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Ma rketin g Heatth Services

CASE STUDY 8.1

HospitatStrategyDevetopm€fit "''

. ^x^Ait ,A hospitat management

company recentty acquired a r5o-bed

generat '

hospitat in a meAiuin-'ltJ"'t' in tfre'southeastern

United States'

Au h o u g h t' e c o m p a'1, i' J i''u' * T:f :1 i: ".I,*:"i"i i : ffi ii:} [l'i

::T$ j5 ,i:lxlJlJn'.[:::" J.i ;#;;'[at had n" been

p rof itabre i n orr.,i # gl;; ;; ; " :: r,T*l jii:j;"fl ::::::'Tl#

Hi*X'"'.'r';: :ffi : i i:'11[?ffi XtT" "i "''"

i s t o d e t e r m i n e t h e

I most appropriate strategy' I ,rlv of the immediate rnarket

;"i::3?ffitil:ffi:;;:F"ilirl ;d;i'* ryre'l arel

i was examin"a in *te l;"ito ;t

"":ra]r t1e nos toi t't metropolitan'area'

Theanalyst,,.ui.*"i-].j.mograplrict,"nl,_.odeterminethefuturestze an d co m positi on

oiln e po p n tutiu n': lil * X;1i, "X

i'JI i;;"'ffi:; rion. This information

was used to'':::: ":#'*

;;ediate *:tr-l

:*Hi*,n::ml;TI['t,iilJ'=;;;iiivesituatio.'"11T': mine the services.;;;;;

;;;trrer taciiiiiel, the existing market shares

for those servic*";;";;lnt11" "t t-*** managed care contracts '

,.nnin.r negotiated retationships'. ea'was not ' The untty'i'oalierJnea

tnat the immediate service ar

ti kerv to, u n P ? ft ' il ;;i ; :T Y5 T; n5"::ll'i""*ll''ll1?i1'

?:1'iJl*T':[: :"Jil]!l':!i:F ;; il' provider ne'iworks or

th e tw o d o m i n ant syste m s,l

11. ::: I ull ir uilHll: ,i.",',^|"1: a targe or strong medicat

stiITT' utvctt..*-.ii,it.*t physicians to the

invotving competing hospitals"attracttng

(rLrurrrvrrv' r'

;**;TJ:::ff :[$T:::y not operate .'tu::lt:Y as a generat

c o m m u n i tv' " ;"'ff ; ; 1 ;l't. : :': ::

t i I iu "''

est u u r 1

s1'e'o c o m p e ti to r s

head-on was not practicar, the *u";;;;:;"r]g::o ,"-r:er

strategres'

niie, u n u rv, i n gl, r'' i :

Ju,a, t h e m a 1 1 n: l:.:' * TX'' ;J$:iil t iifll

,iun.ut, a nlche stratesv *tt "Oo;i;;;;;.;t would be on explolting

ii.ntity niche services' and the corl

those niches' Thehospitathadpreviouslydevetopedanoclunatilnathealthpro-

gram that catered to the nurneroura*o[r.rs inlhe

area' Facitities were

'avaitabte' a basic progfam wat i' oi'l;";'d adequate

personnel'were

Chapter 8: Marketing

!-p

ivaitaute to expand the,progr:am.'Because'no othel entity was off€ring'

thii, service i n the, comm unity; expaniion of thiir progfam seemed : like a

,loglcal next ste,p. h addition, ihe hospital,had a long,standring '6s6rr- !ora!:hea!th,prog6m that had experi€nced some success in attractin$

patients,rand iome of the, area's leading substance abuse experts were

affiliated rwittr the hoEpitat: Thus, because,a fledgting program was iatrelad- ' place, 'key,personne['weqe aVailable], and the marl<et was underseived, the hospital also identified behavioral heatth (including

substinrce,abuse treatment) as a promising niche. Finalty, in view of the

largerMedieare poputatlon in the general area and the tack of geropSy'

chiatric services in the communitv,the hospitaldecided to add psychi'

,atriC.ser-vices for leniors tothe behaviOrat health cornponent. This n,iche

strategy focuied o,n ser,vices that,were not being adequately. pro-vided to

the community. ' .:,

',One other' niche was'considered but eventuatly rejected, ,Mar'ket

r,esearch. ihdicated that minority group members-primarily African Ame rican s - rn ad e, u p, a [a rge p ro po rti on,of t h e co- m m u n ity. Th e H is pa n i c population in'the area was atso rgrowing rapldly: Fur:ther, mainstream provider:s historicalty had neglected these populati-ons. A niche strategy

focuSing on these,target populations was considered that would con'

vert the hospitat into a facility specializing in minority cat'e. Because of

the many unl<nowns surrounding this concept and the potentiat contro-

versy such a strategy might generate, this idea was reiected.

After carefutly assessing the situation; the managers concede-d that

the fu;itity.could .not successfully operate as a general hospital and

therefore chose toi pursue ra niche' strategy. The, approach has= in the

short.lnrn at teast-been-relatively succes5fu[. The hospital'has main'

tained a significant shar:e of the occupational health and behavioral heaith markets in the city and has ear,ned a reputation as a facitity that

does,lnot offer a lot of services but that does a good job with the services

i. What factors,raiSed concerns among the hospital'srmanagers about the viabitity of the facility as a generaI community hospitat,

andihow did the market anatysisrvatidate those concerns?

z. What steps weire tai<en to determine the most appropriate focus forthehospital,sservices?

3. How woutd one ctaisify the strategic appr:oach thdma,nagers , chose, and to what types of services did it direit them?

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