The Role of Advertising in High-Tech Medical Procedures: Evidence from Robotic Surgeries

Abstract

Hospital advertising has grown more than five-fold in the last two decades. However, hospital advertising has been understudied, unlike detailing and advertising for prescription drugs. This study introduces a customer-centric view to this market by investigating the role of advertising in patients’ choice of high-tech medical procedures, with a focus on robotic surgery. The authors analyze approximately 140,000 individual patient records and television advertising data from Florida during 2011-2015 to investigate how hospital advertising of robotic surgery affects patients’ choice of robotic surgery over more conventional laparoscopic and open surgeries. Using a variation of a Designated Market Area border identification strategy, the authors find that this advertising leads to more robotic surgery choices. The advertising effect is especially strong for Medicaid patients, whose socioeconomic status tends to be lower. While robotic surgery is associated with a shortterm health benefit (i.e., reduced length-of-stay), it does not affect long-term health benefits and comes at a higher cost than other forms of surgery. Thus, understanding the effect of advertising robotic surgery has significant health, cost, and marketing implications for different stakeholders in the healthcare industry, such as patients, healthcare providers, surgical robot manufacturers, insurance providers, and policymakers.

Hospital Portfolio Strategy and Patient Choice

“…More generally, our work joins a small, but growing stream of research in marketing focused on understanding the role of marketing in health care (e.g., Ailawadi et al 2020; Chen et al 2020; Yoon 2020; Yu, Ghosh, and Viswanathan 2022). Previous literature on firm actions in the health care context has mostly focused on traditional advertising and detailing decisions, typically from a pharmaceutical or health insurance standpoint (e.g., Shapiro 2020), with the exception of Kim and KC (2020) and Yoon and Kim (2024), who study the effects of hospital advertising on patient demand. However, the signaling influence of a hospital's portfolio decisions has received little to no attention in the marketing literature.…”

“…The contributions of our research stem from its unifying view of the provider's portfolio strategy (e.g., Clark and Huckman 2012; KC and Terwiesch 2011; Moon and Shugan 2020) and the patient choice-of-care perspectives (e.g., Kim and KC 2020; Sfekas 2020; Yoon 2020; Yoon and Kim 2024), a heretofore underresearched link. Additionally, a unique contribution of our work is the identification of the causal mechanism (both empirically and experimentally) underlying the portfolio effects, an aspect that is absent in prior work.…”

“…Thus, especially in a health care setting, patients are likely to be attuned to diagnostic information that would help them make judgments about the quality of care that a hospital may provide. These signals may come in the form of advertisements (e.g., billboard content, electronic media, website descriptions), money-back guarantees, referral networks, and other modalities (Kim and KC 2020; Shapiro 2020; Yoon and Kim 2024; Yu, Ghosh, and Viswanathan 2022). In a similar vein, literature on information disclosure in health care markets has focused on health care report cards (Yoon 2020) and online reviews (Chen and Lee 2024) as quality signaling information that patients perceive.…”

Marketing in the Health Care Sector: Disrupted Exchanges and New Research Directions

“…Except for Kim and KC (2020), the marketing literature has largely ignored the demand-side effects of this strategy. Yoon and Kim (2024) address this gap by investigating the role of hospital advertising for robotic surgery in patients’ choice of high-tech medical procedures. Their findings demonstrate that advertising has a strong effect on new patient acquisition and that robotic surgery reduces the length of hospital stays, creating more convenience for patients and reducing costs overall.…”

“…Third, by determining when health care marketing seems to help and why, we can also guide expenditures. For example, Yoon and Kim (2024) observe that using marketing to promote robotic surgeries seems to create demand. However, Vakratsas and Wang (2024) find that marketing does not increase the adoption of specialty drugs.…”