Marketing and Public Relations and the Budgeting Process
By Barbara C. Carey and Mike McCall, RN
Looking at trends in hospital margins there are mixed results. In a Kaufman Hall report published on March 29, 2022, the data for 900 hospitals showed that median operating margins declined 11.8% last February and 26.7% year over year. The median Kaufman Hall Operating Hall Margin Index reflecting actual margins for the month of February 2022, was -3.45%, up from -4.52% in January but still, not at sustainable
levels. On January 2023 the American Hospital Association reported that 2022 was “the worst financial year for US hospitals and health systems since the start of the COVID-19 pandemic since expenses outpaced growth in revenues and volumes. The report goes on to say that hospitals experienced negative operating margins for most of the year with half of the hospitals ending the year in the red.
The Key Reason for losses was increased labor costs.
This was evident when hospitals were competing for contract labor across the nation during the pandemic. Their staffs were suffering from Covid-19 or burn-out and many left for lucrative contract nursing opportunities. However, these expense pressures will not be as intense in 2023. Although the virus and its variants are lingering and will be with us for the foreseeable future, patients are not being hospitalized at previous levels. A reduction in government spending was also experienced in 2022 from the 2019 and 2020 levels when governments helped with additional funding during the Covid crisis.
Three of the largest for profit hospital systems – HCA, Tenet and CHS, had operating margins that have exceeded pre-pandemic (2019) levels for most of the pandemic including the third quarter of 2022. As of the third quarter of 2022, operating margins were 11.4% for HCA, 8.4% for Tenet and 1.2% for CHS.
Margin history will undoubtedly play a role in the upcoming budgets. Often it’s the marketing, advertising and public relations budgets that are the first to be reduced or be eliminated when margins are reduced.
TCI believes that hospitals that constrain these activities will reap negative consequences in the following ways in 2023:
Patient leakage from smaller to larger hospitals will exacerbate because locals will continue to perceive their local providers and hospitals as inferior to the larger systems. Only information given consistently can combat their brand/image issue.
Larger systems are in a marketing war in some communities. Those systems that provide the best messaging and the most information about their services will attract the most healthcare consumers.
Information gaps in both large and small systems will be filled in by consumers from all communication platforms. Being present on those platforms is a competitive strategy.
Some funds however must be used to ensure the other critical marketing factors:
1. Maintaining a “culture of service” within the hospital and system so that patients universally have a good experience. The “culture of service” builds loyalty and returning patients reduce the per patient acquisition costs.
2. Collecting data on where patients come from geographically, tracking the channels of communication that have been effective and the services that are the most popular are essential marketing functions with associated costs.
3. Monitoring social media for issues is also important and requires software and expertise.
4. Training and tracking are key marketing budgetary items.
Healthcare leaders may want to withhold marketing dollars for short term gain. However, from experience TCI knows that revenue will suffer in the long term and competition will benefit from the shortfall.
Being “penny wise and pound foolish” really should be avoided for future success.
TCI offers marketing consulting and marketing, public relations and community engagement programs. TCI has 20 years of experience helping hospitals to increase their revenue.
We Help Our Clients Understand Their Environment and to Find Solutions.
Call Us 1-888-922-2824 or Email barbara@tciconsults.com
