Public health planning, economy, and marketing
Planning in Healthcare
Strategic management represents a comprehensive philosophy and approach to organizational governance within healthcare systems. The term “strategy” finds its origins in Greek military terminology, where it denoted the “general of the army” and encompassed the planning of victory through effective resource deployment. Contemporary experts, including Duncan and colleagues, have identified several critical areas of knowledge that significantly enhance the quality of strategic management in healthcare contexts.
The first essential area involves generalized evidence, which serves to control and limit contextual variability while testing hypotheses through systematic investigation. Complementing this is the study of specific contexts, characterized by the unique social, physical, and cultural characteristics of individual healthcare institutions, with particular attention to ongoing processes, established habits, and organizational traditions. The third critical area focuses on measuring healthcare system functioning through the evaluation of change effects using rigorous research methods for analysis, assessment, and perspective ranking. Finally, the change plan articulates methods for linking evidence to specific contexts, while the implementation of planned changes ensures the availability of necessary strategic, operational, and human resources.
Strategic thinking forms the fundamental intellectual foundation underlying all strategic management activities. This cognitive process manifests through orientation within the system’s external environment, comprehensive data analysis, assumption discussion, and the generation of innovative ideas. Strategic planning builds upon this foundation by constructing algorithmic sequences of steps designed to execute the healthcare system’s mission, ultimately producing a developed plan and comprehensive strategy. This process encompasses situational analysis, both external and internal examination, the development of various strategic frameworks including adaptive, market, and competitive approaches, strategy formulation, and the planning of implementation through detailed action plans.
The implementation phase involves consecutive actions through which strategy management achieves the organization’s strategic goals, incorporating managerial actions, evaluation processes, and new initiatives. Overall, strategic management serves multiple vital functions within healthcare organizations. It connects system members through shared values while fostering a sense of community and organizational identity. In many cases, it improves financial outcomes while providing clear concepts, specific goals, strong leadership, and decision-making consistency. The approach enhances overall coordination across organizational units and stimulates innovation to meet the demands of dynamically changing healthcare environments.
As experts Swain and Duncan indicate, strategic management fundamentally seeks to identify questions that will prove important for future organizational success. These crucial questions include whether the organization will continue providing current health activities in the future, what new health activities will be needed to meet emerging demands, and which currently provided health activities will become obsolete or unnecessary as healthcare needs evolve.
Health Economics
Economics represents a social science dedicated to studying the choices people make when utilizing available resources to satisfy their diverse needs. More broadly, it encompasses the science of production, distribution, and consumption of both material and immaterial goods within society. Health economics applies these economic principles and methodologies to problems and phenomena specifically related to health and healthcare delivery. The public health system, viewed as an organized entity, pursues the ideal goal of most effectively utilizing its resources while achieving high health efficiency in providing medical services to the population.
The field divides into two primary branches, each addressing different scales of economic analysis. Microeconomic health science serves both public health and private healthcare sectors, with the latter representing an activity pursuing real economic goals including sustainability and profitability. All economic considerations applicable to profit-seeking enterprises naturally apply to the private healthcare sector. Meanwhile, macroeconomic health science examines healthcare’s economic problems at the national level, addressing fundamental questions about what type of healthcare system a nation requires, how to provide adequate resources, how to subsidize and finance healthcare institution activities, and how to structure the healthcare system by specialty, territory, and quantity to achieve optimal results. These constitute short-term challenges, while strategic considerations explore the connections between material and spiritual wealth and healthcare outcomes, examining how economic development affects both the healthcare system and national health. This branch interprets various forms and methods of financing medical activities while evaluating their effects, creates specific economic methods for healthcare work, seeks arguments for improving medical services and national healthcare policy, and evaluates potential innovations in healthcare delivery.
The primary goal of health economics centers on generating maximum health benefits for the widest possible range of users while operating within budgetary constraints. Central to economic thinking is the concept of opportunity cost, which recognizes that every opportunity we choose to pursue necessarily means foregoing another alternative opportunity. Every choice carries a cost, and the true cost extends beyond mere monetary payment. The genuine cost of utilizing one opportunity lies in foregoing other alternative opportunities, specifically representing the expense of the best but unused alternative when selecting a particular type of activity.
Health economics exhibits several distinctive features that differentiate it from other economic sectors. The high degree of differentiation of health products presents the first major characteristic. Healthcare functions as a public service characterized by substantial heterogeneity and the impossibility of repeatedly offering identical services. Like any service, healthcare can only be purchased directly from the provider and cannot be traded among potential service recipients. Individual patients may harbor different preferences regarding treatment type, duration, location, specific health risks, and even the personality of their treating physician. This heterogeneity of health products combines with the heterogeneity of consumer preferences, creating a complex market dynamic. Consumers naturally gravitate toward healthcare providers who best satisfy their preferences, thereby reinforcing these preferred providers’ market positions. However, this market behavior simultaneously reduces market positions for other providers, ultimately affecting consumers of their offered health products.
The low level of substitution between different healthcare providers generates high levels of market presence and influence resembling monopolistic conditions, which consequently manifests in low demand elasticity for health products. Therefore, the healthcare market can be characterized as monopolistically competitive. From the hospital medical care market perspective, relatively few providers operate consistently over extended periods while maintaining high quality levels of health products. This situation creates an oligopolistic supply of well-differentiated health products, allowing healthcare providers to exert significant influence on price setting within this market. In this regard, the healthcare products market does not differ substantially from other markets featuring significant product differentiation. Economic theory provides limited general guidance for appropriate antitrust policies in markets with considerable product differentiation, though it bears noting that strong state regulation and price fixing of health products contribute to decreased social welfare.
Asymmetric information and moral hazard constitute the second major distinctive feature of health economics. Moral hazard, as an economic category, represents situations wherein one party engages in high-risk actions while knowing it enjoys protection from risk, even as another party bears at least the financial costs. The structure of information proves crucial for understanding and analyzing healthcare product markets. Asymmetric information leads to moral hazard in healthcare, increasing demand and consequently expenses without achieving adequate improvements in health products or actual consumer health improvements. Information asymmetry, also termed information insufficiency, arises when the healthcare product provider, typically a physician, possesses substantially greater knowledge than the buyer or patient.
Asymmetric information in healthcare manifests both in physician-patient relationships and in relationships between patients and insurance or institutional payers. In every case of illness and treatment, the physician possesses superior information about the patient’s condition compared to the patient themselves. This disparity raises fundamental questions about the extent to which physicians will represent patient interests and act as their agents. The problem encompasses how to verify and confirm accurate illness diagnosis and appropriate treatment selection. Additional problems arise when consumer uncertainty about health outcomes prompts searches for additional health products that are not always justified, ultimately inducing unnecessary additional demand within the healthcare system.
The presence of asymmetric information also manifests between insured individuals and financing institutions, as consumers possess more intimate knowledge of their own health conditions compared to payers. Consumers often pay a smaller portion or no portion of the price for received health products, while the main portion or entire price falls to the payer. In the presence of insurance coverage, consumers may lack sufficient motivation to act responsibly regarding their health maintenance and prevention activities.
Enhanced state regulation represents the third distinctive feature, arising from the peculiarities of the healthcare sector and the specific characteristics discussed previously. These unique features necessitate mandatory intervention by the state through regulatory mechanisms in every healthcare subsector.
The assessment of economic decisions in healthcare primarily occurs through Health Technology Assessment, commonly abbreviated as HTA. This approach represents a form of policy in scientific research that investigates both short-term and long-term results associated with health technology applications. Its fundamental aim involves providing comprehensive information about alternative health strategies. HTA functions as a multidisciplinary activity that systematically evaluates the technical characteristics, safety, clinical effectiveness and efficiency, costs, value, and the organizational, social, legal, and ethical consequences of applying health technologies in healthcare settings. The focus centers on both clinical and economic value, with analysis being comparative to existing or best-available alternatives.
Measuring the ratio between costs and therapeutic outcomes finds application in economic evaluations of health technologies through Cost-Effectiveness Analysis, abbreviated as CEA. Economic analyses of the Cost-Utility Analysis type, known as CUA, pay particular attention to the quality of health outcomes. CUA utilizes Quality-Adjusted Life Years, or QALYs, as a health measure that incorporates a combination of life expectancy and health-related quality of life. The primary outcome in CUA analysis becomes the cost per gained QALY, providing a standardized metric for comparing different interventions. Cost-Benefit Analysis, or CBA, requires expressing health technology outcomes in monetary terms, thereby enabling direct comparison of gradually increasing costs and outcomes.
Marketing in Healthcare
Managing marketing in healthcare represents both an art and a science dedicated to selecting target markets, attracting, retaining, and increasing patient numbers through the creation, offering, and selling of higher health value. The term marketing inherently connects society’s two main functions of production and consumption. By its fundamental nature, marketing operates as a managerial process responsible for identifying, predicting, and satisfying customer or consumer needs and requirements within market conditions. Marketing can be understood as a comprehensive set of activities designed to align producer resources with market requirements. Within this framework, marketing must solve two interconnected problems: the first addresses consumer needs and their satisfaction, while the second concerns producer profit generation. The combined solution to these problems operates through the mechanism of competition, which involves providing higher quality, desired, and differentiated goods and services compared to competitors.
Several key concepts form the foundation of healthcare marketing. Target markets and segments represent the first crucial concept, recognizing that no healthcare products can meet the health demands of all patients universally. Therefore, the primary criterion for healthcare market segmentation relies on demographic characteristics and patient diseases. Healthcare marketing requires fundamental research on morbidity patterns and causes of mortality and disability. For each selected target market segment, comprising patients with similar or identical disease conditions, the provider must develop a valuable health product positioned in patients’ minds as carrying essential health benefits.
Health needs and demand for health products constitute the initial stage of any marketing cycle, requiring establishment of health needs and demand within the target market. Unlike other economic sectors where the real market includes only solvent demand, healthcare presents a unique situation. Due to the presence of a payer other than the patient, the total demand for health products is considered solvent regardless of individual patient financial capacity. Health value and patient satisfaction represent critical factors in successful health product delivery. Successful health products inherently bring value and satisfaction to patients. Using the structure of health value, defined as the ratio of health benefits to costs, every manager can increase value through several possible approaches: increasing health benefits while maintaining costs, maintaining benefits while reducing costs, increasing benefits more than increasing costs, or reducing benefits less than reducing costs. The latter approach finds limited acceptance among patients and consequently sees minimal application in healthcare marketing.
The transaction concept represents the exchange of values and forms a fundamental part of the marketing process. Within this framework, consumers receive health while paying health contributions, payers receive health contributions while paying for health products, and providers receive money while offering health products. Marketing relationships aim to establish long-term mutually beneficial relationships between healthcare facilities and their patients, staff, suppliers, and other stakeholders. Relationship marketing builds strong economic, technical, and social connections between parties, which evolve into what are termed “marketing networks.” The public benefits of such marketing networks in healthcare can be substantial, aimed again at improving prevention, quality, and accessibility. However, healthcare managers and society must carefully control the balance between the desire for higher incomes and the quality of health products.
Marketing channels enable healthcare facilities to reach their specialized target markets through two primary channel types. The communication channel facilitates the conveyance of messages and reception of information from patients and referring physicians. The sales channel facilitates the purchase of health products, enabling transaction completion. The supply system represents a chain of suppliers through which each healthcare facility obtains services and goods necessary for health product production. Through the supply system, healthcare facilities must gain value while maintaining cost efficiency.
Competition represents a critically important issue in healthcare marketing management, encompassing all existing and potentially competing health products. Competition can be analyzed at several levels: individual, industry, sectoral, and generic competition. The marketing environment in which a healthcare facility operates divides into two interconnected parts. The target environment includes patients, staff, suppliers, and other direct stakeholders. The surrounding environment encompasses demographic, economic, natural, technological, political, and sociocultural factors. The surrounding environment can strongly influence processes and participants in the target environment, creating both opportunities and challenges for healthcare marketing efforts.
The marketing mix, also referred to as marketing structure, represents a comprehensive set of activities that health product providers use to achieve their market goals. The fundamental marketing tools include product development, price setting, place or distribution management, and promotion activities. Managing the marketing cycle primarily consists of three types of activities that work in concert. Strategic activities encompass market research, segmentation, and positioning decisions. Tactical activities involve product manufacturing, pricing strategies, promotion campaigns, and placement organization. Administrative activities include control mechanisms, evaluation of results, and improvement of marketing tactics and strategy based on performance data.
Several factors critically influence the effectiveness of healthcare marketing strategies. Continuous interpersonal relationships with customers or patients based on trust and morality form the foundation of successful healthcare marketing. Professional competence and established prestige of physicians significantly influence patient choices and satisfaction. Easy and accessible access to healthcare services with minimal bureaucratic procedures before contacting physicians proves particularly important since healthcare service users almost invariably experience stress when seeking care. Careful selection of healthcare personnel requires special qualities including tolerance, empathy, communicativeness, discretion, and self-discipline. Training healthcare personnel in standardized workplace behavioral patterns ensures consistency in service delivery and patient experience. Continuous monitoring and control of patient satisfaction with medical service quality provides essential feedback for improvement. Finally, carefully considered and long-term-oriented policies for material stimulation of personnel help maintain high-quality service delivery and staff motivation.
Marketing for healthcare services requires the existence of a functioning market in healthcare, though with important qualifications. The healthcare market should not be viewed as an end in itself but rather as a means to achieve better health outcomes. The market does not pursue profit as its primary objective but seeks more effective use of resources and fairer remuneration for medical work. Market mechanisms appropriately find their place in both private and public sectors of healthcare, though their implementation requires careful consideration of healthcare’s unique characteristics.
Healthcare marketing faces numerous distinctive challenges that require specialized approaches. The presence of negative demand for offered services or products represents the first significant challenge. A market exists in a state of negative demand when the majority of customers disapprove of or dislike the products or services of a given organization, with some patients even spending additional funds to avoid using them. For example, certain individuals harbor negative attitudes toward vaccinations, dental maintenance, or psychiatric assistance, sometimes paying expensive transportation costs and consultation fees with specialists from larger centers specifically to avoid local specialist services. The marketing task in such cases involves analyzing why current and potential clients dislike offered products or services, and whether future marketing programs can change client beliefs and attitudes through quality improvements, price reductions, access modifications, positive advertising, and other appropriate marketing conditions.
The absence of demand for products and services presents another challenge, where target consumers or markets remain disinterested or indifferent to offered products and services. The marketing task here involves finding ways to connect the benefits customers will receive from offered products and services with natural human needs and interests, thereby creating awareness and demand. Latent needs or demand represent situations where significant portions of medical service consumers would eagerly share offered medical assistance and treatment, but for certain diseases lacking satisfactory treatment, they do not seek services to the necessary extent or avoid certain healthcare facilities entirely. Enormous latent needs exist for treatment and servicing of cancer patients, aging and elderly population problems, various cardiovascular diseases, treatment and care for patients with disabling conditions, and other difficult or incurable diseases and conditions. The near future will likely bring methods and means to satisfy these latent needs and other healthcare-related needs.
Decreasing demand or needs affect every organization eventually, as demand decreases for one or more services or products. One reason for demand decrease involves the reduction in needs for some diseases due to effective treatment and prevention availability. Another reason stems from increasing preferences and opportunities for treating patients at home or in daily care units, which reduces hospital base utilization. Marketers need to analyze reasons for demand decrease and clarify whether demand can be stimulated again by finding new target markets, changing product or service qualities, expanding or modifying service ranges, improving distribution and changing production volumes, or developing new, broader, and more effective communication to popularize products or services. The marketing task involves changing the decreasing market and remarketing offered products or services to restore the market. If restoration proves impossible, stopping product production or closing facilities becomes necessary to prevent resource waste.
Unregulated demand presents challenges when many healthcare organizations encounter demand variations for certain products or services across different seasons, days of the week, or hours of the day, causing either underutilization or overloading of capabilities and capacities. For example, emergency medical centers experience higher demand for medical assistance in evenings and on Saturdays and Sundays when doctor’s offices are closed or healthcare facilities near major cities close. Pediatricians face significantly greater burdens at the beginning and end of school years. Hospital paraclinical services primarily experience heavy utilization during weekdays while remaining underutilized on weekends and afternoons. The marketing task in these cases involves finding ways to change the timing to meet needs and demand through flexible advertising, access modifications, pricing strategies, or other initiatives.
Demand according to capabilities, representing full utilization, occurs when organizations find themselves meeting needs and demand that correspond precisely to their capacity capabilities. The marketing task in these cases involves maintaining demand according to current levels while preparing to meet possible everyday or future market changes, evolving preferences, or emerging stronger competition. Organizations must maintain quality and continuously measure customer satisfaction to ensure high-quality production continues.
Excessive demand, exceeding service capabilities, affects some healthcare organizations facing demand levels that surpass their service capacities. This situation often occurs with home healthcare services where calls exceed service capabilities. The marketing task in these cases, called demarketing, involves finding ways to reduce demand or needs by discouraging demand temporarily or permanently if deemed necessary. Generally, demarketing consists of several activities including increasing prices, reducing advertising, and reducing or restricting access to services or products. Selective demarketing seeks ways to reduce total needs while attempting to reduce demand coming from market segments that are less profitable or less in need of the organization’s services or products. Demarketing in this context aims not to destroy needs and demand entirely but only to reduce their level to manageable proportions.
Unhealthy demand, representing demand for unhealthy products or services, requires special attention. Products considered unhealthy or detrimental to health that are used by some population segments require attracting forces to discourage or limit their consumption. Demarketing in this context, or the demarketing campaigns themselves, represent campaigns against sales. Such campaigns are organized against cigarette sales, alcohol consumption, drugs and narcotics use, against large families in some countries through family planning, against abortions, and other harmful practices. Demarketing or antimarketing against harmful products uses almost identical means and activities in the same direction, seeking to reduce consumption through corresponding anti-advertising and adequate emotional communication that emphasizes health risks and promotes healthier alternatives.