The Primary Care – Market Share Connection: How Hospitals Achieve Competitive Advantage

Citation

Srinivasan, N. (2008), "The Primary Care – Market Share Connection: How Hospitals Achieve Competitive Advantage", International Journal of Pharmaceutical and Healthcare Marketing, Vol. 2 No. 2, pp. 154-155. https://doi.org/10.1108/ijphm.2008.2.2.154.1

In essence, Mr Marc Halley tries to make the case that primary care = market share, since the primary feeder for specialty physicians/hospitals are the primary care physicians (PCPs), who are the first health‐care contact point for the patients and PCPs remain trusted advisors. PCPs include internists, pediatricians, family practitioners, and obstetricians. The author borrowing heavily from the marketing concept of demand chain, leading up from the patient (customer) through primary care physician to specialists to hospital and hospital‐based services/specialists. Providing health‐care services can be viewed as a service relationship model, with the initiator (an individual in need of medical services) having a trusted contact point called the primary care physician, who helps navigate the complex chain of selecting specialty physicians, hospital and ancillary service thereafter, if necessary.

During the past few decades, several workshop strategies were popular with hospitals, such as updating physical plant, new labor/delivery rooms, attached medical office buildings, and convenient access to laboratory and radiology results. However, these have not led to a sustainable competitive advantage for the hospital. Instead of focusing their attention to connecting specialists with PCPs, the common strategy was like the professional sports mentality: build it and they will come. However, the trust that is built by PCPs with their patients can lead those in need to various specialists and hospitals that the PCPs recommend and not necessarily the closest in distance.

The author is convinced of Peter Drucker's philosophy that businesses primarily have to “create and keep a customer.” Unfortunately, medical practitioners are not so in their outlook as their primary orientation is to heal people. So, viewing a patient (a retail customer) as the prime driver of businesses up the demand chain is not common. The focus is on meeting clinical needs of patients, who have difficulty recognizing clinical quality and competence. Health services have search, experience, and credence dimensions and the latter two are not easy to ascertain.

More than 60 percent of patients select their PCP based on a referral from a friend or relative. PCPs' referrals may be influenced by friendships, past experience, perceived technological dominance, convenient location for patients and their families, personal experience, and a host of such influences. The profitability battle will be won by demand chains that are successful at capturing market share in primary care practices and attracting that share to affiliated inpatient, outpatient, and ancillary services offered by hospitals.

The major role of primary care physicians is to capture and retain patients. Geographic proximity translates into convenience and plays a major role. What helps capture? Effective physician attributes include the ability to communicate effectively, listen attentively, and reflect understanding and conveying caring. A pleasant and engaging personality plays a bigger role than technical expertise. What influences retention? Payer acceptance by practice, physician availability, timeliness, and call coverage.

A word of advice to specialists: PCPs play the role of their customers. They should get to know the PCPs, pay attention to access, respect their knowledge, engage and compliment decisions, acknowledge referrals, and follow‐up. Advice to hospitals: since hospital services can only survive as part of an integrated service, they are essential components of the demand chain. Volume, technology, innovation, and focus create a distinct differentiation and a demand pull and become components of a strategic integrator.

Hospitals can be viewed as shopping outlets: they have to define their market, conduct demographic analysis, competitor analysis, provider capacity analysis, payer analysis, capacity opportunities, think through strategic needs and priorities and implementation tactics. Since, the first point of contact of patients is a PCP, capturing the referrals of PCPs will play the guiding role in encouraging their set‐up, their promotion, and assistance with performance.

Hospitals cannot act like most businesses in the reward system for creating and retaining customers: incentives; discounts; favors; meals; commissions; gifts; trips; and other perks. The above are not legal. However, referrals drive the health‐care business. Referrals follow relationships. With time, relationships can atrophy. So, how can the referral challenge be managed? Vertical integration in the planning, coordination, and execution of various services by different providers is a solution but not always followed.

Primary influences on the demand chain include third‐party payers and reimbursement, regulators, and their enforcement arms, complementary and alternative medicine practitioners, and the changing population profiles. The Government pays the largest portion of the health‐care bill, and is also responsible for legislation, regulation, policing, and taxing functions. The book does not deal with these issues. Nor are the secondary influences discussed in detail: technology; political trends; sociocultural trends; and the impact of the economy.

Overall, the book is an easy read, but does not go into detail into many of the issues that are raised. It does have a marketer's orientation to looking at the health‐care industry, based on the author's experience. Since the health‐care environment is complex and changing and in need of further change (direction of change depending on the political trends and attitudes), the past learning of hospitals may neither be useful nor relevant.

E‐mail: han.srinivasan@business.uconn.edu