FM002 Marketing Strategies

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CaseStudyThree123-127.pdf

NERPERSONAL SKILShealth FOR THEHEALTHCAREics: An MIARKETER

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FEATURE CASE: PALOMAR HEART HOSPITAL

Thisreal-life case introduces students to common healthcare marketplace issues and contro- versiesrelated to specialty hospitals and hospital-physician joint ventures. It also exposes stu- dentstoexamples of interpersonal and interprofessional conflict, inadequate and poorly aligned Organizationalcommunication strategies, and inept leadership and teamwork that often lead- s ntnis case-to poor organizational performance. Participantand facilitynamesandvarious amerncalvalues have been modified to preserve anonymity and accentuate points of learning.

ddle

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pursuin Strategic initiatives, including the need for proactiveinsurance/managedcarecontract-

materialMatpresentedin Part Ill of this text focuses on helpingstudentseffectivelymanageconflict,

Iniscase challenges students to consider organizational andmarketplacerealitieswhen

ouna hnancial and business modeling, and credible marketing strategies and plans.The

improvetheir leadership nity.:

eadership skills and teamwork, communicate the rightmessagesto thecommu-

uress other important strategic marketingquestions. E

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4 Healthcare Marketing: A Case Study Appro ach1 2

SPECIALTY HOSPITAL PROSs AND CONS

Advocates argue that specialty hospitals provide higher-quality care atJowee by concentrating physicianskills and other hospital/ medical resources on plexdiseases(Nallamothu etal. 2007). Critics contend that specialty bosnis. on low-riskpatientsand shift the financial burden of uncompensated cae generalhospitals.Opponents further argue that physician ownership ofspecisl. incentivizesphysicians to refer patients to their own facilities, cherry-pick lo

unitcosts nagingcom- ocuslargely

care tocompe

spitals K andwell-insuredpatients,and induce demand for certain services (A-Amin et al.2010).

RATIONALE FOR HOSPITAL-PHYSICIAN JOINT VENTURES

The overarchinggoalof a hospital-physician joint venture is to create a clinicalandA.. nomic entity thatbenefitspatientsandthephysiciansand hospital(s) participatingini Patient/community benefits include improved processes of care, services, andoutcome Potentialbenefits for participating physicians include opportunities for increasedreven more efficient use of time, and greater control over operational matters affectingpatient care and physician convenience. Benefits for the participating hospital include themain- tenance of profitable revenuestreams if physician investors sign cOvenants not toinvestin competing facilities (Cohn et al. 2005).

eco-

tcomes.

enues,

PALOMAR HEART HOSPITAL

PalomarHeart Hospital (PHH), a provider of cardiology-related services to patientsliving in andaroundtheCentral Valley of California, opened its doors in 2003.Theopeningof this $50 million state-of-the-art facility was consistent with the nationwideproliferation ofphysician-ownedand hospital-physician joint-ventured specialty hospitals in thecaty 2000s (Barro, Huckman, andKessler 2006). PHH was a 51/49 joint venturebetwt Lincoln HealthcareSystem (LHS) and Central Valley area cardiologists andcardiothorsurgeons, respectively.

tween cic

ng officer(EVP/ hiredin

and

RussellTaylor joined LHSasexecutivevice president/ chief operating on COO) thesamemonth PHH openeditsdoors.Russellwas the third EVP/COOmi thepast 24 months to leadasystemwide inancial turnaround of the ailing verti horizontally integrated four-hospital healthcaresystem.

hno-

its first sixmonths nged from -$150,0

Notwithstanding the PHH facility's physicalattractiveness andhrst-fau ogy, PHH lostbetween$700,000and$1.1 million per month duringitS ofoperation.Expectedmonthlylosses/gainsduring this periodranged to $250,000.Lossesat PHH not only far exceeded LHS's worst expec contributedsignificantlyto thecontinuedoverallunderperformanceo ratemanagement'srepeated but unsuccessful attempts to perslaIf T

xpectations butalso anceof LHS. Aftercorpo

owitz,PHH

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. Int erpersOnal Skills for the He althcare Marketer Part Il: Ini

125

CEO, to adjust overallexpenses, the

Istretche

adiust and improve PHHS marketing and staffing plans and better the decision was made to replace him. Alhough Russell'sspan

cross LHS, he knew that stopping the financial hemorrhageat PHH consultation with other LHSexecutives,physicians,

Bussell identified the central issues leading to PHH's woeful financial

foundin

ofcontrolshisfirstandhighestpriority, In andtrustedstaff andoperatingpertormanc

nce:

DHH%leaders were ineffective and neither willing nor able to make the

d :fcult decisionsneeded to improve thehospital'smarketingandoperations.

Colict existed among area cardiologists andcardiothoracicsurgeons.From rheoutset, jealousies and hard feelings amongseveral of theseven founding physicians/surgeons (each of whom had asubstantive ownership interest in PHH) led certain cardiologists to refuse to referpatients to their fellow PHH

heartsurgeons and vice versa.

Teamvworkamongkey PHH and LHS personnelwaspoor. Notwithstanding its49 percent physician ownership, PHH wasan important member of the LHS family ofhospitals and relatedhealthcarefacilities.Yet PHH' managers resistedassistanceand oversight from LHS's corporatepersonnel, including financelaccounting, marketing/planning, and insurance contractingspecialists

whowereable and willing toassist.

• PHHhad insufficient and inappropriatecontractswithhealthinsurance plans. Although PHHS managers had been given more than twoyears' advancenotice to negotiate managed care/insurancecontracts to ensure adequatepatient volumes, roughly 40 percent of theareapopulation was unableto use PHH's servicesbecause their HMO or commercial insurance

planhad not yet negotiated terms with PHH. PHH'scoststructurewassuffocating.Becauseof itsfirst-rateconstruction, technology,costly furnishings, rich stafing mix, and highlypaid staf, thehospital needed to perform 45 invasivesurgeries/proceduresand 280 oupatient procedures per month and maintain anaveragedailycensusof

Upatientsjust tobreakevenfinancially.In lightofcompetinghospital- base cardiology programs and long-standing strainedrelations among PHH

revenuesand offsetoverheadexpenses.Theideaof addingnon-cardiology

Paysiciansandsurgeons,Russellwondered if otherservices,includinggeneral,

servicesshould be added to PHH'Srepertoire toincreasepatient volume and ariatric, and colorectal surgery; endoscopy; and other medical/surgical

servicesto this pre to this premier regional heart hospitalwas not wellreceivedby the

rdiologist and cardiac surgeon owners. Boardmembers,employees,and

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126 Healthcare Marketing: A Case Study Appro ach

facility'smision otherLHSmanagersquestionedthewisdom ofadjustingthe f

while a growingchorusof and corescopeof servicesso soon after opening, while a dissenters argued otherwise.

PHH hadineffectivemarketingplans. Phil Surrowitzenjoved standingamong many of the areascardiologists, so he did not traditional marketing methods to attract the attention andultinmars ofinsurers, primary carephysicians, and patients.

PHH'S keymanagers, physicians, and surgeons had poor financial liters. Although the CEO and senior financial officer understood thehospiral': financial picture, few other managers and employees-including thephue owners -fully appreciatedthe financial dynamics andnuances.

goodoldboe did notconsider using

Itimatebusines

eracy.

physician

A summary ofselect projected and actual financial and operating indicatorsfrom Irom

PHHS firstsixmonthsof operation is provided in Exhibit 1.

NEXT STEPS

Russell knew he needed to provide an overview of PHHS performance to dateanda compelling plan for improvement at the upcoming meeting of the LHS board.Because various board members still questioned LHS's specialty hospital strategy and thepurpose of the PHH joint venture, an overview of the pros and cons of specialtyhospitalsand hospital-physician joint ventures in generalwasalso in order.

DISCUSSION QUESTIONS

pitals Whataresome of the apparent advantages and disadvantages of specialtynosp froma patient/familyperspective?Froma physician/hospital perspective:rcommunity perspective?

Whataresomeadvantagesof participating in hospital-physician jointventue terms ofa hospital's or health system's overall strategy?

Whatplanning and marketing techniques could Russell and his team useO the financialand operating performance ofPHH?

Inyourjudgment, is it too soon to amendthe mission, vision, and/orsoop servicesoffered byPHH?Why or why not?

Whatsourcesof conflict contributed toPHH'Spoor performance?What andteamworkstrategieswouldyou employ to addressthese contlctperformance?

WhatstepscouldRusselltake to addressthe interpersonal contiicts

1.

From a 2.

3.

improve 4.

pe of 5.

tleadership

6.

the interpersonal conflicts withPHHH?

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Part ||: Tnterpersonal Skİlls for the Healthcare Marketer 127

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