International Journal of Health Care Quality Assurance

Modified importance-performance analysis: an application to hospitals

Ugur Yavas, Donald J. Shemwell,
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 Modified importance-performance analysis: an
application to hospitals
Keywords
Performance measurement,
Hospitals, Positioning,
Competitiveness, USA
Downloaded by University of York At 18:17 20 March 2018 (PT)
Abstract
This paper seeks to investigate
the reasons why, in an
increasingly competitive health
care milieu, patients choose
certain hospitals over others. It
introduces the modified
importance-performance analysis
technique and presents the
method and findings of an
empirical study which applied
importance-performance analysis
in a health care setting. The
strategies derived from the study
findings are discussed.
International Journal of Health
Care Quality Assurance
14/3 [2001] 104±110
# MCB University Press
[ISSN 0952-6862]
[ 104 ]
Ugur Yavas
Interim Chair and Professor of Marketing, East Tennessee State University,
Johnson City, Tennessee, USA
Donald J. Shemwell
Associate Professor of Marketing, East Tennessee State University,
Johnson City, Tennessee, USA
Introduction
Background
More than at any other time in their history,
hospitals are confronted with a fundamental
business challenge ± survival and success in
a turbulent and increasingly competitive
environment. Several troubling signs are
already in place. Hospital stays are
shortening; hospital closures and market
concentration are increasing, and excess
capacity continues to remain a topic of
serious concern (Fuchs, 1997; Madden, 1999;
Succi et al., 1997). There is a growing
awareness that the primary determinants of
survival for hospitals are utilization/
occupancy rates and that in the next
millennium cost-cutting, the primary focus of
hospital administrators to date, will not be
sufficient for survival and success.
With most hospitals operating at low
utilization rates, it becomes important for
them to find out why patients choose some
hospitals over others. This is not merely
desirable, but a necessity. In today's
competitive milieu only those hospitals with
a clear understanding of their competitive
standing will be able to thrive and those
which do not will join the scores of others
that are now closed. Thus, the purpose of this
paper is to assess the relative strengths and
weaknesses of a hospital vis-aÁ-vis its primary
competitor. The analytical framework of
modified importance-performance analysis is
used to perform the competitive analysis.
The remainder of the article describes the
study setting, explains the modified
importance-performance analysis, presents
the method and findings of an empirical
study and proffers the strategies derived
from the study findings.
Study setting
The study took place in a Southeastern SMSA
(standard metropolitan statistical area) with a
population of approximately 400,000. The focal
hospital is a 540-bed facility with 1,856 full
time equivalent employees and 281 active
physicians. It offers a wide range of services
including emergency rooms, ultrasound, CT
scans, MRI procedures, and nuclear medicine.
Like a lot of other hospitals nationwide, it has
been experiencing a period of extreme belt
tightening wrought by declining hospital
stays and occupancy rates, and its
commitment to remain in the preferred
provider network for the private and public
PPOs that dominate the local market.
The focal hospital was concerned about the
impending competition from another large
comprehensive hospital located in the area.
The competing facility is a 407-bed, 2,800
employee hospital. It also offers a wide range
of services including a Level I Trauma
Center and the area's only dedicated medical
air transport. Because of the confidential
nature of the study, herein the focal and the
competitor hospitals are designated as A and
B respectively.
Importance-performance analysis
Arguably few competitive analysis
techniques have captured the fancy of
practitioners, and have been examined,
described and celebrated more than the
importance-performance analysis (Martilla
and James, 1977; Sethna, 1982; Cheron et al.,
1989; Keyt and Yavas, 1988; Crompton and
Duray, 1985; Yavas and Riecken, 1998). The
technique, based on the conceptual
foundations of multi-attribute choice models,
is designed to identify the strengths and
weaknesses of an object (e.g. a hospital) in
terms of two dimensions which consumers
employ in evaluating that object. The first is
the relative importance of the attributes to
consumers. The second is consumers'
assessment of the performance of the object in
terms of these attributes. By defining a two-
dimensional matrix with the horizontal axis
representing the perceived performance of
the object from low to high and the vertical
axis signifying the importance of the
 Ugur Yavas and attribute from low to high, the analysis yields
Donald J. Shemwell prescriptions for four strategies (see Figure 1).
Modified importance- Attributes in Quadrant I are evaluated
performance analysis: an
application to hospitals high in both importance and performance.
International Journal of Health What is needed here is to ``keep up the good
Care Quality Assurance work.'' Quadrant II signals those attributes
14/3 [2001] 104±110
that need special marketing effort. These
attributes are high in importance but rated
substandard in performance. The attributes
in Quadrant III indicate those rated low in
terms of both importance and performance.
Because of their low salience, these
attributes are considered low priority and
require no additional resources. Attributes
contained in Quadrant IV are rated high in
performance but low in importance. This
implies that an overkill has occurred.
The classical importance-performance
analysis, while useful in highlighting the
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strong and weak points of an object in terms
of salient attributes, has a major
shortcoming. It overlooks the relative
performance of an object vis-aÁ-vis its
competitors. Yet consumers do not evaluate
an object in a competitive vacuum. On the
contrary, the ultimate differential advantage
(or disadvantage) an object has is determined
by its performance relative to competitors.
Modified importance-performance
analysis
Figure 2 presents the modified importance-
performance grid, which incorporates the
relative performance as a weighted index.
The index is calculated as follows:
Iij ˆ Mij  …Fij ÿ Cij †
where:
Iij = Respondent j's index score for
attribute i,
Mij = Respondent j's assessment of the
importance of attribute i,
Fij = Respondent j's assessment of the
performance of the focal object in
terms of attribute i, and
Figure 1
Importance-performance analysis
Figure 2
Modified importance-performance analysis
Cij = Respondent j's assessment of the
performance of the competitor in
terms of attribute i.
Mathematically, the formula states that a
respondent's index score for a given attribute
is equal to his/her evaluation of the
importance of an attribute times the
difference between his/her assessments of
the performances of the focal and the
competitor objects. The highest index scores
would emerge when a respondent indicates
that the attribute is highly important to his/
her choice behavior and that the focal
object's performance is excellent while the
competitor performs very poorly. Likewise,
the minimum index scores would be attained
when the respondent views the attribute
highly important and the competitor's
performance is judged excellent but the focal
object's performance is deemed very poor. By
defining a two-dimensional grid where the
horizontal axis represents the focal object's
own performance from low to high and the
vertical axis demonstrates the relative
performance index scores (as described here)
from low to high, the analysis again results
in four outcomes (see Figure 2).
Attributes in Quadrant I are evaluated
high in both relative and own performance.
What is needed here is to keep up the good
work and solidify the competitive edge.
Attributes in Quadrant I make good focal
points for marketing efforts. Positioning
strategies and thematic slogans can be based
on these competitive edge attributes.
Attributes in Quadrant II represent a kind
of double-edged sword. On the one hand,
these attributes represent potential
opportunities in the sense that a
transformation from low to high own
performance would result in redesignation
as a Quadrant I attribute. On the other hand,
Quadrant II attributes represent a false
security because a deterioration in their
relative performance index would result in a
reassignment to the highly problematic
[ 105 ]
 Ugur Yavas and
Donald J. Shemwell
Modified importance-
performance analysis: an
application to hospitals
International Journal of Health emerge.
Care Quality Assurance
14/3 [2001] 104±110
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Quadrant III (competitive disadvantage/red
alert). Thus, the focal entity needs to stay
alert to actions by the competitor to improve
its performance. If ignored, real threats may
The attributes in Quadrant III are rated
low in terms of both own and relative
performance. This suggests a competitive
disadvantage and calls for a red alert.
Immediate action needs to be undertaken to
ameliorate the current positioning of these
attributes by improving own performance in
real terms. Unless mitigated through
concerted actions, competitors will continue
to gain success. Attributes contained in
Quadrant IV are rated high in own
performance but low in relative
performance. This implies vulnerability.
Head-on competition is imminent and the
Results
Attribute salience
To determine which of the 15 attributes are
important and which are unimportant, for
each attribute, mean importance scores were
calculated (see Table I). These scores were
then compared to the grand mean (i.e. the
mean importance rating for all the attributes
taken collectively). The attributes which had
significantly higher means than the grand
mean were considered to be the salient, and
the rest nonsalient attributes. From this
analysis, six attributes emerged as being
important. These were acceptability of one's
insurance policy by the hospital, quality of
emergency care, having up-to-date medical
equipment, offering latest medical
procedures and the competencies of the

focal object cannot afford to relax simply
because its own performance is good.
Decisive programs are needed to turn around
the unfavorable performance gap.
Method
Data for the study were collected through
self-administered questionnaires from people
residing in different sections of the SMSA.
Three hundred questionnaires were hand
distributed to potential respondents
satisfying the following conditions:
. the respondent had to be familiar with
both hospitals as a result of previous
visit/stay or knowing friends/relatives/
colleagues who had stayed there;
. the respondent had to have a health plan
(e.g. private or employee-provided
insurance) which would allow him/her to
make his/her hospital choice.
Respondents not meeting either of these
conditions during the initial screening were
replaced with alternative respondents in the
same neighborhood. After a two-week period,
of the 300 questionnaires thus distributed,
218 usable ones were retrieved.
A list of 15 hospital choice attributes was
harvested from related studies (see, for
example: Baliga-Zifko and Krampf, 1997; Finn
and Lamb, 1986; Jensen, 1987; Sloane et al.,
1999). To generate the importance measures,
respondents were asked to allocate 100 points
to the 15 hospital choice attributes in terms of
their importance. The use of this so-called
constant-sum scale in obtaining importance
scores is advocated by Green and Kim (1991).
Then, respondents were asked to evaluate
each hospital in terms of these attributes on
seven-point scales ranging from 1 = poor to
7 = outstanding.
[ 106 ]
medical staff (i.e. the nurses and the
physicians).
Own performance
What are the attributes in which Hospital A
performs well? In which areas does it
perform poorly? To dichotomize the 15
attributes into good and poor performer
categories, each attribute's mean own
performance score was calculated. A
comparison of these mean scores to the grand
mean performance score revealed that
Hospital A's own performance was good in
nine areas (see Table I). These were
acceptability of insurance, availability of
specialists, quality of emergency care, wide
range of services, use of contemporary
medical equipment and procedures,
competencies of nurses and physicians, and
visitation policies.
Relative performance index
As can be inferred from the data depicted in
Table I, seven attributes attained high and
the remaining eight attributes attained low
relative performance designations. In
making these determinations, first, relative
performance indices were calculated for each
attribute by using the formula presented
earlier. Then, the individual index scores
were compared to the grand mean. These
relatively good performing attributes were
acceptability of insurance, fees/charges, use
of latest procedures, competency of nurses,
clarity of admission/dismissal procedures
and visitation policies.
Attribute placements
Traditional grid
By simultaneously considering each
attribute's importance and the focal
hospital's own performance in terms of these
attributes, the attributes were placed into the
 Ugur Yavas and Table I
Donald J. Shemwell Importance, performance and relative performance index scores
Modified importance-
performance analysis: an Mean
application to hospitals
Own Competitor
International Journal of Health
Care Quality Assurance Attribute Importance performance performance Index
14/3 [2001] 104±110 Attractiveness of interior/exterior 4.16 4.68 5.37 ± 2.37
Accepts your insurance 10.70 5.41 5.51 1.35
Availability of specialists 6.53 5.38 5.57 ± 2.41
Quality of emergency care 8.42 5.18 5.30 ± 0.88
Range of services 6.11 5.20 5.50 ± 1.91
Fees/charges 6.18 4.15 3.84 2.74
Up-to-date medical equipment 7.28 5.36 5.53 ± 0.83
Nurses' competency 8.59 5.21 5.36 ± 0.23
Physicians' competency 15.61 5.33 5.46 ± 1.66
Latest medical procedures 6.88 5.38 5.51 ± 0.63
Clarity of admission/dismissal procedures 4.06 4.91 4.93 ± 0.58
Visitation policies 3.60 5.08 5.21 ± 0.09
Accessibility 4.25 4.80 5.48 ± 3.08
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Privacy 4.23 4.89 5.25 ± 2.25

Personal attention 5.61 4.87 4.81 0.64
Grand mean 6.81 5.05 5.24 ± 0.81
Notes: The relative performance index was calculated on an individual basis and then aggregated. Thus, you
cannot calculate the index from the data in the tables

appropriate quadrants of the traditional grid.
As can be seen from the results summarized
in Table II, the keep up the good work and
low priority quadrants led the pack with six
attributes each. They were followed by the
overkill quadrant, which contained
availability of specialists, range of services
and visitation policies. Interestingly, no
attribute fell under the critical Quadrant II
(concentrate here).
Modified grid
By pairing the focal hospital's own
performance in the 15 study attributes with
its relative performance index in the same
attributes, attributes were placed into the
four quadrants of the modified grid. As
displayed in Table II, three attributes (fees/
charges, clarity of admission/dismissal
procedures and personal attention) fell into
the false security/opportunity alert
quadrant. All three attributes exhibited low
own but high relative performance. Five
attributes in Quadrant IV signaled
vulnerability and alerted the focal hospital's
management to be on the competitive watch.
The competitive edge/keep up the good
work quadrant (Quadrant I) which
represents high own and relative
performance had four attributes. They were
acceptability of insurance, nurses'
competency, latest medical procedures and
visitation policies. Quadrant III (red

Table II
Attribute placements
Attribute Traditional analysis Modified analysis
Attractiveness of interior/exterior Low priority Competitive disadvantage/red alert
Accepts your insurance Keep up good work Competitive edge/keep up good work
Availability of specialists Overkill Vulnerability/competitive watch
Quality of emergency care Keep up good work Vulnerability/competitive watch
Range of services Overkill Vulnerability/competitive watch
Fees/charges Low priority False security/opportunity alert
Up-to-date medical equipment Keep up good work Vulnerability/competitive watch
Nurses' competency Keep up good work Competitive edge/keep up good work
Physicians' competency Keep up good work Vulnerability/competitive watch
Latest medical procedures Keep up good work Competitive edge/keep up good work
Clarity of admission/dismissal procedures Low priority False security/opportunity alert
Visitation policies Overkill Competitive edge/keep up good work
Accessibility Low priority Competitive disadvantage/red alert
Privacy Low priority Competitive disadvantage/red alert
Personal attention Low priority False security/opportunity alert

[ 107 ]
 Ugur Yavas and alert/competitive disadvantage) contains
Donald J. Shemwell those attributes which demonstrate low own
Modified importance- and relative performance. In this study, these
performance analysis: an
application to hospitals critical attributes demanding immediate
International Journal of Health intervention were attractiveness of interior/
Care Quality Assurance exterior, accessibility and privacy.
14/3 [2001] 104±110
Implications
This article presented modified importance-
performance analysis and demonstrated its
application within the context of two
hospitals. The modified technique presented
here permits administrators to better
understand consumer perceptions in light of
competition and guards against mistargeted
strategies. For instance, six attributes are
under the low priority quadrant of the
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traditional importance analysis. For those
attributes, the traditional analysis would
recommend not to spend any resources. Yet,
when the relative performance is taken into
consideration, clearly three of these
attributes reflect competitive disadvantage
for the focal hospital. If ignored, they could
result in the loss of patients to the
competitor. Likewise, the traditional
importance-performance analysis identified
six attributes as being important and high
performing attributes. Thus, the traditional
analysis's recommendation for these
attributes is to ``keep up the good work''.
However, the modified analysis suggests that
three of these attributes (quality of
emergency care, up to date medical
equipment and physicians' competency)
represent vulnerabilities (see Table II). In a
similar vein, according to the traditional
analysis, three attributes are essentially
overkills. Yet, the modified analysis
classifies two of these attributes (availability
of specialists and range of services) into the
vulnerability/competitive watch quadrant.
This modified analysis offers a number of
important recommendations for Hospital A's
administrators. The four attributes in
Quadrant I (acceptability of insurance,
nurses' competency, latest medical
procedures, and visitation policies) represent
areas in which Hospital A has high own
performance and also high relative
performance. From a managerial
perspective, Hospital A should attempt to
keep up the good work. Those responsible
should make sure that the systems and
procedures already in place in these areas
are continued. Those managers responsible
for the good work need be given positive
reinforcements and recognition for their
achievements. From a marketing
perspective, these four choice criteria
[ 108 ]
represent a competitive edge, one that can be
exploited to provide Hospital A with superior
product positioning relative to its key
competitor, Hospital B. Competitive edge
attributes are good choices for high points (or
points of emphasis) in promotional literature
and public relations releases. They also
represent good foci for thematic slogans.
Three attributes in Quadrant II represent
false security/opportunity alert situations,
personal attention, reasonableness of fees/
charges, and clarity of admission/dismissal
procedures. These are attributes in which
Hospital A's own performance is low, but
relative performance is high. The choice
criteria are opportunity alerts in the sense
that Hospital A needs only to improve its own
performance to create a significant
competitive edge. It is important to note that
two of these choice criteria, reasonableness
of fees and (to a lesser extent) personal
attention, have very high relative
performance indexes and they are also the
only attributes in which Hospital A's
performance exceeds that of Hospital B.
Nevertheless, an attribute in this quadrant
can also be a false security because a
deterioration in relative performance index
could lead to being re-designated as a
competitive disadvantage/red alert. As can
be seen clearly from Table I, the attribute
most in danger of downward re-designation
is clarity of admissions/dismissal
procedures. Any slight deterioration in
Hospital A's own rating, increase in Hospital
B's rating, or upward adjustment in the
importance placed on this attribute would
result in a competitive disadvantage/red
alert. Thus, Hospital A needs to watch for
signs of increased importance placed on this
attribute or attempts by Hospital B to
improve its admissions/dismissal
procedures. In addition, Hospital A's
management should conduct a thorough
review of admissions/dismissal procedures.
Also, the officer in charge of tracking
complaints needs to issue an alert to the
senior quality control manager should any
increase in complaints about admission/
dismissal procedures occur.
In Quadrant III (competitive disadvantage/
red alert), there are three attributes, privacy,
accessibility, and attractiveness of interior/
exterior. Hospital A has to pay its closest
attention to these three attributes. Not only is
Hospital A's own performance low for these
three attributes, but its relative performance
index rating is also low. In short, these are
areas in which Hospital A has a pronounced
disadvantage. Thus, specific interventions
are necessary.
 Ugur Yavas and
Donald J. Shemwell
Modified importance-
performance analysis: an
application to hospitals
International Journal of Health area around the building and create a more
Care Quality Assurance
14/3 [2001] 104±110
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In terms of attractiveness of interior/
exterior, it is not physically possible or
financially feasible to build a whole new
building, but it is possible to spruce up the
attractive and friendly interior through
strategic placement of plants, artwork, and
other visually enhancing articles. A
volunteer committee of employees should be
formed to make the interior and exterior
more attractive, and top level administrators
must nurture and support this committee
and their efforts.
In terms of accessibility, the hospital
cannot improve the road system in the area
but it can make it easier to park and get in
and out of the hospital. For instance, an exit
road out of the back of the hospital can give
potential patients and their families an
alternative way in and out of the parking lot.
Improved ingress and egress is particularly
important during certain times of the day,
when an alternative route may save
considerable time.
In terms of privacy, the hospital may want
to improve its system for room sharing to
allow patients and visitors at least the
perception of greater privacy. Single rooms
or private rooms are very expensive and
many insurance companies will not foot the
bill. Thus, demand for these rooms is not
sufficient enough to warrant creating more
private rooms. What people want are less
expensive, shared rooms that give (at least
the feeling of) some significant measure of
privacy. More sophisticated and clever
arrangement of room dividers, for instance,
can often give this perception while
nevertheless allowing hospitals to save
money by enabling them to use more shared
rooms.
Five attributes fall into Quadrant IV
(vulnerability/competitive watch),
availability of specialists, quality of
emergency care, range of services, up-to-date
medical equipment, and physicians'
competency. These are attributes for which
hospital A's own performance is high but its
relative performance is low. Hospital A is
vulnerable in the sense that if its own
performance were to fall, then these
attributes would become red alerts/
competitive disadvantages. It is particularly
disturbing that Hospital A is being
outperformed by Hospital B on all five of
these attributes. Most disturbing of all is the
fact that Hospital B is outperforming
Hospital A on the single most important
attribute, physicians' competency.
The poor showing in the area of
physicians' competency was particularly
upsetting to hospital administrators because
they felt that they had done a really good job
in recruiting excellent physicians.
Apparently, however, public perceptions did
not mirror reality. The problem is that
physicians' competency is a credence
attribute (Lynch and Schuler 1990). In
evaluating credence attributes such as
physicians' competency, ordinary consumers
do not have the knowledge (and may not ever
have enough knowledge) to be able to make
rational judgments. Rather, they tend to
focus on external cues such as where a
physician got his/her degree, awards and
other forms of recognition. Hence, Hospital A
must communicate its strengths in the area
of physicians' competency through public
relations and advertising campaigns
targeting the public. Also, Hospital A needs
to improve its ``sales promotion'' by placing
diplomas, awards, and physician bios on a
bulletin board in the main entrance area of
hospital.
On a closing note, it should be emphasized
that the modified importance-performance
analysis described in this article is simple,
easy to apply and very flexible. It requires a
minimum amount of data, which can be
collected readily. The requisite calculations
do not necessitate knowledge of any
sophisticated, cumbersome statistical
procedures. The information from the
analysis diagnoses the areas that need
special attention and prescribes the strategic
actions. Results can be easily updated with
collection of additional data over time and
any changes occurring in attribute
importance, own and relative performance
levels can be identified. When conducted
over time, the technique can provide early
warning of loss of market position by
detecting changes in consumer perceptions
before they are reflected in financial
performance. In sum, the technique allows
hospital administrators to assess better their
competitive standings and design
appropriate strategies.
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