How do you spread the gospel of the PSO in your market?
Are PSOs a "field of dreams"? If you build one, will they come?
Probably not. You still have to sell the product, most experts say.
"The biggest mistake hospitals make is they fail to realize that selling (insurance) coverage is different than selling a unit of service when it is needed," says Bradley Engel, practice leader with William M. Mercer, a New York-based consulting firm. Mercer is staging seminars on provider-sponsored organizations in conjunction with the American Hospital Association.
"Hospitals think that if they put a new name on a managed-care product, the public will snatch it up," he adds. "They have to come to the realization that they are in a different business than they were in before. It's not inconsistent, but it is a new business."
First steps. When most people think of marketing, they think of newspaper, television and radio advertisements. But those are just the most visible steps on the marketing ladder. They are the culmination of a long process that must begin with an evaluation of a provider's place in the community.
"The reputation of the original providers is key," says Terry Rynne, president of Evanston, Ill.-based Rynne Marketing Group. "You have to have providers that in the consumer's mind are the lead providers in the market."
Much of this early information-gathering generally is done through focus groups and surveys. Health Plans of Pennsylvania, which is owned by Media, Pa.-based Crozer-Keystone Health System, did "mall intercepts" in which seniors were interviewed at shopping malls.
"We did quite a bit of research early on; we knew we didn't have money to waste," says Ann Bagnell, vice president of marketing at Crozer-Keystone. That research made Crozer-Keystone understand that its more than 100 years of experience in the community meant almost everyone in the area was familiar with the hospital.
Crozer-Keystone is one of several PSOs operating under a HCFA demonstration project called Medicare Choices that tests alternative managed-care arrangements for seniors.
There are five PSOs operating under the demonstration project, according to HCFA. Estimates of how many hospitals eventually will apply for PSO licenses vary. HCFA has told consultants it expects up to 400 applications in the first 18 months of the program, while the AHA estimates more than 1,000 could apply.
Under the Medicare Choices demonstration program, HCFA must sign off on all marketing materials, a restriction extended to all PSOs by the balanced-budget law enacted in August.
Research. Early research also led Crozer-Keystone to modify its product. For example, the PSO started with an annual pharmacy benefit of $1,000 but raised it to $1,500 after interviewing seniors. Executives also learned just how crucial it is to have physicians accept and participate in the PSO. As a result, they began what Bagnell called an "ambassador campaign" in which a representative of the plan visited every plan physician individually to solicit advice on the plan structure.
Engel says upfront research is crucial to "know what motivates people to make a choice of health plan."
By surveying seniors who are already in managed-care plans, a PSO can tell what areas aren't addressed adequately by current plans.
Research also can help a plan make a realistic estimate of the number of potential enrollees. In turn, a plan can estimate its total potential revenues and from there base its cost structure, a must for financial viability.
"Research is indispensable, unless you really like to be surprised," Engel says jokingly. "But who knows? Some people may get lucky."
What's in a name. One of the problems that early research can help solve is what to name a PSO product. According to Richard Reiner, president of Orlando-based Florida Hospital Healthcare System, choosing a name is one of the most important early decisions a PSO will make.
The name the Florida system settled on -- Florida Hospital Premier Care -- is meant to trade on the hospital's good name.
"For us not to capitalize on our name -- it will be our 90th year next year -- didn't make any sense," says Leslie Aldrich, assistant director at the PSO.
Crozer-Keystone took a slightly different approach when choosing its name. The PSO product is called MedCare Plus, but the Crozer-Keystone name appears below the product name in all correspondence and ads.
According to system President and Chief Executive Officer John McMeekin, the name gives Crozer-Keystone the flexibility to expand to areas outside its community. To take advantage of other hospitals' reputations, Crozer-Keystone would partner with another hospital and put the partner hospital's name under MedCare Plus instead of its own.
"We could take our system, training, tools, the whole infrastructure, and it could work with another system," Bagnell says. "They would have a turnkey program set up and running. We call it a franchising concept."
But Rynne counsels providers generally to stay away from nondescript names like MedCare Plus.
"You want to position yourself to take advantage of the fact that in most markets most people still trust their own personal doctor," Rynne says. "You have to explain that you are not clerk-driven. Something like `patient care first.' Be out there upfront."
Rolling out the product. Once the preliminary work is done -- the benefits package and cost structure have been actuarially balanced, a name has been chosen and physicians properly stroked -- it's time to roll out the product.
"What a hospital is doing by launching a product is establishing a new promise in the community," Engel says. "You cannot have a failure because it will cost you in other ways.
"An insurer can come into town and run a product up the flag poll and if they don't like it, can pull it down and breeze on to the next community," Engel says. "If providers do it poorly and back off, it is going to affect their reputation in the community."
Florida Hospital Premier Care was the first Medicare-only PSO to get HCFA's OK to enroll Medicare beneficiaries. The product was launched with two general ads in a local paper introducing the PSO last Dec. 31 and Jan. 1. After the first ad, the PSO received 500 calls from interested seniors. The second ad brought in 2,500 calls.
After those successes, it became obvious general ads were no longer needed, Reiner says.
Instead, the PSO shifted to two newspaper ads a week notifying seniors of seminars held at the hospital throughout the week. Since the first week, the seminars have been consistently drawing 30 to 40 senior citizens, and the PSO has more than 9,000 enrollees. Success also has brought in more physicians. After starting at about 85, the number of primary-care doctors in the network has increased steadily to about 150.
"The seminar ads were pulling in enough people that we didn't need introductory ads," Reiner says.
Florida Hospital Premier Care already has created radio and television ads but has yet to use them.
Conservative ads. So far, the PSOs in the Medicare Choices program have taken a conservative approach to their advertisements, a tactic Rynne says works with senior citizens.
Advertising to older adults requires ads that are straightforward and direct, Rynne maintains. In other words, leave the MTV-type ads for the younger set. Stick to the basics: A good ad, for example, is one containing a detailed comparison of a PSO and the competing health plans.
Jay Klitsch, senior vice president for DiMark, a Langhorne, Pa.-based direct marketing firm specializing in managed-care marketing, says an ad targeted at seniors should grab them early.
Using an opening such as, "If you're on Medicare and live in Anywhere County, here's an important message for you," plays on seniors' inherent concerns about Medicare and will increase interest.
Also, use representatives that are older adults. Seniors respond better to people from their age group, experts say.
According to Engel, a PSO should be careful not to make its ads so attractive to sick seniors that the PSO ends up with a riskier pool of patients and a potential financial disaster.
Face-to-face meetings and direct mailings have been the most effective marketing techniques, according to all the hospitals contacted.
Physician marketers. Florida Hospital Healthcare System took the beneficiary lists of its member physicians and sent each senior a letter on the stationery of his or her own physician.
"We get a much better response when the physician is involved," Reiner says.
According to data gathered by Crozer-Keystone, 92% of all seniors ask their doctor about their health insurance. What's more, if a physician recommends a plan, a senior is twice as likely to choose that plan.
There is a general rule among commercial insurers that you don't want your plan's physicians marketing the product because you want to attract the 30% of people who never see a doctor, not those who are already in a doctor's office. But according to Lou Pavia, executive vice president of the Washington-based consulting firm McManis Associates, that formula doesn't hold true for Medicare PSOs.
"Every senior sees a doctor at least once a year, so the risk of adverse selection is much less," Pavia says. "It is much safer in the Medicare market to have physicians market a plan."
Both Crozer-Keystone and Florida Hospital Healthcare System also are sending direct mail to all the area seniors and to people nearing Medicare eligibility age.
Direct marketing and one-on-one meetings are also the most cost-effective methods of reaching seniors, and the PSOs already operating say they are more efficient at luring seniors than HMOs.
Although she wouldn't give exact marketing budget numbers, Aldrich maintains Florida Hospital Premier Care is spending "well under" the generally accepted industry average of $1,000 per beneficiary to enroll new members. Some of that is probably attributable to the quick start-up of the PSO, but it is also a function of using few high-cost media ads, Aldrich argues. Bagnell says Crozer-Keystone has found its cost per beneficiary to be $450 to $550.
The PSOs also have found success linking the PSO marketing to existing programs. Crozer-Keystone had an existing 55,000-enrollee seniors program called ElderMed that sent members a newsletter and held seminars on topics like how to use the Internet. The system was able to take advantage of the obvious link between ElderMed and the PSO.
Dark side. There is a potential dark side to PSO marketing, however.
According to the Congressional Budget Office, allowing PSOs to contract directly with HCFA will boost costs to the Medicare program about $1 billion from 1999 to 2002. That's because PSO physicians are likely to steer their healthiest patients into a PSO while counseling their sickest patients to remain in traditional fee-for-service Medicare. The CBO assumed doctors will try to keep their share of the PSO's capitated payments by excluding patients who would run up expenses.
In an effort to combat medical redlining by PSOs, HCFA has strict rules governing marketing. For example, if a PSO wants to send mail to a physician's patient, the PSO must send the same mail to all the seniors on the physician's mailing list.
"There is no doubt that the potential to cherry-pick is there, and how you market is just one way to do it," says one consultant who asked not to be identified.
After the product is launched, the next phase is to get seniors to enroll. There are several means available.
Using seminars, as Florida Hospital Healthcare System did, is a tried-and-true method. Some groups use salespeople or agents, while others ask the senior to join directly via a mail kit.
The success rate of each method varies depending on the market and, according to Klitsch, the best system is a combination, since different seniors respond to different techniques.
Measuring performance. As a PSO's marketing program progresses, it is important to evaluate how the marketing is working and to begin to collect data that can be used to fine-tune the process.
"Unless your marketing is measurable and accountable, you are in big trouble,"
Crozer-Keystone has developed a sophisticated data bank that "will allow us to send customized information to each beneficiary," Bagnell says. "We began tracking marketing information early on; we didn't have the money to be wasteful."
For example, if a senior citizen says he didn't join the PSO because his doctor wasn't in the plan, that information is entered in the data bank. If the physician joins, the senior is sent a letter announcing the doctor is now a member and asking the senior if he or she wants to talk to a PSO representative.
Crozer-Keystone continues to add information to its database and to refine its marketing message.
"We are looking at this as a laboratory," Bagnell says. "We didn't have anything to base it on, so we are just trying to find what works."