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The American Journal of Managed Care January 2019
The Gamification of Healthcare: Emergence of the Digital Practitioner?
Eli G. Phillips Jr, PharmD, JD; Chadi Nabhan, MD, MBA; and Bruce A. Feinberg, DO
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Rajesh Balkrishnan, PhD
Impact of Primary and Specialty Care Integration via Asynchronous Communication
Eric D. Newman, MD; Paul F. Simonelli, MD, PhD; Shelly M. Vezendy, BS; Chelsea M. Cedeno, BS; and Daniel D. Maeng, PhD
Mind the Gap: The Potential of Alternative Health Information Exchange
Jordan Everson, PhD; and Dori A. Cross, PhD
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Karen Donelan, ScD, EdM; Esteban A. Barreto, MA; Sarah Sossong, MPH; Carie Michael, SM; Juan J. Estrada, MSc, MBA; Adam B. Cohen, MD; Janet Wozniak, MD; and Lee H. Schwamm, MD
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Understanding the Relationship Between Data Breaches and Hospital Advertising Expenditures
Sung J. Choi, PhD; and M. Eric Johnson, PhD
Alternative Payment Models and Hospital Engagement in Health Information Exchange
Sunny C. Lin, MS; John M. Hollingsworth, MD, MS; and Julia Adler-Milstein, PhD
Drivers of Health Information Exchange Use During Postacute Care Transitions
Dori A. Cross, PhD; Jeffrey S. McCullough, PhD; and Julia Adler-Milstein, PhD

Understanding the Relationship Between Data Breaches and Hospital Advertising Expenditures

Sung J. Choi, PhD; and M. Eric Johnson, PhD
A hospital data breach was associated with a 64% increase in annual advertising expenditures.
ABSTRACT

Objectives: To estimate the relationship between data breaches and hospital advertising expenditures.

Study Design: Observational data on hospital expenditures were analyzed using a propensity score–matched regression. The regression was specified as a generalized linear model using a gamma distribution and log link.

Methods: The study sample included Medicare hospitals captured by a survey of traditional media outlets. Hospitals included were nonfederal acute care inpatient hospitals from 2011 to 2014. Voicetrak provided data on hospital advertising expenditures. The Healthcare Cost Report Information System provided data on hospital characteristics and financial variables. Study groups were matched using observable characteristics, such as revenue, number of beds, discharges, ownership, and teaching status. The study excluded hospitals in Maryland and the US territories for financial reporting consistency. Data breaches included theft, loss, unauthorized access/disclosure, improper disposal, and hacking. Advertising expenditures were collected from media outlets including television, radio, newspapers and business journals, and local magazines in a city/metropolitan area.

Results: Breached hospitals (n = 72) were more likely to be large, teaching, and urban hospitals relative to the control group (unweighted n = 915). A data breach was associated with a 64% (95% CI, 7.2%-252%; P = .023) increase in annual advertising expenditures, holding observable characteristics constant.

Conclusions: Breached hospitals were associated with significantly higher advertising expenditures in the 2 years after the breach. Efforts to repair the hospital’s image and minimize patient loss to competitors are potential drivers of the increased spending. Advertising costs subsequent to a breach are another cost to the healthcare system that could be avoided with better data security.

Am J Manag Care. 2019;25(1):e14-e20
Takeaway Points
  • In this observational study, we investigated the relationship between data breaches and hospital advertising expenditures.
  • A data breach was associated with a 64% increase in annual advertising expenditures, holding observable characteristics constant.
  • Efforts to repair the hospital’s image and minimize patient loss to competitors are potential drivers of the increased advertising spending.
A data breach that exposes protected health information is a public relations crisis for hospitals. Healthcare data breaches include theft, loss, unauthorized access/disclosure, improper disposal, and hacking of protected health information. The Health Information Technology for Economic and Clinical Health (HITECH) Act mandates hospitals covered by the Health Insurance Portability and Accountability Act to report data breaches exposing more than 500 individuals to those affected, as well as HHS and sometimes the media, typically within 60 days of discovering a breach. The Office for Civil Rights investigates reported data breaches and enforces corrective action.1 The reported breaches have been published by HHS since October 2009 in a public database,2 and the Privacy Rights Clearinghouse (PRC) also provides information on reported health data breaches to the public.3

Managed care and market-based reforms have driven hospitals to compete for patients. In a competitive market, hospitals use advertising to market services and communicate information directly to patients. It has previously been found4 that hospital advertising increased with market concentration. In recent years, spending on hospital advertising has skyrocketed. The hospital industry spent $2.3 billion on advertising in 2014—a 38% increase from 2011, according to the Kantar Media survey.5

Cancer center advertising spending increased 3-fold from 2005 to 2014.6 Increased advertising reflects the efforts by cancer centers to attract patients in a competitive market, especially as the demand for cancer care increases with the aging population.7 For example, cancer center advertisements promote the benefits of cancer therapy with emotional appeals8; samples of award-winning hospital advertisements highlight positive experiences and emotions associated with care and improved quality of life.9,10

Breached hospitals incur significant costs associated with fixing the breach and protecting the affected individuals from further harm. Investigation of a reported breach by HHS usually takes about a year to complete. The investigation concludes with a settlement, including a penalty of hundreds of thousands of dollars and/or remedial action, which typically must be implemented within 2 to 3 years. Separate from HHS investigations, some breaches result in class-action lawsuits.11,12 The advertising expenditures that we investigated occurred subsequent to the breach disclosure and added to the remediation costs outlined above. Based on a survey of US firms from 2005 to 2014, Romanosky13 estimated that the median cost of a data breach was $200,000, including costs from investigating the breach, notifying the affected individuals, public relations, credit monitoring, litigation, and fines.

The Ponemon Institute estimated that in 2016, the healthcare industry spent an average of $402 per stolen record for direct and indirect costs associated with a breach.14 Costs vary depending on the size and type of the breach; accordingly, it has been found that large breaches place a larger financial burden on the organization.14 Kwon and Johnson15 found that data breaches in hospitals were associated with decreased outpatient visits and admissions in the long run. Their findings suggest that hospitals are vulnerable to patient loss after a breach.

Carefully crafted marketing campaigns can be launched by a hospital to build up its image and minimize patient loss after a breach. Several hospitals and health systems—serving Florida, Michigan, North Carolina, or Texas—that reported breaches between 2016 and 2018 made award-winning advertisements within a year of the breach. These observations motivated our investigation on how data breaches affect hospital expenditures. Together with expenditures related to disclosing and repairing the damage from a breach, such advertising is a potentially preventable burden to the healthcare system. The aim of our paper was to investigate the relationship between data breaches and hospital advertising expenditures by analyzing a national sample of nonfederal acute care inpatient hospitals from 2011 to 2014.


 
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