Transitional Infant Care

Running Head: TRANSITIONAL INFANT CARE HOSPITAL: DIAGNOSES MARKETING 1

Transitional Infant Care Hospital

TRANSITIONAL INFANT CARE HOSPITAL: DIAGNOSES MARKETING2

Summary of the background and facts

The Transitional Infant Care (TIC) Specialty Hospital was founded in the early

1980s with Dr. Ron David’s vision to care for premature and high risk infants in a non-

traditional setting. As a transitional care hospital for infants, TIC was the bridge between

the neonatal intensive care units and home; where parents were educated in the care of

their infants to facilitate the baby’s long term needs. Recognizing that the traditional

approach to neonatal intensive care did not provide the education or support to the family

of the infants, his vision included a family-centered unit with the family assisting in the

care of their infant alongside the nursing staff. The veteran staff was selected from local

neonatal intensive care units and was given decision making responsibilities in the care of

the infants resulting in positive outcomes. These respected staff members were veterans

from other NICU’s and provided a natural source of referrals from the Neonatal Intensive

Care Units (NICU’s) that they had previously been employed with.

As TIC grew they accepted sicker infants and enhanced its clinical services. The

clinician community acknowledged the significant difference TIC made in the lives of the

families and patients while maintaining low costs and TIC soon became the “prototype

for the care of medically fragile infants” (Gittell & Toth, 2000, p. 3). A new executive

director (later chief executive officer) Pamela Schanwald was secured and Nancy

Kennedy, a registered nurse and a founding member, was promoted to clinical

administrator in 1993.

Initially, marketing efforts were minimal with TIC depending solely on referrals

from clinicians who were personally familiar with the TIC physicians and staff. In 1987

some effort was placed in reaching out to private pediatricians to increase referrals. In


1994 a revised marketing proposal was identified and addressed referral sources as well

as potential supporters. TIC also reached out to third party payors in efforts to educate

them that their offering was cost effective, with family centered care and possibly a

reduction in readmissions. The lack of a marketing department, personnel, and budget

resulted in these functions being the responsibility of Kennedy and her clinical team. The

team, busy with patient and family care had little time to assist with the marketing efforts.

This resulted in a decision to employ a Director of Planning and Marketing.

Despite the initiatives undertaken by TIC, environmental issues plagued the small

hospital. With the declining birthrate, the managed care environment changes, and the

takeover of small hospitals by two large systems in Pittsburg fueling their stress over

filling beds, making budget, and the threat of a takeover, the team knows they are

approaching a pending crisis. Three final hits are taken by the small hospital in late 1996.

First, as local area hospitals faced the need to keep their own beds full, referrals to TIC

were few or non-existent. Thought to be a positive initiative, a letter written to case

managers by TIC’s main HMO requiring that TIC eligible babies be referred to TIC was

not seen negatively by both providers and consumers. The last hit occurred when Dr. Al

Lantzy, the head of West Penn’s NICU and TIC’s Medical Director starred in a television

ad campaign promoting West Penn’s newly remodeled NICU which offered the same

services as TIC. 1996 had proved to be a difficult year for TIC and the leadership knew

that action was required.

Statement of "Core" Problem(s) of the Case

Serving their patients and families with individualized, developmentally sensitive


and supportive care had been their focal point while marketing focused only on the

natural referral process from peers in the community. TIC’s lack of strategic focus is at

the heart of the problems they were facing. While the hospitals around them were

offering integrated services, TIC had not differentiated their hospital in the marketing

arena. They were competing with full service hospitals that offered patients the same

care that TIC had innovated. Although the organization was working very hard, the lack

of a marketing plan that is strategically focused and supports the mission, vision and

goals would be their downfall if not addressed.

Secondary Problems

The lack of a strategic plan significantly impacted the ability of the Transitional

Infant Care Specialty Hospital to penetrate the market. The hospital was the vision of Dr.

Ron David, a neonatologist. He wanted to open a hospital to incorporate parent teaching

and focus on the baby’s long term needs but was there demand for this type of care?

Would a hospital with such a narrow focus be sustainable? Where and how would the

hospital get referrals? It seems evident that no one performed an analysis of the market

nor developed a strategic plan for growth before the hospital was founded.

The Pittsburgh healthcare market soon became a flooded and competitive market.

Several hospitals already offered the level of services that the Transitional Infant Care

Specialty Hospital offered and most had internal referral sources. TIC needed a plan to

compete aggressively by focusing on what set it apart from all the other hospitals offering

the same services to attract customer. As the hospital entered the growth stage of the

product life cycle, marketing strategies should have changed (Berkowitz, 2011). Instead

the hospital went years without staff dedicated to planning and marketing. The Executive


Director struggled to perform her administrative duties as well as promote and market

TIC. After 12 years, the hospital finally established a formal marketing plan but failed to

fully implement it.

The hospital had no internal referral sources and failed to establish a strong

referral relationship with area hospitals. The hospital had relied mostly on its front line

staff to promote the service and gain referrals. The majority of nurses at TIC were

respected veterans of the local Neonatal Intensive Care Units and were able to capture

referrals through contacts they had from their previous jobs. Over time however, this

method became less and less effective as new staff members were hired at TIC and the

area NICU’s. These new providers and staff lacked knowledge related to TIC’s mission

and referrals declined. When referrals declined there was no plan on how to regain

market share or generate revenue through the offering of other services. The hospital

also lacked an experienced Clinical Administrator who could assist in expanding their

services to generate revenue, a key decision that should be made in the growth stage of

the life cycle (Berkowitz, 2011).

Another strategic shortfall was that the TIC Medical Director, Dr. Al Lantzy, was

also the head of West Penn’s NICU. Dr. Lantzy starred in a television commercial

promoting the NICU at West Penn. Having the Medical Director of TIC promoting the

competitors product sent mixed signals to consumers and those in the referring

community. Promotion in the growth phase should focus on a message that develops the

consumers preference for the service offered. The neonatologist’s failure to foresee or

acknowledge this potential conflict underscored the TIC’s own medical leader’s lack of

focus on the sustainability of TIC.


Constraints and Limiting Factors

Even though TIC offered excellent care at a price significantly lower than its

competition they were operating at less than 60% of their capacity and barely making a

profit. Several uncontrollable factors contributed to TICs instability. The inability to

anticipate shifts in referral practices was an obstacle. TIC relied on area hospitals with

Neonatal Intensive Care Units for transfers. These hospitals offered very similar care and

were not obligated in any way to make referrals to TIC. Periodically, referrals dropped

as new managers and physicians rotated through the NICU departments. Referrals also

dropped as the birth rate in the Pittsburgh area declined and hospitals stopped transferring

babies in an attempt to keep their own NICU beds occupied to generate revenue.

Another uncontrollable factor was the payor mix. The standard charge was $850

a day. This is an all inclusive fee that includes services such as lab work and pharmacy.

The reimbursement from insurance carriers varied depending on the payor. Blue Cross

paid $840 a day, HMOs paid $800, Medicaid HMO paid $778 and Medicaid paid only

$607 a day. Currently HMOs make up approximately 60% of TICs revenue but in the

past Medicaid, who paid the lowest reimbursements, represented 40-60% of TIC’s

revenues. The payor mix is a constantly changing variable and can easily impact the

bottom line.

TIC’s commitment to ensuring a low price through the bundling of charges is also

a constraint, albeit one under their control. TIC’s original entry into the market utilized a

penetration pricing approach based on Dr. David’s vision of providing low cost, high

quality services. Typically as the service enters the growth stage, changes in the

approach to price occur as additional service offerings are considered or quality


improves. Recognizing that it is difficult to increase pricing without a perception of

substantial increase in quality or the addition of new services, TIC was not in a position

to generate additional revenue by altering its pricing strategy. This lack of additional

revenue prevented the hospital from adding the additional resources necessary to promote

the hospital early in the growth stage.

The hospital also greatly relied on charitable contributions for capital investments

and purchase of equipment. Charitable contributions are not guaranteed and often vary

from year to year. This limited TICs ability to purchase equipment to expand services

that may attract new customers.

Alternative Solutions

In order to continue to care for patients, Transitional Infant Care Hospital has a

decision to make. They must determine whether or not they can increase their operating

capacity above the current 60% and then maintain that increase. If they come to the

conclusion that they cannot increase to that capacity, then they must decide what services

they will offer instead or in addition and move forward with those plans. By focusing on

the 4 P’s of marketing along with market research and soliciting feedback, TIC has a

variety of options to choose from.

The first possible solution is to do nothing. Should TIC choose to do nothing,

they will likely continue to operate at their 60% margin and eventually their facility will

no longer be able to cover costs. Once this occurs, TIC will ultimately close and will no

longer be a valuable community resource.

One of the first viable solutions is to merge with another hospital. However, this

is solution is not consistent with Dr. David’s original goal to “create a hospital in


disguise” (Gittell & Toth, 2000, p.2). TIC was founded on the very principle that the

“overload of stimuli such as light, sound, and touch” has a profoundly negative impact on

an infant’s recovery period (Gittell & Toth, 2000, p.2). Another option would be to

expand the services by utilizing their highly skilled staff in another role and provide

consulting services to area hospitals. Instead of creating the perfect environment in a

free-standing facility, perhaps TIC could go into other hospitals and utilize their skill set

in assisting them in creating the perfect environment for the patients admitted there. This

may have the potential to reach an exponential number of families depending on the

response from hospitals and the number of hospitals in which they serve.

Rather than focusing on the depth of their program, TIC could focus on the

breadth by considering expanding their service line to provide more than transitional

infant care. Options might include acute pediatric care for the children suffering from

some of the same illnesses as the infants they have treated or to provide outpatient

services for infants, children suffering from chronic illnesses and their families.

TIC could also consider raising their prices. Is it possible that families view their

services as less than stellar because the price is lower? Prestige pricing is defined as a

“marketing strategy where prices are set higher than normal because lower prices will

hurt instead of helping sales, such as for high-end perfumes, jewelry, clothing, cars, etc.”

(Prestige pricing, n.d.) Prestige pricing has not widely been used in health care, however,

TIC might investigate whether or not the lower pricing has an impact on their reputation.

As mentioned previously, to ensure an acceptance in this change in pricing, the consumer

must perceive a significant improvement in quality or an increase in the service offerings.

It is not clear whether TIC had been monitoring quality indicators. Should TIC consider


price increases, quality indicators could be publicized to ensure there is a tie to price

increase and exceptional quality. Former patient testimonials appealing to the emotions

of the consumer would also serve this purpose.

Another alternative would be for TIC to increase their publicity-driven promotion

strategies. Instead of concentrating primarily on marketing to healthcare providers, TIC

could direct promotional messages to the community to educate the consumers on the

available services and to appeal to their emotions. TIC might accomplish this through the

use of radio interviews, television interviews, and magazine as well as newspaper stories.

The use of the internet to promote their services would be an appropriate option as the

parents of infants are a target subset that relies heavily on the internet for information

(Diaz et al., 2002). In addition, TIC could develop a Foundation Board consisting of

prominent community leaders and marketing professionals to assist them in appealing to

local businesses to support their efforts. TIC might also want to reconsider their “home-

like” environment. For example, the staff members and nurses wear street clothes.

While this might help promote a home-like and relaxed atmosphere, this also may hinder

the way the nurses are viewed by other healthcare professionals and family members.

They may be viewed as less professional and knowledgeable.

Implementation of the Best Solution

The best solution is actually a combination of several alternatives. TIC should

target the public in their advertising instead of relying solely on physicians and hospitals,

especially those in direct competition, to provide referrals. Personal selling to potential

referral sources should also be a priority. During the growth stage, the focus should be

on maintaining the loyal consumer and to differentiate their service from others that offer


similar care. To support these efforts, marketing efforts should focus on previous

patient’s testimonials and the establishment of a foundation to recruit and receive

donations.

A “face-lift” of the image they portray also warrants change. Nurses are viewed

as professionals when they wear uniforms. Perhaps patients’ family members, possibly

even subconsciously, view the nurses in street clothes as not being skilled or having

expertise. Nursing uniforms are also specific to the profession and have the potential to

command respect and trust that street clothes do not (Albert et al., 2008).

Lastly, due to the changes in the environment and the competition from other

multi specialty hospitals who offer similar services, TIC is no longer reaping the benefit

of a niche service. TIC must expand the services that are offered in order to penetrate

new markets.

Justification

TIC entered the market as a niche hospital, specializing in not only transitional

infant care, but also providing an alternative environment for these neurologically

immature babies. As part of the vision, the entry price was substantially lower than the

competitors. It is unclear if this was a conscious effort by the founders to utilize a

penetration price strategy. Although the advantages of this strategy is that it encourages

demand and discourages competition, the disadvantages of under pricing and the limited

ability to raise prices after the introductory phase should not be dismissed. The focus

during the growth stage should be the timing of price increases with the perception of

substantially higher quality services or expanding services (Berkowitz, 2011). TIC’s


entry into the market with a new service line would support a change in their pricing,

thereby improving their reimbursements and their bottom line.

Marketing efforts should focus on both the growth and near maturity stage of the

transitional care unit as well as the emerging market for the acute inpatient and outpatient

care of children with chronic illnesses. TIC administrators should plan strategies to

differentiate the transitional infant care from other providers in the market, a key

objective during the late growth and early maturity stages. Since price changes at this

stage are typically focused on competitive pricing, the price increase should ensure that

they are still the low price leader in the market. Alternatively, as the new service line

enters the market, decision should be made as to pricing based on penetration or

skimming. Due to the competition of other provides in the area, penetration pricing is

most appropriate for this new service (The product life cycle, 2010).

Establishing a foundation board, or strengthening the association with the

Children’s Home of Pittsburg non-profit organization to increase charitable contributions

would ensure dedicated funds to be used in expansion projects and capital purchases. In

2009 the IRS reported that approximately $1.4 billion in revenue and holdings of nearly

$2.6 billion in assets were reported by charitable organizations (Sherlock & Gravelle,

2009). Tapping into this lucrative market as a means to fund projects should not be

dismissed.

Considering the impact of the nurse’s uniforms in the small hospital might be a

method to improve customer perception and gain respect and trust from the community

and peers. Albert, Wocial, Meyer, Na, & Trochelman (2008) sampled 499 patients and

visitors in a large Midwestern health care center. Utilizing a Nurse Image Scale (NIS)


score the team tested for differences based on uniform style and color and subject

demographics. The study found that adults create perceptions of professionalism based

on uniform color and style with the highest noted in white uniforms. The study could not

directly tie an improvement in patient and family satisfaction based on this trait, but it

would be practical for TIC to consider this finding.

TIC’s leadership realized their hospital was at a turning point in late 1996. A

decision as to the direction of their organization was pivotal to their future. In 1996 the

hospital had limited marketing resources with no strategic, business or marketing plan

that had evolved to the point of execution. With a focus on marketing research, the four

P’s of marketing, and strategic business goals, TIC has a future as they both deepen their

penetration and begin to broaden their presence in the current Pittsburg market..


References

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(2002). Patients' use of the internet for medical information. Journal of General

Internal Medicine, 17: 180–185. doi: 10.1046/j.1525-1497.2002.10603.x

Gittell, J.H., Toth, M. (2000). Transitional infant care specialty hospital (2nd ed).

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Prestige pricing. (n.d.). In Buisness Dictionary Online. Retrieved from

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charitable sector. Retrieved from http://digitalcommons.ilr.cornell.edu/cgi/

viewcontent .cgi?article=1690&context=key_workplace&sei

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%22

The Children’s Home. Retrieved from http://www.childrenshomepgh.org/

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http://www.quickmba.com/marketing/product/lifecycle/

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