Hospitals Competing for Patients
Not on price. Or on quality. Just amenities. (See our previous explanation here, here and here.)
Botsford Hospital in Farmington Hills, Mich., started issuing free “Very Important Patient” cards in 2010. The program got its start as a referral service to link potential patients with Botsford doctors. The cards entitle VIP members to free parking and a 10 percent discount on nonprescription drugs at the outpatient pharmacy and the gift shop, says Lynn Anderson, marketing and public relations manager at the 330-bed hospital in the Detroit suburb. VIP members can also get discounts at restaurants and service establishments such as an oil-change garage.
The program, which has more than 900 members, is open to anyone in the community. In addition to financial perks, it offers regular health education seminars on such topics as hip replacements, back problems and acid-reflux disease, says Anderson.
This is consistent with your previous work.
The simple fact is: firms compete in the form that is the most efficient. Competing on price directly cuts into the profit margin. Competing on quality requires costly investments in processes that may not result in a payoff. Competing on amenities attracts insured patients who insensitive to price (because they are not paying the cost).
The article indicates that hospitals are increasingly marketing directly to patients.
Part of the changing landscape.
An indication of the changing marketplace.
I appreciate what Dr. Goodman and Dr. Herrick are telling us, but I’m not sure this is all bad. A Ferrari dealership will also have a VIP program, host events, and provide services to its customers that have nothing directly to do with the automobile. A Chevy dealer will not have such a program.
If you are trying to signal ultra-high quality to customers who cannot directly measure the quality, you can send such signals by providing high-quality services in other areas not directly related to the good or service you are providing, but which the customer can immediately appreciate. This happens in all sectors of the economy.
We often hear that hospitals specializing in medical tourism (such as Burumgrad Hospital in Thailand) offer high quality non-medical services, and payers who opt for medical tourism (it is reported) will fly the family to the beach in Thailand to have a nice vacation while the patient undergoes the operation. Nothing to do with the quality of the hospital, but a nice touch that loved ones value.
Nevertheless, we still do have the problem in U.S. hospitals that they are not competing on price. The Ferrari dealer charges a much higher price than the Chevy dealer and this is immediately apparent to the customer. The Ferrari dealer has to offer extras, beyond the Ferrari itself, to convince customers to pay more. The hospital does not.
Plus, when I see the examples of the VIP service in the article, they scream “risk selection”! The hospital appears to be trying to attract relatively healthy elderly patients who are excited about getting on a bus to cross the Detroit river to visit a casino.
The hospital does not appear to be interested in attracting patients who are very ill and home-bound. This may be a consequence of Medicare’s increasing restrictions on paying for so-called “never events”.
How dare my favorite department store offer amenities for frequent shoppers like free parking, special sales, educational fashion shows, and affinity discounts?