HSA 505 Health Services Strategic Marketing

Case Study 2: Stopping Outshopping

Due Week 7 and worth 220 points

Read the case study titled “Stopping Outshopping”, located in the online course shell. Then, use the Internet or Strayer databases to research similar marketing strategies in the health care industry.

Write a four to six (4-6) page paper in which you:

Based on the textbook’s summary of Timothy’s philosophy of continually striving for excellence, determine whether or not Scarlet Hospital was prepared to compete with the establishment in Salem even before the highway improvement mandated such an upgrade in delivery health care services.
Examine the potential lessons that the “Stopping Outshopping” case could teach health care executives about complacency.
Evaluate the potential value of Michael Porter’s Five Forces analysis and SWOT Analysis for effective decision making, in its ability to help Scarlet Hospital protect its market share and thus decrease the chance of losing patients to other institutions in Salem.
Appraise the value of the Balanced Scorecard model in its ability to help Scarlet Hospital executives reinforce its defensive marketing strategy.
Propose a one (1) page offensive marketing strategy (i.e. communication, branding, innovation, etc.) that Scarlet Hospital should deploy in order to turn the table on Salam-based health care providers and improve its competitive marketing position.
Use at least five (5) quality academic resources. Note: Wikipedia and other Websites do not qualify as academic resources.

Your assignment must follow these formatting requirements:

Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

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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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172 Ch a p t e r 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

174 Ch a p t e r 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.

D I S C U S S I O N

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?

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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