Health system brands go national
■ The growth of high-profile institutions means physicians may be competing against more than just the doctor down the street.
By Victoria Stagg Elliott — Posted Feb. 25, 2013
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Some of the biggest brand names in health care delivery are deciding that it's not enough to be a prestigious place in the distance.
Places like Mayo Clinic in Rochester, Minn., Cleveland Clinic and MD Anderson Cancer Center in Houston have established affiliate programs that put their names on systems far afield from their main campuses. Duke University Health System in Durham, N.C., is working with LifePoint Hospitals, a large chain of for-profit community hospitals based in Brentwood, Tenn., to set up joint ventures to buy hospitals. Generally, the prominent organizations are partnering with local institutions that are established, but are often not considered the biggest or most prestigious names in their home area.
The motivation by both sides in these deals is stronger branding as a way to increase revenue, marketing experts say. For the name-brand institutions, affiliating with, or buying, a local hospital can formalize existing clinical relationships and allow them to capture revenue from patients who might not otherwise go to the home base. For the local institutions, their hope is that by putting the Mayo or MD Anderson name on their buildings, they can attract patients who might otherwise have passed them by for a better-known facility.
“Positive brand recognition has become and will increasingly be critically important, because it's part of the patient experience, which very much matters and will matter more in the future,” said Debra Richman, senior vice president of health care business development and strategy at Harris Interactive in New York. “Consumers perceive value in a brand.”
Competing against big names
The rise of consumerism in all industries means that an emotional connection to a label is more important than ever, marketing experts said. A strong brand can increase negotiating leverage with payers, considered particularly key in an era of declining reimbursements.
“Until recently, it wasn't necessary to advertise health care services,” said Mark Shipley, president and CEO of Smith & Jones, a medical branding firm in Troy, N.Y. “Hospitals are now forced to brand and market their services to retain even their local consumers' care spending.”
Physicians may find themselves working for or competing with a major national health system brand, no matter where they are in the country. This means physicians in the community, but not a part of the affiliated systems, need to think about the impact on their businesses.
“There could be a real divide developing between the haves and the have-nots,” said Warren Skea, PhD, director of PwC's Health Enterprise Growth Practice. “Some physicians may have a significant competitive disadvantage.”
Mayo Clinic has 14 members of its care network, which launched in 2011. MD Anderson, whose program started in 2005, has nine certified members of its physicians network. Cleveland Clinic has had an affiliate program in some form for about 20 years. Although numbers have gone up significantly, it has 17 affiliates aligned with the heart, neuroscience, neurosurgery, transplant and oncology service lines. It has six affiliates with its telestroke program, and four signed on with its autism development solutions. (An affiliation may be initiated by either side but is usually among those that have a history of working together.) Duke LifePoint, which formed in 2011, has bought four hospitals, most recently Marquette (Mich.) General, the largest in the Upper Peninsula.
In the affiliation deals, hospitals pay a subscription fee and promise to meet certain clinical criteria. Payments were not publicly disclosed. They then get to use the national name in their materials and advertising, as well as gain access to the organization's medical expertise.
NorthShore University HealthSystem, in Chicago's northern suburbs, announced Sept. 19, 2012, an affiliation with Mayo, with which it has long been connected in some form.
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“We have great physicians, and this is a way to formalize the relationship and better manage complex and difficult diagnoses,” said Joseph Golbus, MD, president of the institution's medical group. “Patients often want a second opinion, and this makes it easier to get it.”
National name, local care
The national institutions say they are not trying to create referral streams to, say, Rochester or Cleveland. Instead, they can capture some income and extend their brand to patients who otherwise might be turned away because of a lack of space, or who might be too sick to travel.
“We have to turn down patient requests to come to our campus for care,” said Mary Jo Williamson, administrative director of Mayo Clinic Care Network. “We're trying to find ways to distribute Mayo Clinic culture and expertise and help physicians better serve local populations. We've always had lots of informal collaboration. This is an opportunity to extend our knowledge in a structured way. Patients can receive care in a lower cost setting, and other institutions can stay independent.”
If patients need a higher level of care than can be provided at a local institution, physicians can refer them to the national organization they are connected to, but this is not required. “We're not creating a referral base,” said Melanie Wong, MD Anderson's vice president for business development. “We are sharing our knowledge and treatment guidelines. We actually discourage travel for cancer patients, because that can be a huge burden and slow recovery.”
Physicians at affiliated institutions get access to the clinical care protocols and expertise of a nationally recognized institution, although the organizations said there often is some skepticism from doctors about what the affiliation means.
“When physicians hear about it, the first response is usually, 'We don't need the Cleveland Clinic here,' ” said Joseph Cacchione, MD, chair of operations for the Cleveland Clinic Heart and Vascular Institute. “But they usually come around after they meet us and see what we can do. We're not there to be prescriptive in any way. We want to make things better.”
The benefits for national institutions don't come from just capturing income from the affiliations. It also gives them greater potential to participate in the national contracts with large employers that are becoming more common. A brand associated with high quality may increase the marketability of the system. Having a large geographic reach also may improve the appeal for employers.
For example, Wal-Mart Stores Inc. announced Oct. 12, 2012, that, as of Jan. 1, 1.1 million people covered under its employee health insurance would be able to access cardiac and spinal surgeries at one of six health systems identified as “Centers of Excellence,” including Cleveland and Mayo Clinics. Cleveland Clinic also has contracts with Boeing Co., Lowe's Companies and HCR Manor Care.
“Right now, we are targeting areas where there are employers that we have contracts with and creating a network of affiliates to work with them,” Dr. Cacchione said. “We would still do the most complex cases, but there is a lot our affiliates could handle. We want care to be accessible and provided in the right way at the right time.”
Local institutions also can get significant mileage out of the relationships. The affiliations can differentiate an institution in a market and help attract patients. Some communities value their local hospital. Others view them as lower quality than those in large urban centers or with strong national brands.
For instance, a study released September 2012 by BlueCross BlueShield of Tennessee Health Institute analyzing claims for 47,300 inpatient hospital stays found that 69.9% were not at the facilities nearest to the homes of individual members. In 43.4% of those cases, patients traveled to a larger facility even though the services they required were offered at their local hospitals. Patients traveled an average of 22 miles for care.
“Hospitals need both the perception and the reality of improved quality outcomes to attract patients,” Skea said.
Having a strong brand name on the door also may attract physicians, which has become increasingly difficult, especially in primary care. These positions took 151 days to fill in 2011, up from 125 in 2010 and 115 in 2009, according to the annual benchmarking report the Assn. of Staff Physician Recruiters released Oct. 10, 2012. Rural areas had a harder time than urban ones.
“Particularly in small communities, health systems are leveraging their brand, not just among patients but also with clinicians,” said Craig Savage, a senior principal with Ascendient Healthcare Advisors, a consultancy in Durham, N.C. “An affiliation with a large player can make it more attractive.”
Although there are many advantages to strengthening a health system brand, there also are hazards, according to consultants who work in this area. History is littered with brands that grew too fast or were damaged by links to organizations that were not a good fit. A brand can develop negative associations just for being too big.
To minimize the risk, these programs have thorough vetting procedures. The efforts vary, but most require a high level of physician buy-in and stability in the administration. It is possible for affiliates to lose their status if they don't meet certain benchmarks, but this is unusual.
“When we put our logo on anything and share our brand, that's a big commitment on our part,” said Paul Matsen, Cleveland Clinic's chief marketing and communication officer.