Hospital Spending on Advertising Soars

Health insurers worry that a flush hospital industry that spends more on direct-to-consumer ads might get the upper hand in negotiations.

Hospitals have always advertised their services to consumers. But what the industry spends on such advertising rose 41% between 2011 and 2015, according to data by Advertising Age and as reported by Kaiser Health News (KHN) this morning. Direct-to-consumer ads by drug companies must be approved by the FDA. Such ads by the hospital industry need to be approved by the agency that oversees ads for consumer goods, the Federal Trade Commission.

According to Kantar Media, a company that monitors ad spending, hospitals last year spent more than $450 million on ads overall. Many of the ads promote services and treatments for more wealthy patients. But advertising campaigns also help hospitals gain negotiating leverage with health plans, some experts maintain.

“A hospital that successfully brands itself as excellent or prestigious—even in one procedure or specialty—can leverage that identity when bargaining with insurers,” KHN reports.

Martin Gaynor, a health care economist at Carnegie Mellon University and former head of the FTC’s Bureau of Economics, said that the ads might force insurers to “want Hospital A in their network even more, which means Hospital A can extract more from insurers—mainly in the form of higher prices.”