Identifying Marketing Opportunities in the Health Services Industry Essay

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Marketing Plan for Kaiser Permanente

Part A

For nearly three-quarters of a century, Kaiser Permanente (hereinafter alternatively “Kaiser” or “the company”) has provided quality health care to a growing number of customers (About us, 2018). Indeed, today, Kaiser has more than 12 million members and its future appears bright providing the company can capitalize on its core competencies using a marketing plan that focuses on achieving its current and future organizational objectives. The purpose of Part A of this marketing plan is to provide a framework in which the company can achieve its current and future marketing objectives in an increasingly volatile and competitive marketplace based on the assumptions listed below.

Statement of assumptions

The following assumptions apply to this marketing plan:

· The marketing data provided by the company and third-party analysts are accurate and complete;

· Current trends in changing demographics in the U.S. population will create an increased demand for geriatric health care services as the Baby Boomer generation retires in greater numbers and live longer lives compared to just a half century ago;

· The company’s current leadership will continue to oversee Kaiser’s operations in an effective and informed fashion; and,

· There will be no significant downturns in the U.S. economy during the next 10-year period.

The preliminary information needed to formulate an effective marketing plan for Kaiser is provided below.

Initial information

Founded in 1945 and currently headquartered in Pleasanton, California, Kaiser was originally focused on providing industrial health care programs for blue-collar workers in the construction, shipyard, and steel mill trades who were employed by the Kaiser industrial companies during the prosecution of the Second World War (About us, 2018). According to Raube and Upshaw (2014), the company has transformed itself from this original business model to become one of the leading non-profit health services organizations in the country today. To its credit, Kaiser has consistently provided its members with high quality, integrated health care coverage since its inception (Raube & Upshaw, 2014). The company’s chairman and chief executive officer, Bernard J. Tyson, is highly rated as effective and committed to the organization’s stakeholders by the company’s employees and the company has consistently grown under this leadership (Kaiser Permanent overview, 2018).

The company has been a leader in the health care services industry in a number of ways over the years, including being the first organization to introduce: (a) prepaid health plans that distribute costs to members to make them more affordable; (b) physician group practices that facilitate the delivery of health care services; (c) wellness programs designed to keep its members healthy and reduce corresponding medical costs; (d) an integrated delivery system that provides more efficient care at reduced costs for members; and (e) electronic medical records (Raube & Upshaw, 2014).

The company also maintains a loyal social network following, and Kaiser Permanente had nearly a third of a million “fans” on its Facebook site alone by April 2018 (Kaiser Permanente overview, 2018). The company estimated annual revenues are currently $72.7 billion and Kaiser has about 21,275 employees (Kaiser Permanente overview, 2018). The company is comprised of the following entities:

· Kaiser Foundation Hospitals and its subsidiaries;

· Kaiser Foundation Health Plan, Inc.; and,

· The Permanente Medical Groups (Fast facts about Kaiser Permanente, 2018).

These three entities form the focus for the company’s marketing programs (Raube & Upshaw, 2014).

The company’s operations are currently limited to the U.S. market and current total membership in their health care plans by region of the country is set forth in Table 1 below.

Table 1

Health Plan Membership, by Region

Region

Membership

Northern California

4,284,011

Southern California

4,538,427

Colorado

671,254

Georgia

374,000

Hawaii

255,828

Mid-Atlantic States (Va., Md., D.C.)

783,094

Northwest (Ore./Wash.)

606,511

Washington

711,465

Source: Adapted from Fast Facts about Kaiser Permanente, 2018

The company’s annual operating revenues for the past 5 years are set forth in Table 2 below.

Table 2

Kaiser Permanente Operating Revenues: 2013-2017

Year

Revenues

2013

$53.1 billion

2014

$56.4 billion

2015:

$60.7 billion

2016

$64.6 billion

2017

$72.7 billion

Source: Fast facts about Kaiser Permanente, 2018).

As can be readily discerned from the figures set forth in Table 2 above, the company’s annuals revenues have experienced a significant and sustained increase over the past 5 years due in large part to the efficiency of its operations, the high quality of the health care services it delivers, and the effectiveness of its marketing initiatives which are discussed further below in the market audit of the company.

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Market audit

A timely market audit can help companies identify the extent to which their marketing department is achieving its assigned marketing activities as well as the extent to which it is contributing to the organization’s overall performance (McDonald & Dunbar, 2016). A market analysis of the health services organization industry in the United States using a PESTLE (political, economic, social, technological, legal and environmental) framework in provided in Table 3 below.

Table 3

Market Audit of the Health Services Organization Industry

PESTLE component

Description

Application

Political

These factors determine the extent to which a government may influence the economy or a certain industry. [For example] a government may impose a new tax or duty due to which entire revenue generating structures of organizations might change. Political factors include tax policies, Fiscal policy, trade tariffs etc. that a government may levy around the fiscal year and it may affect the business environment (economic environment) to a great extent.

Although the process is expensive and frequently onerous, Blank (2015) reports that the political will to facilitate the introduction of new, more effective drugs has had an impact and the FDA's Center for Drug Evaluation and Research formally approved 41 new drugs in 2014, including a number targeted at treating cancer as well as type 2 diabetes, hepatitis C, and other serious diseases. This accelerated approval rate reflects the political will to streamline the health care services industry.

Economic

These factors are determinants of an economy’s performance that directly impacts a company and have resonating long term effects. [For example] a rise in the inflation rate of any economy would affect the way companies’ price their products and services. Adding to that, it would affect the purchasing power of a consumer and change demand/supply models for that economy. Economic factors include inflation rate, interest rates, foreign exchange rates, economic growth patterns etc. It also accounts for the FDI (foreign direct investment) depending on certain specific industries who’re undergoing this analysis.

The current unemployment rate of just 4.4% is among the lowest in years (U.S. economy, 2018), and recent trends suggest that the American economy will remain strong for the foreseeable future unless the tariffs invoked by President Trump cause a global trade war that results in a severe economic downturn. This eventuality, however, is mitigated somewhat by legislation passed in December 2017 (the Tax Cuts and Jobs Act) which reduces individual tax burdens and eliminates the penalty imposed on taxpayers who do not obtain the minimum amount of health insurance required under the Affordable Care Act by 2019 (discussed further below). The individual reductions do not expire until 2025 (U.S. economy, 2018).

Social

These factors scrutinize the social environment of the market, and gauge determinants like cultural trends, demographics, population analytics etc.

Growing numbers of health care services organizations (including Kaiser Permanente) are integrating social media platforms into their marketing mix. Other relevant social trends include an increasingly diverse demographic population as well as a rapidly growing population of elderly health care consumers (U.S. people, 2018) who will undoubtedly require an inordinate amount of age-related health care services for the foreseeable future.

Technological

These factors pertain to innovations in technology that may affect the operations of the industry and the market favorably or unfavorably. This refers to automation, research and development and the amount of technological awareness that a market possesses.

Innovations in health care technologies have transformed this industry in fundamental ways over the past 20 years, and electronic medical records have substantially reduced administrative costs as a result. Indeed, Cutler (2015) emphasizes that Kaiser’s implementation of electronic medical records initially saved the company over half a billion dollars a year when adopted in a single region and this amount has increased of $6.6 billion after its deployment nationwide. These types of technological innovations, however, are subject to the legal issues noted below.

Legal

These factors have both external and internal sides. There are certain laws that affect the business environment in a certain country while there are certain policies that companies maintain for themselves. Legal analysis….....

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