Hospitals and healthcare organizations in the U.S. spend $1.5 billion on advertising every year. It’s a topic that provokes lively debate and a certain amount of controversy.
Medical bodies, policy makers, and scholars alike question the ethics and efficacy of using (constrained) budgets to promote hospitals to patients. Diwas KC, professor of information systems & operations management at Emory University’s Goizueta Business School, and Tongil Kim, an assistant professor of management at Naveen Jindal School of Management in Texas, conducted a large-scale study of hospitals and patients in the state of Massachusetts to better understand the impact of hospital advertising.
What they found is striking: Not only does television advertising work, it significantly drives demand, attracting patients living far from the hospital and beyond its regular area. And that’s not all. KC and Kim discovered that limiting hospital advertising or imposing an outright ban, as some groups have called for, might actually have serious negative effects on patient healthcare.
“There has been a lot of discussion about banning advertising over recent years because of uncertainties around wasting money and resources,” KC said.
In the paper “Impact of hospital advertising on patient demand and outcomes,” KC shows that there is a correlation between the amount spent on TV advertising and the quality of the hospital in question. Healthcare facilities that invest more in advertising tend to be “better” hospitals, he adds; they offer higher caliber care and services and, as such, they see much lower patient readmission rates—a key quality metric in healthcare.
To get to these insights, KC and Kim looked at more than 220,000 individual patient visits to hospitals in the state of Massachusetts over a 24-month period. Among the data they collected were things like hospital type, location, and dollars spent on advertising. Patients were documented in terms of medical conditions, insurance, zip codes (to determine residence), and median household income.
They were able to contrast those hospitals that invested in television advertising and those that did not. With the former, they uncovered a significant uptick in patient visits, with people coming from far further afield. This was particularly true of wealthier patients.
Then there’s the question of patient outcomes.
Here the data showed unequivocally that it’s the high-quality, low-readmission hospitals that advertise more—something that KC attributes to the natural tendency to get “more bang for the advertising buck when the quality of your product or service is better.”
As for banning advertising, this would negatively impact these hospitals, he argues, limiting their ability to attract patients. It could also lead to an increase in population-level readmission rates.
“Patient readmission rates are one of the key metrics along with mortality rates that tell us how well a healthcare facility is working,” said KC. “If a patient gets discharged but has to come back to a hospital in, say, 30 days, unless it’s a chronic condition or ongoing treatment, it’s a good indication that the patient didn’t get the level of care they should have the first time.”
Indeed, “when we looked at all of the data, we found that the hospitals where there were fewest revisit rates were those that advertised more,” he said.
KC finds that a blanket ban on hospital advertising could lead to an extra 1.2 readmissions for every 100 patients discharged.
It’s a significant and “surprising” finding. And one that should inform the debate around healthcare advertising spend in the U.S.
“There’s also the idea that this is a zero-sum game because if a patient doesn’t go to hospital A, they’re just going to go to hospital B—the one that advertises more—splitting the pie in different ways but not increasing that pie,” KC said.
“What our study finds is that yes, advertising does draw patients away from one facility and towards another, but that the latter generally delivers better patient outcomes,” he said. “So, there is a social welfare benefit right there that suggests that you should not ban hospital advertising. There are real health benefits in allowing [advertising] to happen.”
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Diwas KC is a Professor of Information Systems & Operations Management at Emory University’s Goizueta Business School. He is an expert in the areas of Data Analytics, Operations, and Healthcare. If you are interesting in arranging an interview - simply click on his icon to set up a time today.
Diwas KC Professor of Information Systems & Operations Management
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