Researchers from Indiana University and Texas Christian University published a new Journal of Marketing study that examines the impact of a hospital’s portfolio strategy on patient demand.
The study, forthcoming in the Journal of Marketing, is titled “ Hospital Portfolio Strategy and Patient Choice ” and is authored by Sarang Sunder and Sriram Thirumalai.
Structural changes in the healthcare industry (e.g., the institution of the Affordable Care Act) over the past decade, as well as advancements in technology and care delivery, have resulted in an unprecedented shift toward patient-centric care. This means that marketing is now a critical differentiating factor in the healthcare industry. While hospitals have tried a number of marketing strategies with varying degrees of success, one aspect largely ignored is a hospital’s organization of its service offerings, or its portfolio strategy.
This new study assesses the impact of a hospital’s portfolio strategy on patient demand. A growing trend in healthcare in recent years has centered on hospital portfolio strategy—hospitals making key portfolio decisions such as expanding or contracting emphasis on care delivery within select departments. For example, Sanford Health, one of the largest rural health systems in the U.S., expanded its emphasis on cancer care services with an allocation of a new dedicated center with specialists, facility, and technology. Orlando Health recently opened an entire hospital unit just for Orthopedic care. These portfolio decisions call for significant resource investments, often running into millions of dollars.
But do these portfolio decisions pay off? This is a common dilemma that hospital CEOs face. Should they invest toward specializing in an area? Or diversify across other areas? If so, which areas should they invest or divest in? Through a series of empirical analyses involving secondary data on inpatient discharges, coupled with experiments, the researchers shed light on these questions.
Sunder explains that “we define a hospital’s portfolio strategy across two dimensions. The first is focus, which is the depth of expertise within a category. The second dimension is related focus, which is the breadth of expertise across related categories.” Hospitals with a high focus on a department may be regarded as “specialists” with a high depth of expertise in that category (e.g., Shouldice Hospital for hernias). Hospitals with a high related focus in a department (e.g., cardiology) are selectively focused on multiple other categories (e.g., endocrinology, respiratory, and digestive systems) that are clinically relevant to that department (e.g., Cleveland Clinic).
A hospital’s portfolio strategy can shape patient preference in important ways. There is value to specialization or focus. An increase in a hospital’s focus in a department leads to a significant increase in market share. However, some patients prefer hospitals that are able to signal breadth of expertise (i.e., focusing in related areas has a positive effect on market share). The results strongly suggest that patients do pay attention to hospital portfolios.
While the effects are significant and substantive, it is also important to know why they are so. “We demonstrate that portfolio strategy can act as a strong signal of clinical quality, which patients care deeply about. Put differently, our results highlight the value of reputation/competence signaling by hospitals through their service portfolios, in particular for patients with complex needs,” says Thirumalai.
This study offers guidance to executives in healthcare, especially those in management roles at hospitals.
In summary, the research indicates that hospitals have the opportunity to leverage portfolio strategy to target specific patient populations, further enhancing their patient-centric capabilities.
Full article and author contact information available at: https://doi.org/10.1177/00222429231204247
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Journal of Marketing
Hospital Portfolio Strategy and Patient Choice
14-Sep-2023