Central Hospital – A case

Located in large Midwestern city, Central Hospital was one of the community’s larger research and teaching hospitals. Central was a full service hospital; and one of its services was its emergency room (ER). One of the concerns of the hospital’s officials was how to attract patients with serious emergencies to the hospital’s ER.

Patients who came to the hospital’s ER fell into three classes. The lowest priority patients were those who did not have an emergency but went to the ER because they did not have a regular doctor of their own to go to. In effect, they had nowhere else to go, so they went to the ER. Such patients were designated class 1 and their use of the FR included follow up inspection visits for the removal of bandages, sutures, and casts, and for checking temperature, blood pressure, and vital signs.

Patients designated class 2 had a higher priority in the ER because they included minor trauma patients with important ailments requiring the care of a physician. However, these ailments were not life-threatening. Cases involving sprains, minor burns allergic reactions, pneumonia and similar ailments fell into this class.

The highest priority patients – designated class 3 were ones in life threatening circumstances. These included patients with potential heart attacks, strokes, severe burns serious poisonings, automobile accident victims and others. Hospital officials were concerned with how to attract more of these class 3 patients to Central Hospital’s ER because of the higher revenues they generated.

The fee schedule for the different classes of ER patients reflected the amount of immediate care the patient and the resources needed to treat the patient’s ailment. Class 1 patients were charged $20 per visit: class 2 patients $100 per visit; and class 3 patients $600 per visit. This fee structure was based upon the analysis of the resources consumed by the different classes of ER patients, and it reflected an equitable allocation of the ER’s fixed expenses as well as the direct expenses involved in the treatment of different classes of patients.

The revenues generated by each of the hospital’s departments were always an important consideration to hospital officials, but in the past year the ER’s revenues had become of special concern. In order to analyze the ER’s revenues situation, hospital officials randomly selected seven weeks from the previous 52 weeks and reviewed the records of all patients who arrived at the ER during those 7 weeks. This reviewed the records of all patients who arrived at the ER during those 7 weeks. This review showed the following arrivals for each of the three classes of ER patients.

Total Arrivals at ER during Seven Randomly Selected Weeks

Patient class Numbers of Patients Percent

1 1,161 31.4
2 2,084 56.3
3 457 12.3
Total 3,702 100.0

Hospital officials clearly were unhappy with the patient mix that had been attracted to the ER. They were especially concerned that the class 3 patients who represented a much higher revenue per patient had accounted for less than 15 percent of all ER patients.

A highly regarded marketing consultant who specialized in health care marketing was hired to assess the ER market situation. He recommended that the hospital advertise its excellent ER facilities and the superb care that class 3 ER patients received there. He presented evidence that indicated that a polished advertising campaign would likely double the number of class 3 patients. If the campaign was just of average quality class 3 patients would still be expected to increase by 50 percent.

The consultant recommended that direct mail be used as the advertising medium fort he ER. Direct mail would allow the hospital to segment the market by important ZIP code areas. Admission records could be used to identify the number of patients admitted from each of the ZIP code areas surrounding the hospital within a five mile radius. Households located in those ZIP code areas containing an average or above average number of the hospital’s patients would be targeted in the campaign and all households within those areas would receive the direct mail advertisement.

On the basis of his past experience the consultant estimated that a polished direct mail campaign would cost $ 50,000 for one year. An average campaign would cost much less, probably $20,000 for one year. In spite of the large difference in costs, the consultant expected the polished campaign to be noticeably more effective. For example, with the polished campaign he estimated that there would be a 0.60 probability of a 100 percent increase in class 3 patients, a 0.03 probability of a 50 percent increase in class 3 patients, and a 0.10 probability of no increase in class 3 patients. If the average campaign were used, then he estimated these probabilities would be 0.20. 0.50 and 0.30 respectively. Of course, the hospital did have the option of using no campaign at all. Under this option, the consultant estimated probabilities of 0.1, 0.2 and 0.70 for a 100 percent increase, a 50 percent increase, and no increase in class 3 patients, respectively.

Hospital officials were not in agreement as to what course of action should be taken. Some were in favor of a direct mail campaign, and some were not. Others were uncertain about the use of a direct mail campaign. Said one official, a direct mail campaign might be effective if the public is unaware of, or has little or no knowledge of, Central Hospital’s excellent ER facilities. But even if people have little knowledge of our ER, how do we know that what we tell in our campaign is what they must hear in order to favor our ER? And will such a campaign be effective if for some reason or other people have a poor or misguided image of our ER?

Print media campaign appears to be a cheaper and best choice as the people can get a complete picture of ER facilities. Regarding the ad language it must be drafted by ad professionals in concert with medical experts.

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