Profits, publicity fuel trend toward marketing of health-care services
Boston — For the good of humanity and the good of Humana Inc.? For the first time, an experimental artificial heart operation - up to now performed in an academic setting - has been sponsored by an investor-owned hospital.
It's a controversial sponsorship.
''This is a publicity stunt, and they've admitted it,'' claims Dr. Arnold Relman, editor of the New England Journal of Medicine and a leading critic of for-profit hospitals.
''Obviously, we've gotten a great deal of attention,'' admits Humana spokesman Robert Irvine. ''But the Humana Heart Institute and our other centers of excellence are not a marketing strategy, although there is an indirect benefit on our business, certainly.''
Sponsoring an artificial heart operation is a smart business move for this hospital corporation, some observers say.
''Clearly this is a marvelous opportunity for Humana to get their name known, '' says W. Campbell Thomson, a spokesman for the Federation of American Hospitals (FAH), a trade group representing for-profit hospitals. ''But no one is questioning the quality of the care given.''
Officials at Louisville-based Humana, who report revenues of $2.6 billion in 1984, have announced that the firm will underwrite up to 100 more artificial implants ''as long as scientific progress continues to be made.'' Estimated cost: $15 million to $25 million.
The potential profits and the public relations derived from this event are not only stirring debate in the medical community. They also indicate just how business-oriented medical care is becoming.
This year, 18 new companies joined the ranks of the investor-owned hospital industry. The number has grown from 32 in 1975 to 62 today. Many of these firms, such as Humana, have grown by buying existing nonprofit hospitals and creating for-profit hospital chains. An estimated 15 to 20 percent of all hospitals in the United States are either owned or managed by these medical-care corporations.
This ''revolution,'' as some are calling it, has touched every state. The hotbed for these concerns is the Sunbelt, however, where in some states the proportion of investor-owned hospitals reaches 40 percent of the total number of hospitals.
At this stage of the industry's development, marketing is seen as crucial.
''Prior to two years ago, marketing consisted almost solely of recruiting well-known physicians. The doctors would bring in the patients,'' says Seth H. Shaw, an industry analyst at Shearson Lehman/American Express, a New York brokerage company.
Now many hospitals are conducting demographic studies of their market areas and tailoring medical facilities to capitalize on what is perceived to be the greatest public need. Says Bud Ferguson, marketing manager at the Macon, Ga., Charter Medical Corporation: ''It's changed from an attitude of 'we have our hospital and all the facilities, so let's wait for the people' to more of a pro-active stance of finding out what the public needs.''
And as competition heats up, ''hospitals are marketing more directly to the public than ever before,'' Mr. Shaw says.
''But health care is not like hamburgers or washing machines,'' says Dr. Relman of the New England Journal of Medicine. ''They're converting what should be a social service that should be decided on the basis of needs to a situation where marketing becomes a driving force, where stimulated patient interest replaces meeting health care needs.''
''Yes, we advertise now,'' says Mr. Thomson at the Federation of American Hospitals. ''We send mailings to the community, send out health information, and do such things as inviting back babies that were born in the hospital so that the whole family will think of it as 'their hospital.' Every successful hospital in America is doing these kinds of things.''
Last week, the Nashville-based Hospital Corporation of America, the largest investor-owned hospital group, completed its first public ''multimedia saturation'' campaign in Houston. The company plans similar campaigns in other cities during 1985 and 1986, says spokeman Roland D. Wussow.
Brand-name marketing is catching on now, too. Humana was the first to put its name on all the institutions it operates and therefore is uniquely positioned to take advantage of the curiosity surrounding a transplant operation, analysts say.
Some officials are privately criticizing Humana's profiting from a delicate experimental operation. But others applaud Humana's efforts.
''I think it was an excellent idea. A dramatic illustration of the role and strength of investor-owned hospitals,'' says Jennifer Flinton, senior vice-president for marketing at American Medical International (AMI) in Beverly Hills, Calif. ''They're drawing fire, but they're also raising important issues.''
AMI and other companies now are also moving to put their corporate rubric on satellite institutions but are not as yet positioned to take advantage of similarly ''dramatic'' operations.
Establishing brand-name recognition also serves to unify the various medical businesses these corporations now encompass. ''A lot of firms are moving into HMOs (health maintenance organizations) and health insurance,'' says Thomson at the Federation of American Hospitals. And free-standing emergency medical centers have begun to proliferate at shopping centers.
''The idea is to have the patient identify with the brand name and increase hospital bed utilization down the line,'' says Shearson analyst Seth Shaw.
To some extent, medicare changes are pushing all hospitals to be more businesslike. The medicare system has been substantially revised. Until recently , medicare paid hospitals a percentage of all medical costs. This system offered little incentive for reducing costs. Now, hospitals get a fixed fee for 467 different patient categories. If the hospital can perform the care for less than the set fee, it makes a profit. If not, it must absorb the loss.
As a result, patients are staying shorter periods in the hospital, and bed occupancy rates are dropping, say analysts. So both nonprofit and for-profit hospitals alike are feeling the pinch and looking for ways to market themselves.
As the tendency to watch the bottom line spreads, there is concern that the poor will be left to tax-supported nonprofit hospitals. ''When for-profit hospitals skim off the insured - leaving the uninsured for other hospitals - it debalances the system. They say, 'let the taxpayers carry the whole freight.' But taxes never did support all needs of public hospitals,'' Dr. Relman says.
But according to studies by economics Prof. Frank Sloan of Vanderbilt University, for-profit and nonprofit hospitals both allocate about 4 percent of their gross revenues to indigent medical care and bad debts.
So the debate rages on. Says Ms. Flinton at AMI: ''Quality care is very important to us. We're not a bunch of evil genies greedily counting our shekels at the end of the day. The customer's too important for us to be that way.''
'Quality care is very important to us. We're not a bunch of evil genies greedily counting our shekels at the end of the day. The customer's too important for us to be that way.'