driving orthopedic surgeries through joint pain classes, or offering heart disease screening to build downstream cardiac business, are all driven by consumer marketing. There is no doubt that much of a hospital’s business is referral driven, but sophisticated organizations don’t stop there, realizing there are many opportunities to drive patients in through marketing directly to consumers.
Which brings us to the third point – business development and marketing shouldn’t be an either/or proposition. Unless your plan is to acquire all the providers in your market (or you live in Canada), there will always be competition for healthcare services. And whenever there is choice in a market, you will need to fight for your customers using marketing and brand building strategies. Compared to the big growth spike that comes from a large merger or acquisition, ongoing consumer marketing may seem like a long, slow slog. But it will pay dividends when done well. In the end, if both you and your competitors are pursuing strategic business development, but only one of you is also investing in marketing, who do you think will come out ahead?
What do you think? Is marketing a hospital a waste of time? Do you hear statements like this from senior leadership? How do you respond?
Chris: Good topic for discussion. I don’t think hospital marketing is stupid, but I think business development tends to be under-appreciated and under-used in the hospital setting and I want to respond to a few specific points:
“The surest way to increase market share or dramatically increase volumes is to lock-in independent referral sources, or acquire competitive businesses. In essence, organizations are “buying” new patients…”
In the case of acquisitions, “buying” patients is almost a reasonable description but not exactly. Patients aren’t forced to remain with said acquired practice. And there’s no guarantee that a provider will stay for that matter; patients may follow a disbanded physician (or NP, PA) to a new practice if they’re able.
Building loyalty with an independent referral source must be done with utmost ethical and legal consideration. I believe that if a hospital can consistently provide great provider experiences and patient outcomes, clinicians will continue to refer. Any organization seeking independent referrals would be wise to familiarize itself with, and follow, Stark Law provisions.
“Second, consumer marketing should help create demand, regardless of what acquisitions are made.”
An organization can only create so much demand. (Didn’t you have a blog post about over-utilization?) Sure, you can draw consumers to an event, get them excited about your services and clinical prowess, but then what? Many can’t self refer for specialty care and there’s no guarantee their primary care doctor will refer to your organization. Probably better to hope your attendees are existing patients and appreciate it as a retention and health education effort.
“…there will always be competition for healthcare services.”
Yes, but it’s not true competition when it comes to consumers. Ultimately a patient can decide where she or he wants to go for care, but without a primary care referral and/or blessing from a health plan, the out-of-pocket cost will be out of reach for most. This is where consumer marketing falls short for hospitals. If there is no true choice, then the message of even an award-winning campaign is moot.
…business development and marketing shouldn’t be an either/or proposition.
Right. The two functions should be joined at the hip. Marketing Departments should lend their talents to business development efforts. This could entail strategic support like CRM management and customer/competitor research or more tactical details like well-designed outreach kits, presentations, clinical publications, conference displays and so forth.
Having left hospital marketing briefly, for a non-healthcare company that was very sales driven, I quickly respected the need to: identify decision makers who have the option to select our service;
reach out to them where they are with a strong value proposition;
provide everything our competitors do — and then some — once the customer engages;
measure satisfaction;
stay in touch.
I came home to healthcare marketing with a new enthusiasm to create a stronger link between the marketing department and medical outreach reps around our organization. It’s been fun and satisfying to support new business development by fostering that partnership.
Andy -
Thanks for providing such great feedback. I think we’re drawing a certain distinction between “business development” and “physician outreach,” which to your point, is often undervalued at hospitals. Here are some more thoughts to your thoughts on our thoughts…
“the surest way” – yes, exactly right. An acquisition is an intent to acquire/”buy” business (customers/patients), but it shouldn’t be taken for granted that customers/patients will stay without a smooth integration and smart communication.
“so much demand” – I don’t know what economics says about a “maximum” amount of demand. But an organization certainly won’t “maximize” demand without ongoing, sophisticated marketing.
“not true competition for consumers” – on this one we’ll have to disagree. In many cases this is true to an extent, but the majority of patients have choice in the majority of their healthcare encounters. They may be limited choices, but even within most managed care plans, there are a choice of a few hospitals. Maybe we can battle this one out over nachos sometime.
Thanks again for keeping the conversation flowing…
Many of the hospitals that I work with separate marketing from business development, and I have to call separate meetings with these groups. And even more interesting, these same hospitals also confuse the terms “marketing” and “business development”:
To them, “marketing” often means PR and communications (this is due, in part, to the fact that the marketing manager often comes from a PR background).
“Business development” is often confused with solely physician engagement, and often that’s their primary focus – increasing physician referral patterns.
Incidentally, due to this confusion, most of the time, the “business development” teams tend to get more resources and attention from the hospital leadership (not only due to their physician-focus, but also because their activity is more measurable than “marketing”).
Of course, I believe marketing is inclusive of all of those elements – PR, communications, branding, physician liaison efforts, community relations, etc. Marketing (in my opinion) is about creating consistent dialogues with all stakeholders using a variety of tools, tactics and strategies.
And marketing is essential for any organization to succeed.
I will accept your nachos and look forward to a spirited debate on the subject of consumer “choice” in health care.