Hospitals, swept up by the dynamics and pressures of surviving in the emerging managed healthcare world, have been boosting their marketing budgets for the past five years. Nationwide, hospital marketing budgets will have exceeded $2.5 billion in 1997 from a base of $1.6 billion in 1992, according to Opinion Research Corporation International, based in Evanston, Ill.
Are the dollars being spent in the right places and against the right targets? And do hospital-based marketing programs achieve projected increases of patient flow? I'd answer "sometimes, occasionally and not very often," based on assessments I've done for several integrated delivery systems around the country.
For starters, consider that a substantial portion of hospital marketing budgets -- as much as 50% -- is being spent on mass-market advertising to consumers, according to ORC. And if hospital marketing follows trends in drug advertising, this could climb significantly higher.
This spending pattern raises a red flag for me -- not because I don't believe in more-educated consumers who want a larger role in decisions about their health, but because such spending downplays the physician's role in decisionmaking.
One might argue that physicians are no longer sole decisionmakers, but they certainly can be the ultimate decisionbreakers. Research we've conducted for our clients indicates that consumers are much more independent and proactive about making decisions on their healthcare -- a real change from the past, when physicians were viewed as almost godlike authorities. But physicians continue to carry significant influence with consumers. And when a consumer's personal doctor says, "I don't recommend that procedure/hospital/etc.," few would go against that advice.
This said, I think the way marketing dollars are being spent is out of whack. When advertising and staff dollars are combined, it leaves less than 40% of a hospital's total marketing budget for everything else, based on ORC's numbers. That includes physician marketing, patient-satisfaction monitoring, health fairs, wellness events, education, marketing to the managed-care community, physician continuing education and the many other initiatives required to sustain and grow business in today's healthcare delivery system.
Of course, it would be difficult to identify the correct spending formula. It depends on many factors, including the competitive environment, the type of institution and the track record. What you need to ask is, Where are my patients coming from? What percentage of possible referrals am I getting?
If you are getting less than 70% of the potential referrals from physicians affiliated with your system, i.e., your captive audience, you should be doing better. And if you're getting less than 50% from physicians who are not part of your system, you need to understand why. It might be because you are not sufficiently competitive; it also might be because there's something wrong with your communications efforts.
As the president of a healthcare marketing communications firm that serves manufacturers of medical products and providers of healthcare services, I'm the last person to minimize the value and importance of advertising to end users. But personal business interests aside, I feel strongly that the dollars being spent and the strategies themselves are too heavily weighted toward the consumer. Such strategies underestimate the importance of the referral system and the benefits to be gained by developing, understanding and targeting dedicated, focused initiatives to influence, manage and leverage this system.
An old truism still carries weight: Controlling the referral sources is key to controlling the delivery of healthcare.
I suppose the next question -- or challenge, if you're one of those people pouring money into consumer marketing programs -- is this: Referrals? Primary-care physicians are limited in whom and how they refer, right? Well, yes and no.
Most gatekeeper physicians see and manage patients within managed-care plans. These plans historically have tried to limit referral options drastically. But many find they are losing their ability to do so.
As Paul Ginsburg, president of the Center for Studying Health System Change, stated in this column (Sept. 1, 1997, p. 46): "A big battle is brewing for control of healthcare. Health plans obviously want to retain their control of the healthcare dollar but find themselves in a Catch-22. Capitulation to consumers may affect their position in the marketplace, but ignoring consumers will leave them with the same result."
And what do consumers want? First and foremost, quality care. But the foundation of quality care is freedom to choose.
Before managed care, physicians did refer to physicians -- and to hospitals. Under managed care, physicians often have been more limited, but in the end, with the notable exception of the emergency room, patients still arrive at hospitals through the portals of their physicians' offices.
In the melee under way today, many of us believe consumer freedom of choice is ascending again. That also applies to physicians' freedom of choice about affiliations and referrals, and therein lies the opportunity for the marketer of the delivery system. The ability to choose renews physicians' credibility, making consumers more willing to rely on their doctors for advice.
Now I'm not suggesting that the gatekeeper mind-set will disappear overnight or that hospitals should slash their direct-to-consumer marketing dollars to the bone. What I am suggesting is that hospitals need to pay attention to their primary audience first: their physician-referral base. Those that support their physicians' efforts to sustain their practices will be the hospitals with the strongest consumer franchises. This is especially true of integrated delivery networks, which, because of their breadth, have the most to gain from maximizing referrals.
Hospital marketers can provide value and benefits to physicians that help them better serve their patients in making choices. Doctors want to be affiliated with institutions that offer the high-quality services their patients seek. Hospitals can give doctors a competitive advantage by providing them with information on their institutions for their use and their patients'.
So if you, as a hospital marketer, must choose between a direct mail campaign to consumers in your service area or a medical education seminar series for primary-care physicians, go for education. If you have to choose between billboards and breakfast meetings, feed your physicians first. The invisible referral highway still is humming with patient traffic. If you want to succeed, you'd better be on it.
Lehman is president of Lehman Millet, a medical marketing communications firm with offices in Boston and London.