17132Stopping OutshoppingSNAPSHOTInstitutionS.docx

171
32
Stopping Outshopping
SNAPSHOT
Institution:
Scarlet Hospital, a 350-bed, not-for-profit provider of general
medical and surgical services
Locations:
Walnut Grove (population 25,454), a small community located
in
the Mountain region of the United States
Salem (population 187,452), a large metropolitan area located
approximately 50 miles to the east of Walnut Grove
Character:
Mr. Timothy Rogers, President and Chief Executive Officer,
Scarlet
Hospital
Context:
In this case, transportation infrastructure improvements force
the
top executive of a once-isolated hospital to consider the impact
of
patients opting to receive medical care in a neighboring, larger
city.
Timothy Rogers, President and Chief Executive Officer of

Scarlet Hospital,
has a dilemma. His institution is facing an interesting and
potentially
threatening situation which ironically is the result of something
beneficial
occurring in the community. Specifically, an interstate highway
is being
extended from Salem, a large metropolitan area of 187,452
residents, to
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© Jones & Bartlett Learning, LLC. NOT FOR SALE OR
DISTRIBUTION. 7176
© Jones & Bartlett Learning, LLC
NOT FOR SALE OR DISTRIBUTION

172 Chapter 32
Walnut Grove, a small community of 25,454 residents located
approxi-
mately 50 miles away, which serves as the home of Scarlet
Hospital.
This new transit route, located in the Mountain region of the
United
States, will reduce the travel time between Salem and Walnut
Grove from
just over 1 hour via a winding two-lane local highway to
approximately
40 minutes via the modern four-lane interstate highway,
dramatically im-
proving the accessibility between the two cities and beyond.
While this
development has the potential to yield many benefits for Walnut
Grove,
it also will usher in a new set of challenges to every business in
the city, as
Walnut Grove will become less distant—at least in terms of

travel time—
to the larger city of Salem and its burgeoning pool of
competitors eager
to attract new business from outer-lying communities. Needless
to say,
this has Timothy concerned, knowing that Scarlet Hospital will
face chal-
lenges associated with retaining its patient population, given
improved
access to Salem and its four major medical centers.
Timothy has served in his current position at Scarlet Hospital
for the
past 14 years and he has witnessed many challenges over that
time period.
Dealing with competition, however, has not been much of an
issue in re-
cent years, making the threat associated with the new interstate
an espe-
cially challenging matter. A 350-bed, not-for-profit medical
care provider,
Scarlet Hospital is the only hospital in Walnut Grove, the result
of a merger
between two competing hospitals over a decade ago, and is the
largest
healthcare provider within a 50-mile radius. The distance
between Scarlet
Hospital and the larger metropolitan areas teeming with
healthcare institu-
tions has benefited the facility in that consumers in the
marketplace histori-
cally have been inclined to look to Scarlet Hospital for delivery
of healthcare
services, viewing more distant facilities simply to be out of
reach.

In fact, the only competition in the marketplace has been in the
area
of outpatient care, as Walnut Grove is the home of several
medical prac-
tices that compete with Scarlet Hospital on several service
fronts. All in
all, Scarlet Hospital has enjoyed delivering medical services in
a highly
insulated market, softening its competitive prowess, but not its
commit-
ment to quality, thanks to Timothy’s philosophy of delivering
the highest
quality medical care possible.
Whereas some institutions would use this isolation to provide
second-
rate services, taking advantage of the captive market, Timothy
has always
believed in delivering the best and striving to outdo past efforts
at every
opportunity. He, too, demands this commitment from all
employees.
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S t o p p i n g o u t S h o p p i n g 173
For this reason, Scarlet Hospital has maintained standards of
excellence
in care delivery that rival those of institutions in much larger
cities, giving
him confidence that the hospital will be able to compete in the
quickly
approaching, more competitive environment.
When the highway extension was announced 1 year ago,
Timothy
called a meeting with Scarlet Hospital’s senior management
team and
outlined the situation, stating that the team would need to
devise a defen-
sive plan for deployment no later than 6 months in advance of
the open-
ing of the highway. He also advised everyone to keep a watchful
eye on

the marketplace, reporting any indication of competitive
activity immedi-
ately. He noted that, just as in any market, some outshopping
will occur,
with patients looking to external markets for institutions to
address their
healthcare wants and needs, but that the increased accessibility
to Salem
would likely hasten such. Their job, Timothy insisted, was to
ensure that
outshopping did not become epidemic.
Timothy’s points were well taken by all. Scarlet Hospital’s
senior man-
agers each knew the risks of doing nothing as many hospitals in
smaller
cities over the years have watched their patient bases dwindle at
the hands
of more aggressive competitors in larger cities, effectively
skimming given
communities of their most valuable and profitable patients.
Those patients
with few or no resources are left, as they simply do not have the
means
to look to other markets for healthcare services. As a result,
cost shifting
opportunities become more limited, with threatened financial
viability
and closure being worst case scenarios. The team dedicated
themselves to
ensuring that this did not occur.
At the 6-month point, Scarlet Hospital’s senior management
team had
developed a defensive plan that primarily increased the
hospital’s advertising

efforts, securing more billboards than it had in previous years,
introducing
radio advertisements for the first time in many years, and
bolstering other
forms of marketing communication. Scarlet Hospital was
fortunate in that
its commitment to quality over the years meant that the physical
plant,
clinical and administrative staff members, and quality of care
rendered all
were top notch, meaning that upgrades, other than those that
naturally
occur within any progressive entity, were not necessary to gain
parity with
larger institutions. The team felt confident that their actions
would protect
Scarlet Hospital’s market share and the plan was immediately
initiated.
Three months prior to the opening of the highway, Timothy and
his
staff members began noticing local advertisements—mostly
billboard
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174 Chapter 32
and newspaper ads, and a few radio spots—promoting
healthcare institu-
tions in Salem. Much as they anticipated, Salem’s healthcare
institutions
viewed Walnut Grove’s population as a source of growth, given
upcoming
improvements in accessibility. The advertisements generally
stressed that
Salem would soon be within easy reach of Walnut Grove. That
was trou-
bling enough to Timothy and his senior managers, but perhaps
the most
disturbing aspect pertained to overtones in the advertisements
that health
care delivered in the “big city” is better.
Timothy’s greatest concern was that the advertisements were

creating the
perception that care is perhaps less effective at Scarlet Hospital.
Given this,
it was very clear that Scarlet Hospital, whose advertisements
served pri-
marily as reminders of the excellent quality and care delivered
by the hos-
pital, would need to be more aggressive in its marketing
communications,
as it was apparent that the battlefront would be one of
perception. Waging
war on this front would no doubt require intensive planning,
something
Timothy vowed to initiate immediately in an effort to address
the most
significant threat that Scarlet Hospital has witnessed in many
years.
DISCUSSION
1. Courtesy of Timothy’s philosophy of continually striving for
excel-
lence, Scarlet Hospital was well prepared to compete with
establish-
ments in Salem even before the highway improvements
mandated
such. What lessons does this case teach healthcare executives
about
never becoming complacent, despite being in environments that
might permit such luxuries?
2. It appears that the healthcare institutions in Salem are
making
strong moves to attract patients from Walnut Grove, threatening
Scarlet Hospital. Timothy indicated that, given the competitive
advertisements’ suggestions that “big city” medicine is better,

the
battlefront will be one of perception. What do you believe he
meant
by this statement?
3. Timothy notes that the nature of competitive advertisements
placed
by Salem-based healthcare institutions in Walnut Grove calls
for
Scarlet Hospital to be more aggressive in its marketing
communica-
tions efforts. Based on your knowledge of marketing and the
infor-
mation supplied in the case, how would you go about addressing
these advertisements and why would you take such steps?
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S t o p p i n g o u t S h o p p i n g 175
4. The case provides a reasonable amount of detail regarding
Scarlet
Hospital’s defensive plans. Based on your knowledge of
marketing
and the information supplied in the case, provide a critical
review of
Scarlet Hospital’s defensive plan. If you were an employee of
Scarlet
Hospital and Timothy asked you how you would go about
shoring
up the plan, what would you suggest and why?
5. Although the case provides limited information, it seems that
Timothy is completely discounting a potentially very positive
out-
come resulting from the new interstate highway, namely that it
might provide a chance for Scarlet Hospital to attract patients
from
the Salem marketplace. Outshopping, therefore, might be a real
concern for healthcare establishments in both Walnut Grove and
Salem. Timothy outlined his defensive strategy, but did not
address
an offensive one. Think deeply on the possibilities, given the
sce-
nario provided in the case, and formulate an offensive strategy

that
could be deployed by Scarlet Hospital to turn the tables on
Salem-
based healthcare providers.
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Brent L. Rollins
PHAR 121G Health Care Systems
9-9-2010
Thomaselli R. Health-care reform stokes spending by top
hospitals, clinics. Advertising
Age [Internet]. 2010 Jun 28 [cited 2010 Jul 2]. Available from:
http://adage.com/article?article_id=144696
In this article, Rich Thomaselli explains how top hospitals and
clinics are adapting to a
new age of medical marketing. Nationally recognizable health
care facilities and institutions,
such as the Mayo or Cleveland Clinic, are using marketing
throughout the country to position
themselves as the undisputed leader in various health care areas.
As new health care reform
takes shape and the baby boomer generation begins to age, these
leading facilities are realizing
an opportunity for growth and have identified social media as
the route of communication. Sites
such as Twitter, Facebook and YouTube are now filled with
health care facilities’ messaging in
order to promote their brand and expand the impact of word-of-
mouth marketing nationwide.
The idea of hospitals using a national marketing campaign, and
in particularly social

media, impacts the health care system in many ways. First,
local health plans must decide
whether to cover care at one of these facilities, which may be
500+ miles away from their
coverage area, if a member only wants to receive care at “the
best.” Second, we have only
scratched the surface regarding the impact of social media on
health care. Practically every
health care facility, office or store not utilizing social media
could be put in a disadvantaged
position and be viewed negatively in the eyes of consumers for
not having a Facebook page or
Twitter account. Finally, just as the beach is a yearly summer
destination, the idea of these top
facilities becoming the desired health care destination places a
heavy burden on local community
hospitals, which may not have the funds to keep up. These
facilities will have to work hard to
maintain their status within the community and not just be seen
as an emergency room or end-of-
life facility.
http://adage.com/article?article_id=144696�

17132Stopping OutshoppingSNAPSHOTInstitutionS.docx

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