Professional Documents
Culture Documents
SSRN Id1807315
SSRN Id1807315
net/publication/228280455
CITATIONS READS
48 6,295
1 author:
Mark J. Kay
Montclair State University
23 PUBLICATIONS 522 CITATIONS
SEE PROFILE
All content following this page was uploaded by Mark J. Kay on 17 December 2013.
Healthcare
Healthcare marketing: marketing
what is salient?
Mark J. Kay
School of Business, Montclair State University, Montclair, New Jersey, USA 247
Abstract
Purpose – The purpose of this paper is to develop a perspective on what is “salient” or critical to
the discipline of healthcare marketing by analyzing and contrasting the consumer (or patient)
perspective with the institutional (or organizational) perspective. This “salience issue” is complicated
by the structural problems in healthcare such as societal service systems, advances in medical
technology, and the escalating costs of care. Reviewing selected studies, the paper examines how
consumers face increasingly difficult health choices.
Design/methodology/approach – The paper examines the different priorities and goals for
marketing that are implied by both patient and organizational perspectives in healthcare, focusing
primarily on the excesses of the more “market-based” US healthcare system.
Findings – Healthcare organizations need to better utilize marketing tools to inform consumers and
assist their healthcare decisions. This effort needs to be balanced by healthcare organizations that can
support the demand to improve quality and increase accessibility of care.
Originality/value – The perspective on the consumer (or patient) often becomes clouded amid the
operation of increasingly complex and convoluted healthcare systems. A new perspective on
healthcare marketing needs to be considered. Greater consumer access to healthcare information could
improve patient decision making. To accomplish this, greater institutional diffusion of evidence-based
healthcare practices is needed to improve organizational performance.
Keywords Health services, Marketing, Decision making, Patients, United States of America
Paper type Viewpoint
Introduction
Armstrong (1998) argues that journals should focus on publishing “useful” findings.
To accomplish this goal, he suggests that authors for journals (such as this one) should
generate a list of research problems or issues and have them rated for their potential
importance. This is an appealing idea, but one that is extraordinarily difficult to
accomplish. Considering the many players in healthcare – the medical profession,
medical researchers, government regulators, the insurance industry, the
pharmaceutical industry, and the hospital industry – each of these hold widely
differing views on healthcare and its marketing priorities.
Healthcare marketing exists in a complex institutional environment that is
complicated by differing viewpoints. Healthcare, as an institution, is a service “system”
(Entoven and Tollen, 2005) – the organizational and business structures of different
healthcare systems significantly affect many of its priorities. Evaluating the
importance and effects of marketing on the healthcare system is not a well-structured
problem since each of the organizational “players” functions to optimize or protect its International Journal of
own position. This is particularly the case in the USA healthcare system which Pharmaceutical and Healthcare
Marketing
Vol. 1 No. 3, 2007
Disclosure. The author has no conflicts of interest (direct or indirect) in writing this paper and pp. 247-263
q Emerald Group Publishing Limited
received no funding for the research or preparation of this manuscript. The author thanks the 1750-6123
reviewers for their comments. DOI 10.1108/17506120710818256
Shifting priorities
The priorities of healthcare organizations now continually shift due to advancing
technology. Tools to better diagnose susceptibility to disease due to genetic predispositions
are now entering healthcare, making preventative care and proactive treatment
increasingly important services to deliver effectively. Preventing disease is a better
course of action for the consumer than treating it after it develops. It is also cost effective
and can be profitable. For example, one of the most profitable drugs on the market, Lipitor,
is prescribed to help prevent coronary problems before they happen. (Note, however, that
five other statins have entered the market from competing firms – Mevacor, Zocor,
Pravachol, Lescol, and the newest, Crestor – yet these “new” drugs are simply chemical
variants with similar levels of efficacy.)
Healthcare organizations are aware that perceptions of quality are enhanced by
media attention. For example, doctor-owned hospitals may specialize in transplants or
gene therapy to garner the perception that they employ cutting-edge technologies and
IJPHM capture patients for the most profitable procedures. Organizations that concentrate on
1,3 developing new life saving cures and procedures are portrayed by the media as heroic.
For example, Merck’s drug development and distribution programs to cure river
blindness in Africa have provided the firm with customer goodwill and have inspired
employee loyalty.
With advancing technology, moreover, health priorities change, particularly as the
252 root causes of health problems and new health threats come to light. Diseases are now
more frequently tied to dietary issues, smoking, and other behaviors, or even connected
to the food or the local water supply. New health threats include problems such as
AIDS, potential problems such as avian flu, and terrorist threats such as the anthrax
powder scare. These threats affect public perceptions, greatly complicating decisions
by executives in public and private health organizations who are responsible to react to
each of these disparate problems.
The organizational choices for evaluating and assessing health risks, health
procedures, and health spending are continuing problems, subject to shifting priorities.
Yet maximizing health outcomes grows increasingly difficult as the costs of new
testing and other procedures have caused healthcare spending to grow at double digit
rates. There remain notable international, regional and organizational differences in
cost and quality (Reinhardt, 2005; Wennberg et al., 2005) that suggest that there is
considerable leeway for health organizations to significantly improve their
performance. Healthcare management has clear and rather formidable cost and
technology challenges.
Quality in perspective
The medical and organizational issues that define quality healthcare management are
not simple ones. Unlike other businesses, marketing for healthcare organizations is not
simply a matter of managing the perception of quality by responding to customer
satisfaction concerns. Organizations need to optimize real health outcomes, not mere
public perceptions. Consumers need to be educated in health issues that are consistent
with performance priorities and international standards.
Healthcare organizations face marketing and organization challenges that are
unlike those of other businesses. For example, the goal of hospitals is not simply to
maximize the production of services or to increase demand. In fact, the goal is often the
opposite. Hospitals shifted their emphasis to less profitable outpatient treatment
services between 1980 and 2000, enabling the number of hospital beds in the USA
to decrease from 6,985,000 to 5,810,000. Nevertheless, cost savings did not result.
Hospital spending increased from $246 to 1,300 million during that time (Folland et al.,
2004).
The quality of healthcare organizations needs to be understood in the context of
rising costs and changing treatment regimes. The issues are acute in the hospital
service sector. For example, quality often suffers, less due to the caliber of the medical
staff in the USA than due to limited capacities to handle the treatment burden.
The quality of healthcare services is, in effect, bounded by the capacities of healthcare
systems that are in place to serve the public, thus rationing or constraining the
consumption of healthcare. Outcome measures are apt to decline more due to the strain
placed on health service organizations – these, in fact, have limited the public
availability of healthcare services in the USA.
The medical industrial complex Healthcare
The editor of the prestigious New England Journal of Medicine coined the term “medical marketing
industrial complex” to describe the medical system (Relman, 1980). Healthcare systems
have grown in size and complexity due to both developing technology and the complex
organizational structures that have developed in healthcare systems. Organizational
systems need to be considered to assess healthcare’s marketing priorities.
In the USA in the late 1970s and early 1980s, nursing homes as well as large 253
hospitals consolidated into much larger organizations. Large corporate entities
emerged, such as Humana and Hospital Corporation of America. Similarly, the
pharmaceutical and medical device companies have merged into larger entities since
the 1990s. Boston Scientific bought out eight companies in 1995 to early 1996, rapidly
becoming a sizable player in the international medical device market. Pfizer merged
with Warner-Lambert in 2000 and bought Pharmacia (which had acquired Monsanto)
in 2002. Two British drug makers merged to form GlaxoSmithKline and Novartis was
created in 1996 from the merger of the Swiss companies, Ciba-Geigy and Sandoz.
Large international corporate entities do not necessarily create greater healthcare
value. For example, the pharmaceutical companies tinkered with controlling the
pharmaceutical benefit management organizations (Kay, 1999a), but this produced
little practical improvement for healthcare systems. Large organizations have greater
resources and can apply them with greater impact, however. This gives them
substantial power to lobby regulators and local governments, and influence legislation.
The effects and pitfalls of this are highly apparent in the USA. In 2005, it was
reported that the drug companies had spent $800 million on lobbying over the previous
seven years; lobbyists included 26 former members of congress and two former
chairmen of the Republican National Committee (Mahar, 2006).
This power fostered support for the Medicare Bill (Part D), the prescription drug
program, passed by the Republican-led Congress and endorsed by the Bush
administration. Medicare Part D is a program in which private insurance companies
receive subsidies to offer insurance. By fragmenting the purchase of drugs among many
private plans, the law denies Medicare the ability to bargain for lower prices from the
drug companies. The CBS news program, 60 minutes, documented many who received
lucrative jobs afterwards – for example, Republican Congressman Billy Tauzin, who
forced passage of the bill in a 3 AM vote, soon left Congress and took a $2 million a year
job as president of Pharmaceutical Research and Manufacturers of America.
Systemic problems
The systemic problems with healthcare are apparent simply by examining healthcare
spending figures. Healthcare in the USA is much less efficient that healthcare in OECD
countries (Anderson et al., 2003). National health expenditures per capita have
increased about 500 percent since 1960 in real terms. In 2002, the US spent $5,267 per
person in the population, and of this, $2,364, or 45 percent, was government spending,
mainly Medicare and Medicaid. Canada spent $2,931 per person, of which $2,048 came
from the government, while France spent $2,736 per person, of which $2,080 was
government spending (Krugman, 2005a).
The US Government spends considerably more on healthcare than other advanced
countries. Additionally, the private sector in the US supports a large part of the
healthcare burden. Yet the US performs poorly on health outcome measures such as
life-expectancy and infant-mortality rates, compared to other advanced countries. The
USA may have a technologically capable healthcare system and technologically
advanced practitioners, but Americans pay substantially more on healthcare and
get less.
This poor performance is not entirely the result of a defective healthcare system.
The segment of Americans (particularly children) that live in poverty distorts some of
the comparative national performance indicators. America’s relatively higher infant
mortality rate does not necessarily imply that its pediatric care services are inferior.
For example, social or behavioral factors, such as diet and lack of exercise, can play a
role in increasing the incidence of many health problems. Obesity rates among children
have doubled, and this has been correlated to diabetes and other problems. This
increase in disease incidence is not necessarily due to the performance of the hospitals
or other healthcare service providers.
Healthcare costs are higher, in part, due to the wage requirements that prevail in the Healthcare
US market that raise costs (Anderson et al., 2003). For a variety of reasons, US doctors marketing
are paid much more than their counterparts in other countries. Medical tests and
procedures are employed more frequently in the USA. New costs engendered by
diagnostic testing have consistently escalated healthcare spending requirements.
And the USA is the major profit center for pharmaceutical companies, who are able to
price their products higher due to any lack of price controls – the US market comprises 255
half of sales in the $400 billion global pharmaceutical business (Smith, 2004).
Cost containment in the USA appears to be a necessity, but little effort has been
made to integrate efficiency goals into those of increasing the quality of practice.
Responsible doctors, often working 60 hours a week and attempting to stay current
with medical advances, may lack the means or have the impetus to structure medical
procedures around efficiencies. Moses et al. (2005) found that while the USA spends
about six cents of every health care dollar on medical research, the nation spends only
one-tenth of a cent of every dollar on longer-term evaluation of which drugs and
treatments work best at the lowest cost.
Health technologies, such as vaccines, have historically significantly reduced
healthcare costs and improved outcomes. More commonly today, scientific discoveries
yield healthcare solutions that result in complex and costly treatment regimes. For
example, Medicare now pays for implanted cardiac devices in many patients with heart
trouble since research has proven their effectiveness. Survival rates and health
outcomes from heart disease is a prominent success story in that new emergency
services, methods, and treatments have extended lives for decades. Diseases that were
once virtual death sentences, including AIDS and cancer, are now often treatable.
Yet survival of patients with these chronic conditions has had the consequence of
substantially raising health costs.
Healthcare cost problems in the USA are aggravated by the lack of health insurance
coverage among an estimated 46 million Americans. Lack of insurance results in costs
imposed on public healthcare systems through the increased use of hospital emergency
services, and through the problems of non-payment of medical expenses that result
from this. As medical costs are shifted to hospitals, the effect is to raise costs to other
services as the burden is shifted to paying customers. There are other important social
costs of the uninsured segment as well, including lower worker productivity and
increased disability problems (Hadley, 2003). Untreated health needs and problems do
not simply go away. The costs of the lack of healthcare insurance are simply shifted.
Society pays for ill health in other ways.
References
Altman, S., Shactman, D. and Eilat, E. (2006), “Could US hospitals go the way of US airlines”,
Health Affairs, Vol. 25 No. 1, pp. 11-21.
Anderson, G., Hussey, P., Frogner, B. and Waters, H. (2005), “Health spending in the United
States and the rest of the industrialized world”, Health Affairs, Vol. 24 No. 4, pp. 903-14.
Anderson, G., Reinhardt, U.E., Hussey, P. and Petrosyan, V. (2003), “It’s the prices, stupid: why
the United States is so different from other countries”, Health Affairs, Vol. 22 No. 3,
pp. 89-105.
Armstrong, J.S. (1998), “Management science: what does it have to do with management or
science”, Marketing Bulletin, Vol. 9, pp. 1-15.
Baker, T. (2005), The Medical Malpractice Myth, University of Chicago Press, Chicago, IL.
Davis, J. (2007), “Consumers’ preferences for the communication of risk information in drug
advertising”, Health Affairs, Vol. 26 No. 3, pp. 863-70.
Entoven, A. and Tollen, L. (2005), “Competition in healthcare: it takes systems to pursue quality
and efficiency”, Health Affairs, Vol. 24, pp. 420-33.
Folland, S., Goodman, A. and Stano, M. (2004), The Economics of Health and Health Care, 4th ed.,
Prentice-Hall, Englewood Cliffs, NJ.
Hadley, J. (2003), “Sicker and poorer – the consequences of being uninsured”, Medical Care
Research and Review, Vol. 60, pp. 3S-75S.
Hayes, R. (2006), “Interview on the Leonard Lopate show, radio station WNYC”, available at:
www.wnyc.org/shows/lopate/episodes/2006/07/28 (accessed July 28).
Kay, M. (1999a), Marketing Structural Change in the Health Care Market: Emerging International
Opportunities, Contemporary Developments in Marketing, ESKA, Paris.
Kay, M. (1999b), “The economic impact of the HIV/AIDS problem”, paper presented at Ten Years
with AIDS: the Congress of Eastern/Central Europe, Vilnius, Lithuania, organized by the
Lithuanian AIDS Center, June 3.
Khatri, N., Baveja, A., Boren, S.A. and Mammo, A. (2006), “Medical errors and quality of care:
from control to commitment”, California Management Review, Vol. 48 No. 3, pp. 115-41.
Krugman, P. (2005a), “The medical money pit”, The New York Times, April 11.
Krugman, P. (2005b), “Bad for the country”, The New York Times, November 25.
Krugman, P. and Wells, R. (2006), “The health care crisis and what to do about it”, New York
Review of Books, Vol. 53 No. 5, available at: www.nybooks.com/articles/18802
McEachern, S. (1995), “Disease management: they all ‘say’ they’re doing it”, Health Care Strategic
Management, Vol. 13 No. 6, pp. 19-23.
Mahar, M. (2006), Money Driven Medicine, Harper Collins, New York, NY. Healthcare
Maxwell, J., Temin, P. and Watts, C. (2001), “Corporate health care spending among Fortune 500 marketing
firms”, Health Affairs, Vol. 20 No. 3, pp. 181-8.
Moses, H., Dorsey, E.R., Matheson, D. and Their, S. (2005), “Financial anatomy of biomedical
research”, JAMA, Vol. 294 No. 11, pp. 1333-42.
National Committee for Quality Assurance (2003), The State of Health Care Quality: Trends and
Analysis, National Committee for Quality Assurance, Washington, DC. 263
Reinhardt, U. (2005), “Variations in California hospital regions: another wake-up call for sleeping
policymakers”, Health Affairs, Vol. 24, pp. 549-51.
Reinhardt, U. (2006), “The pricing of US hospital services: chaos behind a veil of secrecy”, Health
Affairs, Vol. 25 No. 1, pp. 57-69.
Relman, A.S. (1980), “The new medical-industrial complex”, New England Journal of Medicine,
Vol. 303 No. 17, pp. 963-70.
Shin, J. and Moon, S. (2005), “Direct-to-consumer prescription drug advertising: concerns and
consumers’ benefit”, The Journal of Consumer Marketing, Vol. 22 No. 7, pp. 397-403.
Siegel, M. (2005), “The irony of fear”, The Washington Post, August 30.
Smith, C. (2004), “Retail prescription drug spending in the national health accounts”, Health
Affairs, Vol. 23 No. 1, pp. 160-7.
Thorpe, K. (2005), “The rise in health care spending and what to do about it”, Health Affairs,
Vol. 24 No. 6, pp. 1436-45.
Wennberg, J., Fischer, E., Baker, L., Sharp, S. and Bronner, K. (2005), “Evaluating the efficiency of
California providers in caring for patients with chronic illnesses”, Health Affairs, Vol. 24
No. 4, pp. 256-64.
Wilkes, M., Bell, R. and Kravitz, R.L. (2000), “Direct-to-consumer prescription drug advertising:
trends, impact, and implications”, Health Affairs, Vol. 20 No. 2, pp. 110-28.
Woloshin, S., Schwartz, L. and Welch, H.G. (2004), “The value of benefit data in
direct-to-consumer drug ads”, Health Affairs, Vol. 24 No. 2, pp. 234-43.