Challenges of Growing Hospital Revenues and Business of Healthcare
Our expert contributor on Community Healthcare, Dr. Naresh Purohit* (Exec. Member, Federation of Hospital Administrators) diagnoses the pitfalls of Business of Healthcare globally
New Delhi: Seeking your attention on the broad and provocative statement that is valid for a vast majority of private hospitals and doctors in the country: “Stop buying business, focus on building It”
In the present market situation, most players are focused on ultra-short-term tactics to develop business and drive revenue. In order to substantiate this, let’s understand a few “Marketing Strategies” that hospitals are using for driving revenue and growth:
Strategy Number 1 – Acquiring “STAR” Medics: Engaging and acquiring“STARS” i.e. high value doctors by poaching them from other competitors.
So, HOW is a “STAR DOCTOR” defined?
The main considerations are: Size of doctor’s patient base , number of surgeries/ procedures done by the doctor and the amount of revenue that is currently generated by the doctor.
Based on these criteria the doctors are chosen and then enticed to join the hospital by providing them with a range of incentives. These incentives include an increase in their earnings (Increased minimum guarantee and/ or increase in revenue share), promises of individual marketing, promises of providing the latest medical equipment of their choice, promise of providing manpower of their choice so on and so forth. In other words, the so-called strategy is to offer them a more lucrative package than what they are currently getting irrespective of whether this would be financially viable. Very little thought is given to the speciality, gross margins, ability to maintain patient base or ability to increase the volumes is taken into consideration at this time of “wooing the bride”. There have been numerous examples where doctors having been lured by fancy promises that were not viable financially and joined the hospital. Over a period of time when the expected financials did not accrue the relationship between the hospital and doctor started to deteriorate with each side blaming the other for failure to keep their commitments and promises and ending with a bitter divorce.
Strategy Number 2 – Growing the referral network: There is arguably no private hospital brand in India till date which can claim that they are capable of driving patients on their own. Most patients while seeking treatment for major diseases depend on word of mouth recommendation. One of the powerful influencers in this decision is the local physician.
The system works like this; the local physician is incentivized by the hospital to refer the patient to them for treatment. This incentive is usually monetary and is linked as a percentage of the bill. The fundamental strategy for the hospital is to have a large number of “referring physicians” in their network who would refer their patients for treatment to the hospital. The key lever for growth is the number of referring physicians in the hospital’s network.
What is interesting is that all hospitals in the region are doing exactly the same. They are going to the same set of doctors and providing similar incentives to refer patients. In other words, hospitals are buying patients by paying the referring doctor differentially. So, now the thinking and the strategy is how do we increase the absolute number of such referring physicians and incentivising them differentially from other hospitals.
How much referral fees are we paying them, and can we entice them to refer more patients by increasing the payouts? Interestingly, it does not seem to matter that all the hospitals in the geography are having the same conversations with the same set of doctors.
Strategy Number 3 – Empanelment: This strategy is aimed at getting empanelled with a large number of corporates and public-sector organisations as their recognized hospital for treatment. The key is not merely to get empaneled but how to differentially incentivize the medical officers working in these companies to refer patients to your hospital. Again, it does not matter that all the hospitals are doing exactly the same – the key lever being the maximum percentage that one can offer over the competition. (Sounds familiar!!!).
Strategy No. 4 – International business: Another huge area of interest for hospitals is the International tourism business. How does this work? There are a number of patient facilitators of different kinds who are bringing patients into India or picking them up from the airports and then bringing them to hospitals for treatment for a commission. This commission could be at times as high as 40 to 50% of the bill. A visit to the four metro airports of the country in the night when the flights from Iraq/ Afghanistan / Middle East are landing would be a revelation on the pathetic state of this “business”. Again, the key lever for the hospitals is how much more attractive is your incentive (commission) to these “facilitators” in comparison with the other hospitals, this becoming repititive?
Strategy No.5 – BTL activities: This is too do with conducting BTL (Below The Line) activities Iike:
CMEs (Continued Medical Education) programmes with the local physicians (domestic and International) so that they refer patients to the hospitals. Most of these CMEs are subsidized by pharma and device companies.
Unfortunately, the focus is more on the social interaction and less on the academics. Conduct camps and outreach OPDs. The metric of success is not the number of patients that were screened and needed treatment at the hospital but the volume of patients that attended the camp,
Miscellaneous activities: These include walks, health talks, PR, other community education and interaction activities, etc.
So, I have just given an executive summary of any Private Hospital’s Strategic and Marketing plan. All one need to do now is create an excel sheet, plug in requisite numbers on these metrics and one is ready to go.
The main point Is that the core of the marketing strategy of most hospitals is on “buying the business rather than developing it”.
It is tragic that most private hospitals have the same mind-sets and are doing the same things desperately expecting somehow or the other to achieve different results.
*Dr. Naresh Purohit-MD, DNB, DIH, MHA, MRCP(UK), is an Epidemiologist, Advisor-National Communicable Disease Control Program of Govt. of India, Madhya Pradesh and several state organizations.). He is Exec. Member, Federation of Hospital Administrators .
Dr. Purohit is also Principal Investigator for the Association of Studies For Kidney Care.
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