Innovation in Hospital Revenues: Developing Retail Sales Channels

Hospitals are facing increasing cost pressures due to cutbacks by Medicare, Medicaid, and managed-care organizations. There are also rising concerns that public policy may exacerbate the problem. In lieu of these concerns, nascent innovative ways of generating increased revenues are beginning to appear. In particular, a few hospitals have adopted retail sales practices to generate significant nonmedical services revenues. The hospital retail sales opportunity has been compared with that of the airport industry where nearly 50% of revenues are generated by sales of retail products as opposed to aeronautical-related transactions. This initial investigation included a qualitative interview of a health care retail sales expert and a pilot survey of 100 hospital senior executives to gauge the current state of this phenomenon. The industry expert suggested that only 2% of US hospitals have pursued this initiative in a meaningful way. Of the 44 survey responses, only 9 institutions were engaged in e-commerce or retail sales activities. Questions remain as to why this opportunity remains unrealized, and additional research is proposed.