The (New) Health Care Marketing Professional

Last Post Review

In my last post I analyzed the implications and particularities of the Public Health Care market. What I have seen in 5 different countries during the last years is that partnership can be described as the best relationship model with public agencies. Note that I’m using relationship, not business model.
Companies should aim to make long-term and continuous businesses in the public arena. This means seeking win-win situations that may be totally contradictory to the “low-hanging fruit approach” in some cases, but will certainly generate an outstanding pay-off in time.

The (New) Health Care Marketing Professional

Since this blog was created to generate strategic discussions around Health Care Marketing, nothing more logic than focus on the #1 strategic asset: people.

Based on my perceptions and conversations with innumerous other professionals, I have listed the most commented items companies are looking for in Health Care Marketing Professionals nowadays. I don’t have the intention to create a definitive description of how should a successful professional look like (BTW, this is not my core skill); on the contrary, my idea is to list a few major assets that in no way make a complete list by themselves. However, they might serve as a valuable compass to one’s career map.

Not Products Nor Solutions; Sell Health Care

I remember one of my former Marketing professors showing a drill to our class. Next, she asked what consumers were actually getting when they bought that drill.

Convenience, a powerful tool, the drilling itself and a hammer (!) were a few answers we all gave. All wrong.

When consumers buy a drill, my professor said, they are getting holes. Likewise, when consumers buy movies, they are actually purchasing entertainment. Of course, it varies depending on the product/service itself and the consumers: used cars may represent transportation while a Porsche may bring status. The fact is, we never buy things for what they are, but for what they can provide us.

When a patient buys a medicine, that patient is not buying a chemical compound. Well, based on the above paragraph we can infer that the patient is buying a solution for a certain condition (relieve for a headache, for instance). However, this is a particularity of current Health Care business: because of the limited resources and need for efficiency, products should not provide solutions. They should provide the best solutions.

A headache relieve may cause indigestion the next day. Although the solution was achieved, we created a new problem. In that sense, any health care product may lead to any possible complication, ranging from simple discomfort to severe complications. Companies that sell simply health care products are focusing on the activities and not on the value they should generate to patients.

Strong marketing professionals quickly realize this doesn’t mean shrinking your market to a few “ideal” individuals. On the contrary, there is an opportunity to reinforce the Marketing strategy by demonstrating to all stakeholders (not only patients) the benefits of a certain product in terms of health care.

Remember that headache? How about measuring the positive effects of employees’ productivity once they get rid from the pain? Same with lower drug costs to health plans.

In summary, health care marketing professionals should be focusing on the long-term effects of the product to patients, not on the product features to physicians or simply lower costs to health plans. Focus on Health Care is the same as focus on value for patients.

Value for patients, and nothing else, is the ultimate goal of our business. Any questions?

Multi-Stakeholder View

As previously described in my posts, the market is more than simply companies – physicians – patients. Other participants such as government, health plans, regulatory agencies, other medical professionals and employers are also equally involved in the health care cycle.

Marketing 101 again: STP: segment, target and position your message. Since we have multiple participants in the system (like it or not), the logic conclusion is that each stakeholder has a different value proposition. The cost-savings for health plans is different than the reduction in Operating Room Time for Hospitals.

“OK, but you just said that the business is all about value for patients!”

Indeed! And that is why once we determine the real value for the patient, we need to walk backwards and assess the specific value for each stakeholder. If you cannot do it; either you need some Marketing insight, or your product is not that good. Usually, the first option is what happens.

Health Care Marketing professionals should understand the fragmentation and dispute for power among the system’s participants. Successful strategies focus primarily on the patients and link secondary value-propositions to each of the participants.

As in investment, we should not put our eggs in just one basket. There is no single participant (physicians, patient, health plan, hospital etc) that is strong enough to deserve more than 50% of your product strategy.

Cross-Functional Work

Although this is not a new concept, it has gained a lot of importance lately. And if you want to know a little bit more about me, this is also the reason I temporarily left the “pure” Marketing area to work in a Market Access division.

Marketing campaigns should not start the moment products are launched in the market. The Marketing part should be involved since the beginning, during the product development phase. And I’m not referring to only Market Research.

Taking me as example, my Market Access experience taught me how to assess and estimate clinical and economic benefits of products in development. Later, I can validate those assumptions and estimations in the market, which will significantly increase my product’s chance of success after launch.

In order to better analyze a diversified and changing market, you should invest a couple of years working in or at least closely with different areas. Marketing professionals need to understand the major implications for their products, from regulatory aspects to health plans reaction. Once more, this is not a threat but an opportunity to be head and shoulders above others who only dare to use the Marketing perspective.

The great Marketing Professional is more than just a Marketing guy. He understands the market as a whole and how to apply cross-functional knowledge to shape the market.

Final Words

As I said, my intention was not to make an HR guide, but to focus on those personal skills that are among the strongest ones for a Health Care Marketing professional. There are others, and I invite readers to list them as well.

Hope you’re enjoying this blog as much as I am. Suggestions and critics are always welcomed!

Ernesto M. Nogueira

The Public Arena

Last Post Review

In my last post I basically demonstrated that Employers (companies) are among the most important stakeholders in the health care business scenario. And that is because, in most cases, they pay for most of the medical expenses.

Having said that, what are we doing to target employers? Are we focusing on them with our Marketing strategies?

My Answer to the Last Question

“Since the average U.S. employee stays at job for only 4.5 years, is it enough time for companies reap the benefits of investing in their employees’ health?”

My answer is: it depends! (that is the best answer we learn in the MBA!) And indeed, it depends on the patient’s (employee’s) medical condition.

Employees with chronic diseases tend to stay longer in their jobs; and that’s basically because their companies keep paying for their expensive drugs. Thus, employees that have heart conditions or Diabetes, for instance, usually look forward to staying in their jobs.

On the other hand, asymptomatic employees (without disease symptoms, which may be or not “healthy”) have a shorter turn-over rate. However, they respond better, and quicker, to corporate health programs.

In summary: YES, it is worthy to invest in your employees’ health, especially on those with chronic conditions.

Feel free to send me your comments.

The Public Arena

As you may have noticed, I’ve worked for the World Health Organization, which exposed me to more than 10 different governments in the America and Europe. In addition, I held a position with the Brazilian Ministry of Health and had my MBA summer internship focused on the US Public Market. All that said, the Public Arena is definitely something which I’m at least familiar with. And, like it or not, governments across countries think very much alike!

There are two aspects that define a really good Public Health Care Strategy:

Partners, Not Clients

Partnership is the name of the game. Governments are usually cautious when dealing with health care companies, and that is basically because their value proposition is very different from ours. While we focus on market growth and profit, governments essentially want to demonstrate results to the population.

The problem; or, should I say, opportunity; is the fact that most governments don’t know how to collect data and demonstrate results. I remember I public campaign that was focused on Preventive actions against Heart Diseases. Although the message was clear, and the targeted population was demonstrating a change of habits, that government was not able to translate the benefits into numbers. In other words, the government didn’t know how to show how well tax money was spent on Preventive Medicine; which eventually led to the campaign cancellation.

How can companies help governments to identify and measure the positive outcomes of investing in a certain condition? The first step is to treat governments not as clients, but as partners. And, by definition, a partnership occurs regardless of money incentives. If you pay someone to do something, that cannot be called partnership (maybe a very positive commercial relationship).

Promote Results

It is better to treat 10 individuals and demonstrate the results than treating 10,000 individuals and do nothing with it.

Any Marketing campaign focused on governments should consider a few approaches to identify measure and promote the benefits. Few governments have these skills in their PR area, which is a very promising venue for developing a relationship which will, hopefully, lead into a business deal. Not the contrary.

See this article about a partnership among the Natural Sciences and Engineering Research Council of Canada, Merck Frosst Canada Inc and Boehringer Ingelheim (Canada) Ltd. The deal resulted in a $915,000 grant towards the establishment of a Industrial Research Chair, which is a promise for strong pharmaceuticals innovation.

Final Words

Overall, the public markets may represent either low ROI or very long-term efforts to companies. However, they are also the major market, and it doesn’t make sense to leave them out of Marketing strategies.

See you next time; keep sending me your comments or e-mails!

Ernesto M. Nogueira

Focus on Employers

Last Post Review

My last post described the complex scenario of health care business. In summary:

1) The market is more than companies, physicians and patients.

2) Market stakeholders are also health plans, hospitals, government and others described in the post.

3) If you want to have a successful Marketing strategy, your product must deliver a specific value for each stakeholder.

And don’t forget: each stakeholder demands a different value proposition!

My first feedback: According to one of my colleagues, the last post “Creating a Multi-Stakeholder Approach” was very complete but too technical.

I accept the comments and appreciate the frankness. This blog is focused on the strategic-level discussion around health care business and it seems my last post went a little bit out of the scope. I will keep further discussions at a higher level and, if necessary, we can all dive into a certain topic using the comments section or exchanging e-mails. Thank you again!

Employers, the Big Payors

Employers may have the largest stake on the health care business, and that’s because of one single reason: they pay the majority of medical costs. If we take the example of Brazil, employers pay approximately 80% of managed care costs, and finance a significant portion of public health with their tax payments. This is not very different in the U.S.

However, employers are usually one of the less involved in health care discussions. Usually, they don’t realize how much profit (yes, profit) can be made by managing employees’ health. On the other side, few health care companies know how to promote their products to this segment.

But the situation is changing. See this very short list of articles that give real-world examples of the discussion around employers and health care costs.

What Fat Costs America – Forbes; November 8, 2007 (article)
Quotation:
“Obese people miss more work, costing employers something on the order of $4 billion.”

The Public Face of Wal-Mart’s Health Care Program – NY Times; November 13, 2007 (article)
Quotation:

Q: “When you think about solving the American health care crisis what are the roles of an employer like Wal-Mart, the government and the individual worker?”

A: “Clearly, we need to do something differently (…) We believe there is always a role for the employer, as well as the individual and the government. So it’s shared responsibility.”

Judges Tell San Francisco It Can Begin Health Plan – NY Times; January 10 2008 (article)

Quotation:

“The unanimous decision, from a three-judge panel of the United States Court of Appeals for the Ninth Circuit, allows the city to require businesses with more than 20 employees to pay a fee to help cover employees’ health care costs…”

Company Clinics Cut Health Costs – NY Times, January 14, 2007 (article)

Quotation:

“Within the last two years, companies including Toyota, Sprint Nextel, Florida Power and Light, Credit Suisse and Pepsi Bottling Group have opened or expanded on-site clinics(…) Today a new wave of clinics is opening, driven largely by a motive that was less of a factor in the past: employers’ desires to reduce their health insurance premiums by taking care of workers before they need to see outside doctors.”
“A clinic serving a couple thousand employees can probably save $1.5 million to $2 million a year,” said Mr. Beech, a health care specialist at the Watson Wyatt benefits consulting firm.”

Aiming at the Value Proposition

Let’s remember our Income Statement: Revenues (minus) Cost of Goods Sold (equals) Gross Margins.

Gross Margins (minus) Sales, General and Administrative expenses (minus) Depreciation (equals) Earnings Before Tax and Interest, or Operating Profit.

If you still need a cheat sheet, see below:

As a classical approach to increase Profit, you should either increase Revenues or Decrease Costs. Considering that almost all approaches to increase Revenues (enter new markets, target new customers, increase prices, sell more…) demand higher investment in Advertisement and Marketing Campaigns, it is very unlikely that profits will grow as much as sales. You don’t need to be an MBA to reach this conclusion.

That leaves us with the less risky way to increase profits: reduce costs. Let’s see how it applies to our situation.

For instance, your health care company sells a product that reduces length of stay in the hospital by 2 days on average by patient. How much that translates into value for employers?

Benefit: less 2 days of LOS
$ Benefit: Cost-savings of $200 (each day in the hospital is around $100)

Company XPO has 1,000 employees that could benefit from this product in one year

Potential cost-savings: 1,000 emp x $200 = $200,000
And by the way, that benefit goes directly into the Operating Profit

Now the final question: How much more sales (units or $) should Company XPO make in order to reach the same increase in Operating Profits?

Suddenly, your product can be a terrific asset for a company looking forward to improving its bottom line. Your value proposition for employers should then be divided into two parts:

Part 1: “My product can help Company XPO reduce medical costs by $200,000 in one year, thus increasing Operating Profits.”

Part 2: “If Company XPO would like to see the same result, they would have to increase sales by (%, more units, more $...)”

The Invisible Impact

So far, we have been discussing the “Direct Costs”. These are the actual visible costs that companies can assess by checking claims and bills. But Direct Costs are far from being the end of the story.

In 2006 the Thomson Corporation estimated that Migraine Headaches cost U.S. employers more than $24 Billions annually (see the article here). Of these $24B costs, slightly more than 50% were due to Indirect Costs. These hidden costs can be divided into Absenteeism and Presenteeism.

Absenteeism is the absence of a worker from his job, in our case due to a medical condition. It can be easily translated into costs by multiplying the worker’s hourly wage by the number of hours he is absent from work. The final number will represent how much the company is investing in an employee while getting no return form his work.

John’s hourly wage is $30

John has been absent for two days: 2 days x 8 hours/day of work x $30

Total Absenteeism cost of $480. In other words, the company lost $480 since John didn’t work or produce anything during those 2 days

Remember the case about Company XPO above. Do the math: $480 absenteeism cost/employee multiplied by 1,000 employees…Much more than the Direct Costs we calculated!

Presenteeism happens when employees are working in spite of medical problems. The concept is very straightforward: if you have an employee feeling pain or any other kind of discomfort, he or she won’t be able to concentrate and, thus, will produce less than expected. Healthier employees work faster and more productively.

There are several ways to calculate Presenteeism, and I strongly recommend only two approaches:

1) Speak with your target employer. Ask if he understands the Presenteeism costs related with the condition and discuss ways to measure it.

2) If the first approach doesn’t work, look for published papers for relevant data.

Wrapping-up

Step 1: See how much Direct Cost savings your product can generate for a certain employer. The most challenging part will be to get the employer’s cost structure.

Step 2: After you get the numbers, assess the benefits of reducing Indirect Costs. Don’t forget to break it down into Presenteeism and Absenteeism.

Step 3: It is always a good idea to see how much familiar the employer is with the concept of Direct/Indirect Costs before demonstrating your results.

There is much more I’d like to describe and discuss, but I must refrain this blog to a strategic discussion. However, feel free to contact me for any other information you would like to share or receive in regards to employers.

Before I finish this post, I want to provoke you with a question:

“Since the average U.S. employee stays at job for only 4.5 years, is it enough time for companies reap the benefits of investing in their employees’ health?”

Let me know your thoughts. My answer will come with the next post.

May we all improve our value propositions for our clients!

Look forward to hearing from you,

Ernesto M. Nogueira