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March 7, 2016

Is a Starbucks-style loyalty program right for hospitals?

Daily Briefing

    Read the Advisory Board's take on this story.

    These days, patients can change physicians or hospitals more easily than ever before—and many do.

    The average Pioneer ACO lost 38 percent of its patients by the end of one year. Over a five-year period, more than half of patients in a Medicare demonstration physician group practice switched physicians and care settings.

    So how can you keep patients coming back? A recent article published in JAMA recommends turning to a system that's been a staple in the retail world for years: loyalty programs.

    Classic loyalty rewards range from "buy nine coffees, get one free" at your local coffee shop to airlines upgrading a frequent flier's seat. The authorsLaurence McMahon Jr., Renuka Tipirneni and Vineet Chopra of the University of Michigan, Ann Arborargue that hospitals can adapt the approach to fit the health care market, offering perks such as parking vouchers or discounted cafeteria food.

    Increased savings

    The benefits of loyalty programs, the authors argue, are two-fold: Customers benefit through the perks and rewards, and businesses benefit by strengthening relationships with patients.

    The authors note that customers who feel positively toward their providers are more likely to keep coming back—and it's less expensive to retain a current patient than to market to new ones. Loyal customers also are more likely to overlook problems such as difficulty scheduling appointments, and they're more likely to tell friends about the business, the authors write.

    Loyalty programs also can cut down on costs. Health care providers can partner with gyms, pharmacies, or other health organizations to provide loyalty rewards—incentivizing patients to focus on their health, which can lower the cost of care.

    Results are in: What drives patient loyalty?

    Offering the right incentive

    To counter concerns that loyalty programs might encourage patients to seek unnecessary care just to rack up rewards, the authors say health care rewards should be based on the duration of a relationship, rather than how many times the patient visits.

    Some providers doubt the value of loyalty programs, believing that patients care more about clinical excellence than anything else. In this view, patients will wait in line, struggle to get an appointment, and endure subpar service if it means they can get great care.

    But the authors argue that this "pervasive myth" overstates a "patient's ability to appreciate technical excellence," and that a combination of excellent care and quality customer service is a new way to attract and retain patients in a highly competitive market (Bird, FierceHealthcare, 3/1; McMahon Jr. et al., STAT News, 3/2; McJahon Jr. et al, Journal of the American Medical Association, 3/1).

    The Advisory Board's take

    Anna Yakovenko, Market Innovation Center

    While we've heard of several health systems offering loyalty programs to their patients, it's not yet clear whether they generate ROI.

    That said, I wholeheartedly agree with the article authors on the need for health care organizations to adopt a more customer-service oriented approach. Our research finds that after care quality, the strongest predictors of loyalty—in both primary and specialty care—are patient experience factors such as physician respect, staff patience and helpfulness, patient education, and short wait times.

    As providers think through their consumer experience strategy, their focus should first be on efforts that increase access, minimize critical service flashpoints, and deliver a consistent, exceptional experience to the patient.

    It's important to be thoughtful about the place of loyalty programs in health care. Providers considering implementing a loyalty program at their organization should do their research by getting patient input on program desirability and perceived utilization. And before rolling out the program to the entire health system, providers should pilot the program with a specific cohort—like their ACO patients—to track the return on investment.


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    1. Current ArticleIs a Starbucks-style loyalty program right for hospitals?

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