Hospital Advertising and Its Effect on the Cost of Healthcare Services
Hospitals, medical centers, and individual physicians currently spend millions of dollars annually advertising themselves to the public.6 The question is, “What is the return on all this money,” or (put another way) “Is all this spending worth it?” Certainly, the pervasive and increasing use of advertising by healthcare institutions indicates that the advertisers, at least, believe it is. But beyond the salutary effect advertising may have on a single institution, what is the cost of healthcare advertising for the healthcare system as a whole?
When hospital advertising first became widespread, one of the most pervasive justifications for its use was that it was not advertising at all; it was simply education.7,8 Advertising, it was argued, was a way for hospitals to educate the public on the need or availability of vital healthcare services. Defenders reasoned that it was not a matter of stimulating demand but rather of increasing utilization. While admittedly there are instances in which healthcare service advertising has increased the demand for necessary and efficacious services, it is just as likely to promote expensive, unnecessary, or inefficacious ones; for example, the aggressive advertising of whole-body computed tomographic and magnetic resonance imaging screening tests (a procedure whose benefit has never been proven and that may expose patients to invasive and costly follow-up tests).1,3,9
Admittedly, the costs of these screening tests are borne by the individual consumer, but the expensive and often unnecessary follow-up testing they may provoke are covered by all of us. Evidence also indicates that hospital advertising may (in part) be responsible for the public’s demand for costly and ineffectual treatments around the end of life, given the perception that higher technology and more advanced procedures are always better.1,9
We shouldn’t be surprised that the expansion of healthcare advertising has led to this situation. In essence, healthcare institutions that advertise without regard to the actual need for their products or services are simply behaving the same way more obviously commercial enterprises do. General Motors Corp. doesn’t need to consider the actual transportation needs of the public when it introduces a new car—only whether or not the company can sell it. By the same token, without standards for healthcare advertising that explicitly address the effect these advertisements may have on demand for unnecessary services, promotion of these often-profitable services will only continue and grow.
The Costs of Competition
Supporters of healthcare advertising also suggest that advertising is good for the healthcare consumer. They cite marketing theorists’ contentions that by providing the public with free and useful information, advertising lowers search costs—the costs associated with finding a good or service—and makes consumers more sensitive to product characteristics. The consequence, they contend, is that advertising not only ultimately lowers consumers’ cost, but it can also drive an increase in quality.10 These observations may have some merit with other sectors of the economy; they have little relevance in healthcare.
First, aggressive and well-funded advertising can easily overwhelm the disincentive of purchasing low-quality goods or services—particularly in a field like healthcare, in which quality is so difficult to measure objectively. Further, in an area like healthcare, in which there are legal restrictions on price competition and consumers typically pay through a third-party intermediary, there is little if any room for advertising to promote lower costs. The fact is that healthcare advertising is more likely to be inflationary.