SHSMD Report Shows Healthcare Marketing Budgets Growing Despite Hospital Consolidation

According to the latest SHSMD By the Numbers report, 25% of respondents who have gone through a hospital merger said their Marketing and Communications budget increased vs 15% who said it decreased.

Today is the first full day of the 2018 Society for Healthcare Strategy & Market Development Conference #SHSMD18 here in Seattle. In preparation, I thought it would be interesting to dive into the 6th edition of the By the Numbers Report recently published by SHSMD and the AHA Data Insights team.

This report is based on survey results collected from almost 2,700 respondents by SHSMD from August 2017 to January 2018. It provides a detailed snapshot of marketing & communications (marcom) at hospitals in the US. Overall, the report paints a rosy picture for marketing. The size of marketing teams is increasing, use of digital marketing tools/techniques is growing and the scope of responsibilities for Marketing departments is expanding.

Here are some of the interesting findings in the report.

Growth in Marketing & Communications Despite Hospital Consolidation

Consolidation is rampant. According to By the Numbers, the number of independent hospitals has dropped from 50% of respondents in 2013 to 30% in 2017. Selection bias was not a factor.

50% of respondents that had gone through a merger said that the marcom function had been centralized (multiple marcom departments merged into a single one). You would expect that this level of consolidation activity would have a negative affect on marcom budgets, but that wasn’t the case. Of those that had been through a merger:

  • 25% said their marcom budget increased
  • 20% said their marcom team grew in size

This is in contrast to:

  • 15% said their marcom budget decreased
  • 5% said their marcom team decreased in size

Hospital Marketing Budgets Growing, but Remain <1% of Overall Hospital Budgets

By the Numbers shows that the average hospital budget in 2017 was $875M – an increase of 39% over the 2013 average of $533M. In that same time period, marcom budgets have grown 65% (adjusted for inflation) to an average of $5.4M.

While it is impressive that marcom budgets have increased at a faster pace than overall hospital budgets, at $5.4M it still represents less than 1% of the overall budget. For most other commercial entities, spending less than 1% on marketing would lead to slower growth and eventually to stagnation.

In 2017, Deloitte published a report that showed the average marketing budget as a percentage of overall budget for a variety of industries:

The Healthcare/Pharmaceuticals category included medical device makers, healthcare software companies and pharmaceutical companies – all of which have much larger marketing budgets compared to hospitals.

I asked Anne Feeney, Research and Data Analytics Specialist for SHSMD and one of the key people behind By the Numbers, why hospitals spend <1% on marcom.

“Some hospitals are the only player in a particular market,” said Feeney. “In those cases there is less need to spend marketing dollars attracting new patients. Also, healthcare has not yet experienced the same competitive pressures that dominate other industries, like consumer packaged goods. In healthcare it’s been as competitive as it has always been, but as an industry we have not risen to the levels of competition we see in other parts of the consumer world.”

Traditional Media Still Dominates Hospital Ad Spend

According to By the Numbers, hospitals are still spending the majority of their advertising budgets on traditional media – TV, newspapers and outdoors.

  Median Average
TV $90,000 $270,859
Newspaper $84,500 $143,810
Outdoor $70,000 $153,278
Electronic ads $56,000 $185,095
Pay-per-click $51,050 $316,112
Radio $50,000 $114,261
Content marketing $33,500 $72,675
Magazines $30,000 $55,227
Direct Mail $30,000 $98,237
Brochures/print collateral $30,000 $73,809
Search engine marketing $22,000 $101,495
Mobile ads $20,000 $108,846
Email $18,500 $21,468
Social media $15,000 $54,584
Location-based ads $15,000 $21,289


What I found most interesting is the difference between the Pay-per-click median ($51,050) and average ($316,112). This large delta suggests that the data is highly skewed – meaning that there are some hospitals that are spending a lot more than their peers on Pay-per-click. I believe these high-spending hospitals have discovered something that B2C companies have known for a long time – pay-per-click advertising works. With this knowledge they are exploiting an advantage that their competitors have failed to recognize.

Other Highlights

  • Marketing Departments are watching review and ratings sites. 50% of respondents said they actively monitor existing ratings and review sites on behalf of their hospital
  • Hospitals spend very little on marketing professional development. By the Numbers found that the median spent by marcom in this area was a paltry $6,500 per hospital
  • Social media is still used mostly for broadcasting messages vs patient engagement.

“Among our respondents, the social media stalwarts—Facebook, YouTube, and Twitter—were the most commonly used platforms,” said Lisa Isom, Assistant Director of Digital Content and Social Media, Montefiore Health System. “However, few survey respondents report use of these platforms for engagement and development of the types of conversations that build and/or enhance brand awareness. YouTube was most commonly used as a broadcasting medium for one-way communications. Facebook, on the other hand, was far more likely to be used for two-way communications, which saw respondents taking advantage of its capacity both to share information and engage in interactions. Twitter, the third most commonly used, was used primarily to broadcast news.”

For Feeney, the key takeaway from By the Numbers was the movement towards ROI metrics in marketing: “Marketing used to be seen as a fixed cost. Hospitals are doing so much more now to measure the ROI of marketing & communications. It’s good to see this focus on marketing efficiency, even though as a % of revenue remains small compared to the overall healthcare budget. ROI means marketing is more strategic and can grow if can show ROI.”

For me the report’s key message is it’s time for healthcare marketers to seize the moment and become more strategically relevant in their organizations. The SHSMD data clearly shows that healthcare Marketing departments are being asked to take on more and more responsibilities – from managing the hospital’s reputation to operationalizing patient engagement. This expansion in scope is a perfect time to shine.

I’m looking forward to seeing some of these shining examples on Day 2 and Day 3 of #SHSMD18

About the author

Colin Hung

Colin Hung

Colin Hung is the co-founder of the #hcldr (healthcare leadership) tweetchat one of the most popular and active healthcare social media communities on Twitter. Colin speaks, tweets and blogs regularly about healthcare, technology, marketing and leadership. He is currently an independent marketing consultant working with leading healthIT companies. Colin is a member of #TheWalkingGallery. His Twitter handle is: @Colin_Hung.