Employer-Directed Business Development Initiatives Represent a Golden Opportunity

Healthcare Marketing Report 04.01.2011

By Pearson Talbert

The number and nature of items that pass through a hospital’s marketing department are staggering. Strategic and tactical. External and internal. Short-term and long-range. Every department has a request and everyone needs it now. So much so, that there seems to be no conformity in what heads of marketing, business development and public relations are being asked to do.

Except from the CEO.

With amazing consistency, CEOs of hospitals today, both large and small, are in almost total agreement about what they expect from their marketing and business development departments: grow our market share, find new streams of profitable revenue, and enrich our brand in the community and marketplace. One but need glance through any host of industry periodicals today, or attend any number of industry trade group meetings, and see that hospital leaders are being told with amazing consistency that in order to survive and thrive in today’s marketplace they have to grow, attain efficiencies, and take market share.

The challenge of course, becomes how to achieve these lofty goals given that no hospital has the luxury of unlimited resources when it comes to time, dollars, energy, technology or focus. Layer onto this the simple truth that not everyone can grow market share at the same time within a defined marketplace-ultimately winners and losers will shake out in this healthcare battle of customer loyalty just as in every other industry.

Unlike other industries though, not all revenue streams are created equal as there is often a great divide between what a hospital charges and what they actually get paid. To compound matters further, not all payers pay the same amount for the same services. One look at the wide inconsistency in reimbursement rates between like services for a Medicare, Medicaid, self pay, and commercial insurance patients makes this crystal clear. In short, not all market share is created equal. Healthcare marketers understand that every dollar spent on targeting the commercially insured patient usually drives the greatest financial return to their hospital.

It should come as no surprise then that at more and more hospitals around the country, heads of marketing and business development are smartly embracing one path that makes the growth and market share goals attainable: building and nurturing relationships with their local business community. The employer is, after all, where the majority of commercially insured secure their benefits. Such an employer-directed strategy creates a value exchange between purchasers of commercial healthcare (employers) and the providers of needed healthcare services and products (the hospital and its medical staff) in a focused and disciplined way. It does this by driving commercially insured consumers to hospitals and physicians based not only on their ability to pay but on an assessment of an individual’s unique health risk profile.

Focusing on an employer­ driven strategy also makes sense as hospitals position themselves in the world of Accountable Care Organizations (ACOs) because such a strategy forces the hospital to focus beyond the hospital and begin to think efficiency and value, not just volume. ACOs are one of the government-prescribed remedies aimed at maintaining or improving the quality of care while reducing overall healthcare costs. Organizations that can effectively demonstrate they meet quality thresholds (e.g., clinical processes and outcomes, patients’ and caregivers’ perspectives on care, and utilization and cost targets) may be eligible to receive additional incentive payments from the Centers for Medicare & Medicaid Services in the form of shared savings. As a result, most hospitals are today looking at what they need to implement to reap these benefits.

One of the things they need to do is recognize that under a population management model the hospital is called upon to focus on the community as a whole and shift into an integrated health system model rather than a more traditional health center. Part of this means thinking beyond admissions and adapting a “right care, right time, right place” mindset. In other words, hospitals need to go beyond care giving and include care management as part of the overall healthcare experience. Working closely with local employers can position hospitals to coordinate all elements in the continuum of care by developing programs and strategies that work to keep people healthy and out of the hospital whenever possible.

Additionally, revenues generated out of the commercial and private insurance sector will become more important than ever for those health systems that do transition to an ACO model and see a corresponding increase in Medicare and Medicaid revenues. Simply put, government payment mechanisms have never been intended, nor could they ever be accused of trying, to generate a profit for the healthcare provider.

Not All Patients Are Created Equal

Many hospitals historically have made only a very loose correlation between the execution of their marketing plans and their institution’s profitability. Attracting increased volumes of patients has often been the broad-brush mandate, and since the mandate hasn’t changed through the years neither have the tactics. As I travel around the county I find that many marketers are still spending the majority of their budgets on buying TV and radio airtime, newspaper and magazine ads, direct mail and billboards. The only new wrinkle has been the addition of online media, but even there hospitals lag far behind their service industry counterparts (banks, hotels, airlines, etc.) when it comes to how to use this interactive medium to target and influence buying decisions.

The main objective has been to create awareness so that when a patient needs care, he or she will pick the hospital whose message is most memorable. This “top of mind” strategy may be well-grounded in other industries, but since the “buy” decision for health services often occurs long after the commercials have faded (and sometimes not even by the end user themselves), the reality is that few hospitals can measure the direct impact of their messages on their bottom line, making direct return on mass media marketing not a very scientific or directly analytical task.

Just as problematic is that many hospitals have not been strategic enough in their approach to attracting the right kind of business. The recent recession lifted the veil off this problem as many hospitals went from slightly profitable to showing operating losses when their endowments and charitable contributions dried up and bonds were downgraded. Today’s smart marketers and CEOs know that it isn’t necessarily the volume of patients they service anymore. Rather it is how and where they serve them, inpatient vs. outpatient for example, as well as how many commercial patients they have to offset less profitable payer sources. Profitability-actually making a profit on the services rendered-must be strategically addressed if hospitals are to survive. Never has Sister Irene Krause’s statement of “No Margin, No Mission” rung more true.

Building relationships with local employers can be a successful strategy for hospitals because it is one where everyone wins.

Employer Worksites Are a Logical Place to Focus

Since a large percentage of America’s health benefits originate at the worksite, local employers represent a logical place for a hospital to direct its business development strategy. On a daily basis, local employers are making purchasing decisions that can positively or negatively impact hospital and physician practice revenue growth. They are asking themselves:
• Which health plans should I make available to our employees?
• Which providers should be included in these plans?
• How can I better address employee health risks as a means to reduce claims and lower my cost of health benefits?
• How can I better promote the importance of health to our employees?
• Who is best equipped to meet our occupational health needs?
• Who can I trust to guide me through these important issues?

Hospital marketers needn’t look far to know what makes employers tick. For many employers, healthcare costs are their second biggest expense after salaries and those of us who have been in the business for some time remember the shock when first hearing Detroit automakers say that they spent more on healthcare than they did on the steel that went into their cars. Today, these auto makers are not alone. According to a recent Towers Watson’s Healthcare Cost Survey, employer healthcare costs for active employees are projected to rise 8.2 percent (after plan changes), to an average annual cost of $10,730 in 2011-the seventh consecutive year of increases. As a result, today’s employers are looking for answers and will try any reasonable strategy that will help them both understand and control these skyrocketing healthcare costs.

The passage of the Patient Protection and Affordable Care Act may help, especially the provision that earmarks billions of dollars in federal tax credits for small business owners who offer health insurance. Under this, for-profit companies with no more than 25 workers and whose average annual salaries is less than $50,000 are eligible for a tax credit of up to 35 percent of the employer ‘s contribution for health premiums. But the reality is the jury is still out on healthcare reform and there is much in the legislation that has not yet been sorted out.

While the cost of healthcare is causing employers to grind their teeth in frustration, those same numbers should make hospital marketers more than pleased at the potential for their hospitals. Perhaps more than ever, they have an opportunity to step in and help employers manage their healthcare cost concerns by establishing partnerships with the local business community that result in improvements in employee wellness and a corollary reduction in expenses. They are also, in many cases for the first time, positioning the hospital as part of the solution, not part of the problem, of rising healthcare costs After all hospitals are employers too, and usually one of the largest in any community.

Building relationships with local employers can be a successful strategy for hospitals because it is one where everyone wins:
• Hospitals win by driving desirable patient volume into their facilities (and medical staffs) and establishing themselves as the provider of choice in the community. This helps build trust, positive name recognition and brand loyalty.
• Employers win because by working with the local hospital they are able to identify employee health risks and implement employee­ specific early detection, prevention and educational initiatives. This creates a healthier workforce which saves them dollars in insurance premiums, absenteeism and workers’ compensation claims.
• Employees win by learning more about their health risks and developing the knowledge and tools they need to lead a healthier lifestyle.

Building a Program by Adding Value

A program of this nature needs to begin with a thorough market analysis to identify appropriate employers in the hospital’s catchment area. These employers can be based on size of workforce, insurance profile and other factors proven to be most desirable.

Once identified, the most successful partnerships start with the hospital administering a health risk survey among the company’s employees (and, in some cases, spouses and covered family members). The survey helps identify overall health trends, such as a high percentage of smokers or obese employees as well as current utilization of health services. By identifying the most pervasive health issues among an employee population, hospitals can then truly serve as an ACO by offering interventional programs such as onsite smoking cessation classes and weight or stress management programs or offering blood pressure tests, diabetes screenings, BMI calculations and more.

There is also significant opportunity in offering on-site health services. “Brown bag” lunchtime programs provide a way to offer pertinent health information while building a bond with individual employees. Such programs provide the opportunity to link employees to local physicians who can help address identified health risks; or direct them to the hospital, if the problem is acute. The result is a strengthened bond between the hospital and its physicians, the worker and the employer- a win-win for everyone.

Why would employers open their doors to you and invest time and dollars into these kinds of programs? According to the 15th Annual National Business Group on Health/Towers Watson Employer Survey on Purchasing Value in Health Care, nearly two-thirds of employers say employees’ poor health habits are the biggest challenge to managing healthcare costs. That statistic certainly explains the findings of the 2009/2010 North American Staying@Work Report, in which more than two-thirds of companies surveyed have added or enhanced their existing health and productivity programs or expect to do so in the next year.

With employers increasingly willing to make investments in the health of their workforce, hospitals have a decision to make. They can continue to defer this activity to health plans or any assortment of entrepreneurial enterprises, or they can see this as a key opportunity to provide true leadership in creating a healthier community. In truth, no organization or industry is better positioned than the local hospital to play this role and assume this responsibility. After all, it is the hospital that is there for the community 24 hours a day and whose very mission is centered on being recognized as the local “expert” in health and healthcare.

For too long, hospitals have been hesitant about seizing the opportunity to work closely with local employers therefore directly impacting the health and health habits of employee populations. The difference now is that the awareness of the advantages and power of such programs has never been greater and the employer‘s motivation to act has never been more obvious. Partnering with local employers is your opportunity to grow market share, increase profitability and position your institution as your community’s foremost Accountable Care Organization. It is prime time for your hospital to step up and seize this opportunity, before your competition recognizes the merits of an employer directed strategy and beats you to the punch.

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