A key strategy to revenue growth: the right marketing infrastructure: not all successful revenue strategies are focused externally. Sometimes the strongest strategies are built from within

Healthcare Financial Management, May, 2005 by Arthur C. Sturm, Jr.

Rather than examining strategies and programs that build revenue, this month's column looks at marketing organizational structure and resources and how their unique deployment can achieve desired results. As much as we like to scrutinize strategies, perhaps the infrastructure should be put under the microscope as well.

Our example is St. Louis-based BJC HealthCare, a $2.1 billion, 13-hospital system. In BJC's business model, the hospitals openly compete with each other on a wide range of fronts. There is not a combined medical staff, so referrals and revenue are fair game to all. BJC's marketing goals are to selectively gain market share and increase total revenue. By using a unique organizational model, it appears to be achieving both.

Supportive Strategy Focuses on Local Autonomy

BJC's model advocates local autonomy. Individual operating units set targets and strategies to build their respective books of business. The corporate marketing department provides key resources in marketing consulting, market research, database management, and a call center for business development. On behalf of its facilities, the corporate office fields 425,000 calls to the call center a year and manages 2.5 million records in a master customer database, euphemistically referred to as its "corporate memory."

In comparison with other multihospital system models, BJC's corporate marketing supports rather than dictates strategy. "We are essentially a consulting resource to our facilities," said Tess Niehaus, director of corporate marketing for BJC. "They use us to refine strategy, capture referrals, and quantify their results" in ways they could not replicate at the local level.

"Corporate provides a level of sophistication we probably could not afford on our own," said Susan Milford, director of marketing, public relations, and physician services at 1,385-bed Barnes-Jewish Hospital, BJC's major teaching hospital. "If I had to replicate call center, market research, and database management at my hospital, I would probably have to pick one."

"It's a tremendous staff extender," according to Dave Nowak, director of communications and marketing at 489-bed Missouri Baptist Medical Center, one of BJC's suburban facilities. "It gets us there more quickly and with a higher degree of confidence that we will achieve our results given the skills and experience we can draw on at corporate."

BJC's central talent well appears to be achieving positive results at the operating level. "Take our use of direct mail, for example," said Nowak. "As recently as six or seven years ago, we would shotgun thousands of pieces of direct mail. But now that we have a central customer database and the talent to manage it, we are becoming extremely efficient and effective in many of our direct mail programs. Our response rates, which once averaged percent, are now 2.5 percent to 3 percent, sometimes spiking to 5 percent."

Nowak cited a recent example of an owned physician practice that was struggling in a new location. Missouri Baptist's team worked with corporate marketing to identify unique segments, eliminate households that were already BJC users, and craft messages that were expected to resonate with the target audience. They launched a direct mail campaign of 2,800 pieces to just three zip codes, and the practice was busier within a few weeks. "We could never have done that on our own," said Nowak.

Collectively, this use of corporate tools has allowed Nowak to "maintain overall advertising expenditures and increase the number of people we touch" at a time when resources are continually challenged.

The data also help hospitals understand the right marketing mix for the results they are seeking. "By working with the data, we saw how productive events, such as screenings, could be for us," said Nowak. "We have learned better ways to target individuals we want to attract to our events. And just as important, we're looking at whom we want to retain as patients and how to keep them. Our master database allowed us to track these activities and their resulting revenue."

Numbers talk. Missouri Baptist recently promoted a women's health symposium in its highly targeted newsletter. "We filled 550 slots and had a waiting list of 220 women two days after the newsletter dropped," he reported.

Centralized Infrastructure--and Refined Metrics

By centralizing marketing infrastructure, Niehaus' group at BJC can better help local facilities create ROI analysis prior to campaign launch based on past efforts within the system. "We have been able to work with facilities to adapt our metrics to local requirements," she said. "Some CFOs calculate ROI differently than their counterparts. But our wealth of data allows us to accommodate those models and often help them improve reporting, expectations, and results."

"We now have some generally accepted marketing metrics within the BJC system," said Niehaus. For example, new patients are universally defined as not having any contact with the organization for three and a half years prior to their first transaction. "We have also learned that the way we measured results over time needed to be challenged," she said. In the "old" model, results would be measured over a fiscal year. But Niehaus' analysis of conversion cycles (the time from initial contact to an actual transaction) was unfairly reporting results.