Hospital Advertising Contributes to Runaway Health Care Costs
Health care is big business in the U.S. and growing rapidly. The Department of Health and Human Services reports that in 2009 the health care industry accounted for 17.3 percent of the domestic economy.
That year $2.47 trillion was spent on medical services, up from $2.34 trillion in 2008. The trajectory of costs has escalated since then and is projected to reach $4.5 trillion in 2019.
In fact, the U.S. leads the developed world in health care expenditures. In 2010 we spent $7,538 per capita compared to our closest rival, Norway, which spent $5,003. Japan leads the world in life expectancy yet spends only $2,729 per capita.
Given the reality of a health care system devouring its nation's resources, medical cost containment is imperative. One small, yet meaningful, piece of health care expense is hospital advertising. The New York Times (May 3, 2009) reported that hospital advertising in 2008 amounted to $1.23 billion, an amount that doubled in only seven years.
Hospital advertising, be it television, radio or print, tracks the same inflationary trajectory as health care budgets in general. A 2010 survey of the nation's hospitals by The American Hospital Association found the average annual advertising budget of all responding health care institutions was $883,000. Large hospitals spent disproportionately more for advertising. The typical stand-alone hospital with more than 400 beds allocated $2.18 million for advertising.
Requests for information about advertising budgets of local health care systems were denied
Runaway medical costs take a toll on families, industry and governments. According to the Towers Perrin Health Care Cost Survey, the average yearly premium for an employer-sponsored family health insurance plan in 2010 was a hefty $15,084. Of this total the benefiting family paid $3,492.
From 2000 to 2009 family paid premiums for employer sponsored health care plans escalated by 149 percent. In the same period salaries increased 37 percent. Your tax dollars are also tapped. The U.S. Department of Health and Human Services reports that in 2009 the federal government spent about $500 billion on Medicare while federal and state governments spent $380 billion on Medicaid.
In fact, 20 percent of the federal budget is allocated to Medicare and Medicaid. Taken together, data concerning the escalation of health care costs paints our current system as unsustainable.
Arguments against hospital advertising and its impact on health-care costs are many. Hospital advertising relies on simplistic appeals of we're better, we're faster, we're more caring, we have the most expertise, etc. In fact, hospitals are more alike than they are different.
Often diagnoses and treatment procedures are directed by protocols generally followed across hospitals. Furthermore, it is not unusual to find a physician providing services in more than one health care institution. If indeed one hospital is meaningfully superior to another, would not physicians be ethically obligated to inform their patients of this information?
Advocates of hospital advertising claim that the practice educates the public to make sound choices concerning medical services. Yet how can a lay public be meaningfully informed about complex medical procedures in a minute or less of TV ad time?
Furthermore, advertising becomes a necessary expense when one hospital heralds itself as superior to others. Competing hospitals must allocate health care resources to advertising to maintain an even playing field in the court of public opinion. Advertising begets more advertising, as is evidenced by the rapid increase in the practice across the last decade.
In many businesses advertising makes sense. Persuasion increases demand for a product thus increasing sales and profits. Sales of candy bars can be increased by depicting an irresistible combination of chocolate and caramel. This principle hardly applies to broken arms, however, where demand is necessarily fixed by the incidence of accidents in a day. Applying the business model to medical care just doesn't fit.
Clearly the runaway cost of medical care requires emergency treatment. Eliminating hospital advertising is one small step in containing the meteoric rise in health care expense. Perhaps hospitals should just rely on a free and more spontaneous form of marketing, word of mouth as transmitted through the social media.
John M. Seaman is a retired school psychologist and currently an adjunct professor of psychology at Salt Lake Community College.