[BreachExchange] Hospitals Spend 64% More on Advertising After a Data Breach

[Destry Winant]

https://healthitsecurity.com/news/hospitals-spend-64-more-on-advertising-after-a-data-breach

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.”