Orange County Hospitals Stage Marketing Blitz

A doctor-owned hospital in north Orange County recently mailed a $2,500 check to each member of a physician group that the hospital wanted to recruit.

The doctors could keep the initial “dividend payments,” the hospital said, if they agreed to buy stock in the hospital and begin sending patients to the facility.

One of the doctors, who asked not to be named, said the checks were returned uncashed. Some of his colleagues were offended by the high-pressure tactics, he said, but he believed the hospital officials were simply behaving like typical “aggressive, pushy businessmen.”

Although the check-mailing incident may be extreme, aggressiveness has become the rule rather than the exception as hospitals throughout the country engage in both behind-the-scenes negotiations and high-profile advertising as part of an all-out marketing blitz:

- Just east of Chapman General Hospital in Orange, a billboard advertises a doctor referral service at nearby St. Joseph Hospital on one side and an alcohol and drug treatment program at Martin Luther Hospital in Anaheim on the other. “It’s just a highly competitive environment,” said Chapman marketing director Judy Mercer, who tried unsuccessfully to have the St. Joseph ad removed.

- Healthcare Medical Center of Tustin has created a “hotel service division” in charge of housekeeping and food. The division buys hotel-quality towels, linen, dishes and stemware. It employs a “gourmet chef” and stations a “concierge” on every floor to answer patient requests. The hospital cleans and presses the clothes of “guests” during their stay. And it even provides valet parking.

- Downey Community Hospital is attaching an inflated beating heart to several freeway billboards. The giant heart, which thumps 55 times a minute in response to air blasts from two fans, is intended to call attention to the hospital’s new $6-million heart center. “There are a lot of heart centers throughout Southern California,” marketing director Carl Westerhoff said. “We wanted to be sure people knew we had one.”

- Hoag Memorial Hospital Presbyterian in Newport Beach is running full-page newspaper announcements of the opening of combined labor, delivery and recovery rooms. Hoag officials characterize the multipurpose maternity rooms as a step up from conventional maternity accommodations offered by surrounding hospitals.

- Not to be one-upped, Saddleback Community Hospital in Laguna Hills is advertising the opening of a $20-million women’s center, offering labor, delivery, recovery and postpartum care in just one room.

- UC Irvine Medical Center, in an effort to shed its indigent care image and attract more privately financed patients, has increased its annual marketing budget to $300,000 from $75,000 a year ago.

‘Market Share’ Sought

With U.S. hospital patient occupancy on the decline, “you need to find a way to get an increasing market share if you want to stay even,” said Donald L. Hicks, vice president of marketing and development at St. Joseph Hospital.

The competition is also driven by government deregulation of the industry and by new cost containment requirements by government and private insurers that are squeezing hospital profits and encouraging more outpatient care. Hospitals realize that at least some acute-care facilities sooner or later will be forced to close.

“They are all trying to identify their basic strategies for survival,” said Steve Knapp of SR Knapp & Associates, a national advertising firm in Chicago that draws most of its clients from the health business.

The marketing war is being waged on several fronts.

Direct mail and ads via newspapers, radio, TV and billboards have become increasingly popular in the last three years. In 1987, America’s hospitals spent $726 million on advertising, 45% more than in 1986.

Health facilities are commissioning surveys--and jealously guarding the results--to find out how to please the public while attracting and keeping doctors and affiliations with group insurance plans.

Packaging Into Centers

Hospitals are packaging cancer treatment, maternity, cardiology and various other medical and diagnostic services into “centers” and “institutes” designed to make each facility stand out from the crowd.

Although it shows no signs of abating, the marketing push is being questioned by some participants in an industry that just a decade ago considered promotion unethical.

Critics are concerned that the high cost of marketing is an unnecessary burden on an already-strained health system and that, in many cases, the barrage of competitive advertising confuses the public rather than educates it.

The emphasis on marketing is based in part on the belief--substantiated by surveys--that consumers are making an increasing number of decisions about their health treatment and relying less on the opinion of family physicians.

Marketing experts acknowledge that selling hospital services is more complex than peddling most other kinds of merchandise. Potential customers may not need a particular service for years, if ever.

Ross Goldberg, who oversees advertising for HealthWest Foundation, a Woodland Hills group that owns nine hospitals, said: “If you advertise a bar of soap, everybody out there is a potential buyer. But if you advertise a health care product, such as a drug abuse program, you have a much more limited potential clientele.”

Goldberg noted that hospitals tried to portray themselves as “caring” institutions when they began advertising 10 years ago, but the soft sell didn’t bring in patients. “With those kinds of ads, you might as well take thousand dollar bills and burn them,” he said.

About three years ago, hospitals began identifying departments that are particularly strong, are underused or have broad consumer demand or high profit potential. Those departments, frequently after repackaging, were then advertised as products.

“The cost of media is so high and the noise out there is so loud and the battle for a share of mind of the consumer is so intense, you have to be more sophisticated in your advertising strategies,” Goldberg said.

Nationwide, hospitals are checking their ads to make sure they are based on adequate consumer research. They are giving exit interviews to patients and querying people in shopping malls and focus groups to determine what they are doing right or wrong.

“We know the thrust this year for all hospitals and marketers of hospitals will be to measure the cost-effectiveness of their marketing,” said Judy Neiman, director of the division of strategic planning and marketing of the American Hospital Assn.

Steven R. Steiber, senior vice president of SRI Gallup, a Chicago-based hospital marketing consultant, said he expects hospitals to boost their total marketing budgets to $1.3 billion in 1988, an increase of 8% to 9% over 1987. As recently as 1985, hospital marketing totaled just $385 million.

By the end of 1987, Steiber said, 91% of all hospitals with 50 or more beds in the continental United States were advertising, compared to 64% in 1985.

As part of their marketing, hospitals are trying to win the right friends in their communities. Their goal is to bond with such key demographic groups as women, who make most health decisions for their families; men over 40, who tend to have heart disease, and senior citizens, who are apt to require hospital services sooner than others.

Many hospitals offer discounted lunches, drugs and other services to senior citizens. They frequently present free lectures by staff physicians on topics from plastic surgery to stress management and ski conditioning. The lectures are often held at the hospital to acquaint people with the facility.

Role of ‘Health Fairs’

Hospitals are holding “health fairs,” with free diagnostic screening for high blood pressure, breast lumps, cholesterol and other potential health problems. Participants who test in a high-risk category and have no family physicians are referred to staff doctors, a practice that could lead to future hospital admissions.

Paul R. Schmidt, administrator of Buena Park Community Hospital, said the mingling of the hospital’s marketing representatives and counselors in the community--where they meet with groups of concerned parents, students and teachers--generates about 67% of referrals to the hospital’s inpatient chemical dependency program.

Three years ago, Brea Community Hospital belonged to one chamber of commerce. Now it belongs to 14. Bud Yoakam, director of public relations, said he attends all of the chamber mixers, ribbon cuttings and ground breakings.

Yoakam said the hospital offers discounts of up to 20%, depending on insurance coverage, to employees of firms that are members of the 14 chambers, and to their families. The discounts are provided to patients who use Brea Community Hospital or any of the 280 doctors on its referral list.

The discount program yielded the 162-bed hospital $2 million in additional revenue in 1985, the year it started, Yoakam said. The figure jumped to $5 million in 1986 and to nearly $10 million in 1987.

“We have people driving 20-25 miles to Brea to take advantage of the 20% discount,” Yoakam said.

Hospitals are also striving to recruit and win the loyalty of doctors--who still wield a significant, though declining, influence on a patient’s choice of hospitals.

To win their allegiance, hospitals are offering staff doctors such incentives as referral services, insurance claim management aid and computer networks that relay information about hospitalized patients to their doctors’ offices.

Hospitals are also giving physicians more direct financial enticements to refer patients, such as sizable rent discounts or free space in hospital-owned office buildings and joint ventures in which doctors receive part of the profits from certain equipment and services.

Physician referral services are especially popular. An increasing number of hospitals are advertising referral services in telephone directory yellow pages, as well as via newspapers, billboards and buses. They are also computerizing their referral services, which are programmed to identify physicians by specialty, office hours, sex, age, location and affiliation with a health maintenance organization, among other criteria.

David Albachten, president of San Diego-based HealthLine Systems, which produces software for a computerized physician referral system that is sold to hospitals, said about 80% of those who call into the system go on to see the physician to whom they are referred. And about 10% are admitted to the hospital within six months of calling.

Sari Weiner, vice president of external affairs at Hollywood Presbyterian Hospital, said the hospital does very little consumer advertising because it prefers to devote time and money to its doctors. Weiner said the hospital considers its physicians “our best advertisements.”

The hospital’s efforts to make its doctors feel more appreciated range from holding wine-and-cheese socials involving physicians and administrators to helping physicians market their practices.

Northridge Hospital Medical Center started one of the first eating disorder programs in Southern California. With the hospital’s encouragement, the psychiatrist who directs the program, Murray Zucker, has become a superstar, hospital administrator Jeff Flocken said.

Zucker has appeared on “The Today Show” and “AM Los Angeles” and has been a consultant on two TV shows, even making a cameo appearance on a “Hotel” episode about bulimia. Flocken said that because of Zucker’s fame, “many come from out of state to be part of the program.”

Wayne Schroeder, president of United Western Medical Center, which has acute-care hospitals in Santa Ana and Anaheim, said he incorporates the pictures and testimonials of staff physicians in his ads because he believes it lends credibility lacking in what he criticizes as the “Barnum & Bailey” ads of other hospitals.

Hospitals are also teaching staff physicians to be more responsive to patient needs. Medical Center of Tustin, after discovering that its target market is composed mainly of double-worker households, is encouraging physicians to schedule early office visits. It schedules cosmetic surgeries on Friday afternoons and Saturdays so that patients don’t have to miss work.

But some in the medical industry are skeptical about the effects of the escalating marketing war.

John Gilwee, Orange County regional director for the Hospital Council of Southern California, is concerned that the high cost of marketing is placing more financial pressure on hospitals, many of which are already on shaky ground. And ultimately, he said, marketing costs have to be passed to patients on their hospital bills.

“There are more services and choices being made available to patients,” Gilwee said. “The other side is, at what expense?”

Gilwee said he believes that the marketing push is confusing to patients, with hospitals advertising what they say are superior services--even though the services sound similar to those offered by other institutions.

“It is chaos out there. It really is,” he said.

Eisenhower Medical Center in Rancho Mirage has drawn fire from other hospitals for using comparative hospital mortality figures released by the Federal Health Care Financing Administration to advertise its coronary artery bypass grafts.

Critics complained that the method of deriving the figures was flawed, in part because it failed to account sufficiently for the differences in hospital patient populations.

Others said that, on balance, the public benefits from hospital marketing.

Joyce Jensen, senior vice president of National Research Corp., a health industry marketing research firm in Lincoln, Neb., cites the results of her firm’s recent survey of physicians in the nation’s top 100 markets, including greater Los Angeles.

She said 80% of the physicians surveyed reported that their patients are much more informed than they were a year ago.

“Obviously, the media advertising has affected that,” Jensen said.

Also, she said, 56% of physicians surveyed wanted their hospitals to advertise. The figure jumped to 72% among doctors less than 35 years old.

Dr. Walter Henry, a cardiologist and chief of staff at UCI Medical Center, said he is convinced that marketing is good if the result is more resources and better care.

“There is not necessarily anything phony in advertising,” Henry said. “If you aren’t providing the service, your referrals will dry up very quickly.”

DECLINING RATE OF HOSPITALIZATION

Average Number of stay patient Year in days *discharges 1981 7.2 169.3 1982 7.1 169.3 1983 6.9 167.0 1984 6.6 158.5 1985 6.5 147.9 1986** 6.4 143.1

* Number of patients discharged from the hospitals in the United States per 1,000 population.

** Most recent year for which figures were available.

Source: National Center for Health Statistics’ annual survey of hospitals.