HMOs Can Teach Hospitals the Marketing Game

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Although HMOs are newer to the health care scene than hospitals, they can teach hospitals a thing or two about marketing.

“HMOs are the one segment of the industry that really understands marketing. They are flexible, respond to the market faster, and have an overall greater understanding of marketing,” says Larry Selwitz, an analyst with Bateman Eichler, Hill Richards, Inc., the Los Angeles-based investment analysts.

HMOs’ entire existence has been based on “knocking on doors,” Selwitz explains. HMOs exist by setting up provider health care networks and creating business for them. HMOs are managed and operated as businesses. Hospitals, on the other hand, have existed merely by sitting back and being available for those who are sick or injured.

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Soliciting patients. Knocking on doors is just what Share Health Plan of Illinois does. The HMO’s marketing department consists of sales forces that primarily sell to three markets–the commercial or employer market, the senior market, and the provider market. This force includes about 20 sales representatives.

How much money does it take to market Share? According to Tom Balacek, vice-president of sales and marketing for the HMO, Share is spending between 25 and 30 percent of its revenues on marketing.

One step ahead. Sound bleak? Maybe not. Hospitals do need to become more focused in their goals to compete effectively in this marketplace. But they also have the edge on HMOs. “Hospitals must remember that they are the market leader,” says Michael Meyer, president of the New York City-based MED SELL, Inc.

He explains it this way: When Apple entered the market with the personal computer (PC), IBM could have relied on its own prevalence in the market to keep the business already established. Instead, IBM began to manufacture PCs. Even though the PC would compete with its main product, IBM was getting the PC business and not giving it away to Apple.

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The same can be seen in health care. Hospitals have been in business for 50 years or more. And, according to Meyer, “50 years in business is a lot of equity.”

Waning trust. More than that, HMOs are losing their credibility with the business sector. “HMOs are no longer at the forefront of delivery systems,” says Peter Boland, president of Boland Healthcare Consultants, Berkeley, CA.

Many flagship corporations are becoming dissatisfied with HMOs because “the HMOs are going to the bank with the corporations’ money,” he explains. According to Boland, many surveys are now finding that, more often than not, health benefits managers don’t think HMOs are saving them money.

But beware: This may push HMOs to market themselves even more strongly and with greater resources than ever before.

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