Inpatient discharge data, compiled by the California Office of Statewide Health Planning and Development, is used to measure market share among hospitals. As one marketer told me, “We watch it like hawks.” In 2007, Sharp applied for — and won — the Malcolm Baldrige National Quality Award, given by the president to recognize “performance excellence” in health care, education, and business management. In the application, Sharp reported comparative market shares for San Diego health systems. As of 2005, Sharp had the largest market share at 27.27 percent, followed by Scripps at 22.18, Palomar Pomerado at 10.68, UCSD at 6.51, and all others at nearly 34, including Kaiser at 9.62 percent. Kaiser is a member-based health-care organization that has almost 3.3 million subscribers in Southern California as well as 22 hospitals, clinics, and medical offices in San Diego County.
Compared to the thousands of doctors and nurses and administrative staff, the marketing and communications staff in each health system is small, at best, a few dozen employees. Marketing, as defined by the American Marketing Association, is an activity that creates, communicates, delivers, and exchanges “offerings that have value for customers, clients, partners, and society at large.” The four marketing departments focus their “offerings” on advertising, web design and operations, customer strategy, media relations, multicultural relations, physician liaison, and more. Not counting call-center personnel, Sharp employs 55 people, 15 of whom design and run its website as well as produce its videos, perhaps the biggest new thing in hospital marketing. Scripps marketing has 51 employees, Palomar Pomerado has 11 full- and part-time people, and UCSD has 20 employees. Their marketing budgets are also small, in the range of $1 to $2 million, much less than the usual 3 to 5 percent of profits spent on marketing at multibillion-dollar companies such as Budweiser and Home Depot.
Revenues of the four health-care systems are huge, ranging from $1 billion to over $2 billion annually. All profits from any not-for-profit hospital are reinvested. None of it goes to award shareholders, owners, and executives as it does at for-profit hospital chains. The three largest hospital systems are defined as not-for-profit corporations. Only Palomar Pomerado is a nonprofit community hospital with a publicly elected board, financed through taxes, bond issues, patient revenues, and donations. The not-for-profits are self-supporting: patient revenues, foundations, and donations from estates and annual parties or balls sustain them. They must, as one marketer told me, “attract a favorable payor mix.” Payor money comes from patients, insurance companies, and Medi-Cal and Medicare reimbursement and has to compensate hospitals for those they serve who can’t pay.
Tomlinson Scores Big with Palomar Pomerado
The guy who signed up L.T. with Palomar Pomerado is Gustavo Friederichsen. He’s also the marketing guru behind the system’s “Hospital of the Future,” coming to Escondido in 2011. The 50ish Latino possesses abundant energy, talks inveterately, and is, in his words, “involved with everything.” Before he got to Palomar Pomerado in 2004 as chief marketing and communications officer, he was the marketing head at Scripps and Sharp, five years at each.
On board, Friederichsen was expected, he says, to campaign for “community health improvement, prevention, education.” To understand his client base, he began with focus groups and in-house interviews. He found three concerns: the managers were “too conservative” and the marketers “risk-averse,” the latter doing little more than profiling doctors poring over X-rays in magazine ads; too few in the community had a clear idea of what the hospitals did, where they were located, and how to pronounce the name; and the foundation wasn’t bringing in enough money.
What troubled Friederichsen was that the system had “zero brand equity. If I put us against Sharp or Scripps, we lose every time.” Focus groups said they wanted a spokesperson with whom to identify. They recommended that “I get a face, an image, a something.” He remembers one person saying, “I don’t know what you stand for.”
His solution: brand the hospital.
So, in 2007, Friederichsen sought the superstar running back of the Chargers, coming off his greatest year ever. Friederichsen persuaded the season’s most valuable player to become the hospital spokesperson for five years. “It’s not just a strict endorsement deal, where he’s just pitching. He’s doing a whole lot more.”
L.T. is paid $400,000 per year — the hospital’s marketing division pays him $200,000; human resources, $100,000; and the foundation, $100,000. In turn, L.T. raises money, hosts TV and radio spots, recruits new doctors and nurses, visits patients, and talks to kids at schools about health. Friederichsen says that the reason L.T. signed up was, “He gets it. He has a family history of illness — stroke, heart disease, diabetes. Mother, father, grandmother.” Kids love him, he’s got a famous San Diego face, and he’s amenable.
The health system’s gala fund-raiser is called Night of Nights. Friederichsen says that L.T. has to raise “half a million dollars every year, minimum; it’s in his contract, recession or no recession.” He’s especially proud that the event with L.T. last year brought in $642,000; the highest total for a previous fund-raiser had been $30,000. This, as well as all the other educational things the running back does, justifies his salary. Yes, he says, “There’s a culture here that thinks we can’t pull the LaDainian thing off.” This is the old guard, who says to every (costly) innovation, “We can’t afford it.”
In short, Friederichsen needs to justify the L.T. expense.
How? He’s selected a number of standards for measuring the campaign. One is the number of diabetes patients admitted to the emergency room. L.T. talks to the public, mostly fifth-graders at school, about diabetes; he’ll present information about lowering their risk and changing their diet. After 24 months, Friederichsen will look at whether the number of diabetes patients coming into the emergency room has dropped. If it has, he’ll use the data as proof (mostly to the board) that his marketing strategy has legs. Already, he says, he’s gotten a call from a nutritionist who is treating “her first 300-pound Latino fifth-grader.”