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Feb. 2004

The Hospital's Strategic Advantage in a Consumer-Driven Marketplace

Those outpatient settings may be in direct competition with you. They may even be owned and operated by members of your cardiology staff. You want to retain those services and those physicians inside your own doors or, at the very least, have an ownership stake in any ambulatory initiatives being contemplated.

But one strategic advantage in shaping the right scenario is yours: the ability to operate in what is becoming a consumer-driven marketplace.

Granted, hospitals have not traditionally had to worry much about appealing directly to the customer. But as employers shift more of the burden of costs to the employee, those new healthcare consumers are shopping too for the best quality and service, not necessarily going where their physician says, and depending more and more on information sources such as the Internet to become an educated consumer.

Physicians thinking about defecting to an entrepreneurial enterprise might think twice when they realize that the very tools they need to survive in a competitive marketplace are right at their fingertips. You’re role as a senior leader is to gently and subtly convince them that remaining is in their long-term interest, showing what you have to offer and showing that customer acquisition and retention will exponentially grow when the physician and hospital are working as a team. The sum will be greater than the individual parts. In a reverse competitive scenario, each works against the other, weakening each and opening the doors for yet other competitors.

Hospitals have been evolving to meet the needs of a consumer-oriented marketplace for some time

Hospitals started with baby steps, advertising in the late 1980s (some mistook that for marketing) progressing to the present where marketing departments with sophisticated database capabilities can segment and target markets with niche strategies. They embraced customer service - remember Total Quality Management in the 90s? And now they are struggling to figure out what benchmark quality study will be the end all that people will point to when trying to sort out their healthcare options. Physicians opting to go on their own have a steep learning curve ahead in order to become knowledgeable of the consumer mindset and to learn how to respond to it. Collaboration with hospitals makes better sense.

Hospitals can provide the same empowerment physicians seek on their own

Physicians often seek to leave because of some basic worker needs - control and power. Empowerment comes in many forms. Do these physicians have representation at the board level? Do they participate in the strategic planning process? Are they kept well informed of hospital, system initiatives, progress and in a timely manner? Do they have regular communication with senior management? Are they privy to capital budget planning processes? These are often underserved issues that can be viewed as a hospital’s internal public relations effort to satisfy and keep qualified staff.

Those that have the data win

Solid planning is rooted in data. Hospitals have the IT infrastructure to analyze patient trends, demographics, and referral patterns. And that can help target where and how marketing efforts are concentrated. That data is invaluable and would be coveted by any physician seeking to establish an independent presence.

That very data if used correctly can help hospitals retain the referring base and reduce the risk that referral sources will follow defecting physicians. Senior management must show their commitment and spend more time developing referral sources, working the relationships, and making the introductions while delegating operational issues to qualified staff. No one has more responsibility for restoring these relationships than the CEO. As relationships develop, physician liaisons can step in and maintain them.

Then there is the consumer marketplace. You first need to make the case to your physicians that consumers are and will be making more of their own choices and the implications. Boomers used to getting their way will do research and shop by quality and price. They will be footing more of the bill and wanting and gaining more of the choice. Bottom line - they may not necessarily go where they are told and if they do and do not like the service and quality, they will defect. You can develop your empirical evidence through existing research showing physicians some of the consumer movements underway such as The Leapfrog Group - a coalition of more than 150 public and private organizations created to help save lives and reduce preventable medical mistakes by mobilizing employer purchasing power and giving consumers information to make more informed hospital choices.

Hospitals can help physicians through the quality quagmire

Physicians want to get back to practicing medicine, not filling out paperwork and quantifying their clinical excellence. Yet, excellent quality has been and will continue to be expected. In the future this will not simply be a term to throw about but hard data that can be examined. Quality will more and more become the basis of real choice by consumers and those representing them.

While others debate the actual tool, hospitals need to start thinking about what the benchmarks will be, how to address and improve them and then how to position these in the public domain. When this happens collaboratively, each plays their appropriate role. Physicians concentrate on improving the practice of medicine; hospitals quantify it and use the data in meaningful ways.

Hospitals have been improving service excellence

Future benchmarks could potentially show just small differences from a clinical standpoint between one provider and another. The need for differentiation becomes even more acute. Often times, the next factor in consumer choice becomes service excellence. Describe it however you like. Some may say their good or bad experience starts with how they are greeted by the volunteer receptionist. Whatever the case, do your research to find out what excellent service really means to your customers. And it is more than just the patient satisfaction survey. Focus groups, perhaps even exit interviews with discharges can shed light. It is then incumbent that you develop the programs needed to improve service. More important, it is critical that your medical staff endorses these programs and allows you to take them into their settings, providing appropriate training to staff.

Sometimes it still comes back to the basics

While addressing quality and service will go a long way in engaging and keeping physicians, they will still expect other support. And you will need to prioritize and budget for it as you have in the past. Physician-centered marketing and communication campaigns will still play a role. And your role will extend beyond developing good looking collateral to truly finding ways to differentiate your physicians in the market. But you have the expertise to do that. Marketing assistance will also progress to assistance in new product development and in selling. The good news is that you have the data and the means to acquire the data so that you can make intelligent decisions in this area. What you need is the collaboration.

All this being said, it still comes back to basics. Both parties must fully understand and share the mission and embrace the concept of a consumer-driven healthcare marketplace where empowerment is shifted to the buyer and where collaboration by hospitals and physicians can only help but strengthen your response to this shift.

Anthony Cirillo, CHE, ABC is president of Fast Forward Strategic Planning and Marketing Consulting, LLC in Huntersville, NC. He is a board member of the Society for Healthcare Strategy and Market Development, a Diplomate of the American College of Healthcare Executives and an Accredited Business Communicator of the International Association of Business Communicators. You may reach Anthony at Anthony@4wardfast.com

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