For some people, seeing “CHI Health Center” emblazoned across Omaha’s convention center and arena will be just another example of how there’s too much money in medicine.
Omaha-based CHI Health, which operates Creighton University Medical Center-Bergan Mercy and other hospitals in the region, will pay $23.6 million over 20 years<http://www.omaha.com/livewellnebraska/health/so-long-centurylink-center-chi-health-buys-omaha-arena-naming/article_6dd7ef51-d7c1-5e39-a284-cf3ca50f7deb.html> to see its name in lights, renaming the CenturyLink Center.
Why couldn’t CHI Health spend that money on health care? Free vaccinations for babies? A discount on a knee surgery for a person in need? Flu shots for all?
It doesn’t work that way, CHI Health executives and others in the advertising and health care industries say.
The naming-rights deal is an acknowledgment of reality: Even a nonprofit health system like CHI Health operates in a marketplace in which patients can choose where to take their health care business. CHI Health needs to advertise to be in the conversation, industry watchers say.
“Hospitals are increasingly seeking sponsorships that fit their business objectives to build awareness,” especially as consumers take a more active role in health care decisions, said Kim Mickelsen, chief executive of Omaha-based advertising firm Bozell.
In other words, CHI Health needs to get its name out there so people choose its facilities and doctors for their health care needs — spending money to make money.
Dr. Cliff Robertson, CHI Health’s chief executive, said for the number of national and local mentions the health system will get through the naming rights, compared with something like a Super Bowl ad, the decision was a “no-brainer.”
Out of an annual budget of about $2 billion, CHI Health spends about $8 million each year on marketing in the region — in line with a national study of marketing expenditures for health care systems of similar sizes.
Health systems of CHI Health’s size nationally tend to spend about 0.4 percent to 0.5 percent of their revenue from patients annually on marketing and advertising, according to the study. One of CHI Health’s competitors in the region, Methodist Health System, said its marketing budget fell within that range. Another, Nebraska Medicine, wouldn’t disclose its marketing budget.
(Methodist didn’t bid on the arena naming rights, the health system said. Nebraska Medicine considered a bid, but decided against it, a spokesman said.)
The naming-rights deal won’t add to CHI Health’s marketing budget, Robertson said — it’s coming out of the existing pot of money dedicated to marketing.
Even so, some people have bristled that a nonprofit health system could spend such money to name an arena. Social media has lit up with questions over the deal.
Dan Pleiss of Omaha, a retired accountant, said he thought it was wasteful for CHI Health to spend that kind of money on naming rights. He said CHI Health could have spent the money to lower the cost of medical treatments and other care for patients.
“This just sends a totally wrong message,” he said.
Doug Shonka, a software salesman who lives in Valley, called the $23.6 million agreement “a waste of money.”
“Sure, it’s coming out of their marketing budget,” Shonka said. “My question is, why do they need a marketing budget?” CHI Health is a health care provider and just by that fact alone, it’s going to draw patients, he said.
Dr. Ali Khan, the dean of the College of Public Health at the University of Nebraska Medical Center, tweeted soon after the announcement of the newly named center.
“CHI Health is a wonderful community citizen in Omaha,” he said. “But spending $23 million for naming rights on a building is a reminder that medicine is a business.”
Even a nonprofit like CHI Health still operates as a business: It’s got to pay its bills, including its biggest expense — money it spends on staff. (About 70 percent of CHI Health’s budget goes to wages and benefits, Robertson said.)
Nonprofits don’t pay taxes, but they do provide more uncompensated care than for-profit hospitals, according to the School of Business at George Washington University.
At CHI Health, more than $191 million went last year to free care and other community benefits — nearly 10 percent of its annual budget.
For comparison, Omaha-based Methodist Health System, also a nonprofit, provided $74 million in community benefit funds in 2016, the most recent year available. That was about 8.2 percent of its total operating expenses.
Nebraska Medicine, also a nonprofit and the clinical partner of UNMC, delivered $198.5 million in community benefits in fiscal year 2017 out of a total budget of around $1.3 billion, which works out to about 15 percent of its operating expenses.
That’s the type of thing hospitals should be doing more of if they have extra money lying around, some have said.
Edmund Leslie founded the Methodist Hospital Foundation and was public relations director at the old St. Joseph Hospital when it was on South 10th Street. He retired in 2005 after a 40-year career in PR and fundraising.
Leslie said he understands that hospitals want to create public awareness about their services and attract doctors and other staff members.
“They want to be able to attract a medical staff, and having a big image helps them attract more medical specialists and other health care professionals,” he said. “That’s a part of the whole ploy of marketing.”
But putting the hospital system’s name on an arena doesn’t educate the public on health issues, Leslie said.
“And merely to say, ‘Look at us. Aren’t we big?’ doesn’t educate the public,” he said.
CHI Health contends that having its name on the arena and convention center will pay healthful dividends over the long term. The system plans to have health-centered events at the venue — and on a large scale that an 18,000-seat arena can draw.
Buying naming rights shows community support, said Richard Gundling, senior vice president at the Healthcare Financial Management Association in Washington, D.C.
Nonprofit hospitals provide charity care, public education, clinics in low-income areas and low-profit services, he said.
“I think a lot of hospitals want to position themselves as being part of the community, not just providing sick care but well care, too,” Gundling said. “They want to make sure people see their name in support of the community and not just based on the emergency room.”
Robertson said CHI Health sees the naming rights purchase as another investment in the city, another community benefit.
Meanwhile, he said, the health system is committed to lowering the cost of health care. According to federal metrics of cost when it comes to 10 common hospital procedures, CHI Health is at or below the region’s average in seven, Robertson said. And he said officials are continuing to work to reduce those costs.
“This is not an increase in costs that’s going to be borne by patients or employers,” Robertson said of the naming-rights deal.
Ellis Verdi, president of New York City-based advertising agency DeVito/Verdi, said the health care market today is competitive, and consumers are making more decisions on their own than they have in the past.
Perceived reputation and importance play a role in those decisions, said Verdi, whose firm represents large health systems such as Mount Sinai Medical Center in New York City.
Verdi said he didn’t think CHI Health’s roughly $1 million-a-year contract for naming rights was a huge expenditure, “given the size of the institution or the need to have a commitment to marketing.”
But marketing that is so visible — literally, CHI Health’s name in lights — does get more scrutiny, where a series of small ads would not, he said.
Anthony Cirillo, principal of the marketing firm Fast Forward Consulting in Huntersville, North Carolina, said without success on the business side of health care, nonprofit hospitals can’t provide the charity care and other community benefits.
The amount pledged might “irritate some people,” Cirillo said, but naming the convention center pairs CHI Health with healthful sporting events and other activities, and reaches people beyond the hospital and clinic — putting the CHI Health name in their minds when it comes time to choose a health care provider.
“It buys you an entry,” he said.