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Hospitals Spend 64% More on Advertising After a Data Breach

The costs are associated with efforts to repair the hospital’s image and minimize patient loss to competitors; researchers say it could be avoided with better data security.

hospital spending on advertising after a breach

By Jessica Davis

- Hospitals spend 64 percent more annually on advertising after a breach over the following two years, according to a recent report from the American Journal of Managed Care.

Researchers Sung J. Choi and M. Eric Johnson examined nonfederal acute care inpatient hospitals’ advertising expenditures after a breach, compared to institutions without a breach. The analysis was based on data from The Healthcare Cost Report Information System, market competition, and surveys of media vehicles from 2011 to 2014.

They found a hospital breach significantly increased the amount of spending around advertising for two years after the event, presumably due to efforts to repair the hospital’s image and minimize patient loss to competitors.

“Advertising costs subsequent to a breach are another cost to the healthcare system that could be avoided with better data security,” the researchers wrote.

According to the report, breached hospitals spent almost three times more on advertising than controls hospitals, with breached hospitals spending about $688,000 annually. Meanwhile, the control hospitals spent just $238,000.

During the year of the breach, those hospitals spent $817,205 annually on advertising expenditures and up to $1.75 million over the course of two years.

Breached hospitals were more likely to be large, teaching, and urban providers, with an average of about 566 beds. About 77 percent were teaching hospitals and around 69 percent were higher in occupancy rate.

“Breached hospitals were located in counties with significantly more hospitals and Medicare enrollees, suggesting that they were in more competitive areas,” the researchers wrote.

The number is significant when compared to recent reports that found hospital advertising has significantly increased in recent years with market concentration. A 2014 Kantar Media study found hospital systems spent $2.3 billion on advertising in 2014.

To make matters worse, the costs associated with healthcare data breaches are more than any other sector. In fact, it costs a breached healthcare provider $408 per patient record to recover.

The most recent report found the increase costs are associated with fixing the breach, along with protecting patients from future harm. The Department of Health and Human Services estimated that it takes a breached organization a full year to recover.

Fines and class-action lawsuits also cause an increase in spending for breached health providers.

But the increase in advertising costs are due to those breached organizations creating “carefully crafted marketing campaigns” to rebuild its image. The researchers noted that in 2014 and 2016, two breached organizations released award-winning advertisements within a year of the incident.

“Regardless of the motivation, breach response adds financial burden to hospitals and the healthcare system,” the researchers concluded. “Advertising and the efforts to fix the damages from a data breach increase healthcare costs and may divert resources and attention away from initiatives to improve care quality.”

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