How to sell your hospital

Jörg F Debatin MD MBA, Medical Director and CEO of the University Medical Centre, Hamburg Eppendorf, outlines strategies for administrators taking on a relatively new role - in marketing

Photo: How to sell your hospital

To date, healthcare throughout Europe has remained largely insulated from normal market mechanisms. Rather, healthcare providers are operating in a jungle of rules and regulations created by bureaucrats and enacted by politicians. Obviously, there are many reasons why healthcare cannot be considered a ‘normal’ market. First and foremost, health is a very special commodity, which should be affordable for all members of a society regardless of their income levels. Acceptance of this paradigm remains the basis for all European healthcare systems. Despite the introduction of patient co-payments for physician visits, as well as medication, thankfully there appears to be consensus that healthcare needs to remain available for all in need.
Insulation from market mechanisms has resulted in highly inefficient healthcare service structures. Ever increasing healthcare costs have now resulted in a growing trend towards the introduction of market mechanisms based on supply and demand. In some regions, particularly large metropolitan areas, healthcare providers are therefore confronted with increasing competition mandating the development of marketing and sales strategies for individual healthcare providers.

Points to take onboard:
Current health systems based on state-governed regulations have failed to provide affordable and efficient healthcare.
The introduction of market mechanisms based on supply and demand to healthcare is rapidly gaining acceptance.

Healthcare: a special product
In an abstract sense healthcare is a product rather different from most other commodities. From a customer perspective it is of unsurpassed value, as it represents the virtual bases for a productive life. Despite its importance to the individual patient, it is difficult for the customer, i.e. the patient, to define its monetary value or the required product quality. Healthcare providers expect their patients to trust that their product is of high quality and priced correctly. In view of the multitude of regulations governing the way healthcare is provided, patients only too willingly place this trust into healthcare providers and their professionals including physicians, nurses and technologists.

Unfortunately, the reliance on rules and regulations to assure sufficient quality of healthcare is not really warranted. In contrast to all other products, regulations governing the health sector only affect the process of administrating healthcare regardless of outcome. If the same principles were applied to the production of cars, the assembly of brakes in a car would be regulated, whereas performance of the same brakes would not be subject to any checks at all. Increasingly patients are becoming aware of this central shortcoming of European healthcare systems. Pressure has grown to a point where even governments are reacting. New rules and regulations are being implemented. Most again fall short of what is needed: transparency of quality and pricing for healthcare products to the customer, i.e. the patient. Hence, efforts to provide reliable quality data can be considered one of the most important contributions to any health marketing strategy.
The process of pricing healthcare products has remained as elusive to the average patient as the assessment of product quality. For many healthcare services patients do not even receive a bill. Rather, payments are provided by anonymous insurance or health service agencies, in accordance with rules lacking in transparency - and frequently sense. For the healthcare market to gain in efficiency, it is of utmost importance that pricing becomes transparent to the patient. Clearly this does not mean that invoices also should be paid directly by the patient. Rather, the underlying insurance system with acceptable co-payments should be maintained.

Points to take onboard:
For market mechanisms to unfold their desirable effects, healthcare products must become far more transparent to the customer, i.e. patient, regarding pricing and quality. The latter should be based on outcome and should represent a central theme in all marketing strategies.
While transparency in pricing requires patients to be billed, it does not require the patient to pay those bills themselves.  Rather, the underlying risk sharing systems should be maintained as payers.

Hospital marketing strategy
Most healthcare professionals would probably associate marketing with advertisement strategies. First and foremost, such strategies should focus on information to the patient. Transparency should be provided regarding the quality of the medical products offered. The creation of an attractive and content-rich internet platform clearly represents a corner stone in this undertaking. Furthermore, occasional press releases that document the success of medical treatments should be prepared and distributed into all available channels. Finally, advertisement strategies can also include direct marketing measures, such as letters to treated patients outlining progress in diagnosis and therapy regarding their disease. The healthcare provider should be careful however to respect all laws and regulations governing advertisement in the healthcare sector in most European countries.

Marketing however covers far more ground than mere ‘advertisement’. In a sense marketing represents the very core of any company by first and foremost defining a product portfolio.
Hence we can summarise as follows:
The central aspect of any marketing concept relates to the definition of products
Advertisement strategies only represent the tail end of a marketing concept.

Product portfolio
In our current hospital world product portfolios, by and large, have developed in a historic sense. While there are variations in the number and type of healthcare products offered by different hospitals, few providers have consciously decided upon what is offered as part of the existent product portfolio. Rather, portfolios appear to be the results of historic processes based on individual physicians interests and abilities as well as perceived patient needs, expressed by insurance carriers. Frequently, a hospital offers various healthcare products for no identifiable reason at all.

As a first step in the process of developing any marketing strategy, the currently offered products should be listed. Using portfolio analysis tools, each of these products should be analysed in terms of quality, profitability, and future relevance. The assessment of quality and profitability should be based on comparative benchmarking data. Both factors generally relate to volume. Thus, there is ample data to illustrate a direct relationship between outcome quality of a particular procedure, or operation, and the number of times that the procedure is performed within the same hospital in a given time frame. Case volume has also emerged as a direct predictor for cost. Similar to most other products, economy-of-scale effects also contribute towards reduced cost of medical procedures. Put differently: the same procedure becomes less expensive if it is performed more often within the same hospital.

Points to take onboard:
Product Portfolios should be consciously defined based on different criteria including quality, cost and ‘future relevance’.

Unique selling Proposals (USPs)
Future relevance of products relates to existent Unique Selling Proposals (USPs) of the hospital offering the product. Each hospital should define these USPs, which set it apart from its most direct competitors. USPs can relate directly to the type of patient group served by the hospital (community hospital vs. specialised referral centre), medical services on offer (cardiac surgery, organ transplants), or the quality of care provided. In addition to this, USPs can also relate to aspects of process affecting all products, such as a special means of nursing, the implementation of a quality assurance programme or a particularly innovative means of electronically archiving medical patient data.

USPs should be designed to be as defensible as possible. Thus, USPs that can be easily copied by a competitor are of considerably less value than those that will remain truly unique - preferably over a very long period of time. Put differently: Unique Selling Proposals should be associated with ‘high barriers of entry’ for any potential competitor. For a University Medical Centre, the following USPs seem relevant:

All products requiring an interdisciplinary approach  
Because university hospitals will generally be home to more sub-specialists than other hospitals, diseases that require a multi-disciplinary approach will be treated in a more efficient manner. 
Complex diseases requiring intensive care 
Because university hospitals are generally equipped with vast intensive care resources, they should be used to treat the most complex disease entities that require such services.

Ability to adapt to new therapies 
Because university hospitals encompass research, as well as medical care, it should be far easier to implement new medical advances in healthcare products.
Once defined, USPs should be checked against those products that have been determined as being of high quality as well as high profitability. In the end, only those products that combine defensible USPs with high medical quality and profitability should be further developed and entered into a future product portfolio.

Points to take onboard:
USPs can relate to various aspects defining the character, infrastructure or medical abilities of a hospital
Defensible USPs are those associated with high barriers of entry for any direct competitor.

Sales strategies
Once a product portfolio has been defined, the hospital infrastructure has to be developed in a manner to strengthen the ability to deliver these products at maximal quality in minimal cost. These efforts should be made transparent to the customer by publishing them on the web. Furthermore, these efforts must provide the bases for any direct sales strategy that, in common with all other industries, can only be based on quality and pricing. In this regard it will be most important to provide transparency regarding the definition of quality. Clearly, these aspects will need to be regulated in a homogeneous, hopefully European manner.

Points to take onboard:
Any sales strategy must be based on transparency regarding the quality and pricing of the medical products offered.
Attention must be paid to existing laws and regulations governing the healthcare sector.

Summary
Healthcare is rapidly evolving from a totally non-transparent and heavily process-regulated system to a competitive market. To survive in such a market, hospitals will require the conscious development of marketing and sales strategies. These should be based on a product portfolio defined by quality, profitability and Unique Selling Proposals. The basis of marketing and sales strategies must however lie in providing transparency to the customer, i.e. patient, regarding outcome quality and pricing of healthcare products.

07.08.2006

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