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The long-term impact of service empathy and responsiveness on customer satisfaction and profitability: a longitudinal investigation in a healthcare context

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Abstract

Rising labor costs in healthcare industries have led many firms to underinvest in service empathy and responsiveness by downsizing staffing levels. Although such a strategy may help contain operating costs and improve productivity in the short run, its sustainability and long-term effect remain unclear, as the literature offers competing explanations of such an effect on customer satisfaction and overall profitability. Using 24 quarters of longitudinal patient satisfaction data and archival financial data from 25 clinical units in a large healthcare organization, this study examines how empathy and responsiveness influence profitability over time. The findings show that downgrading empathy and responsiveness allows firms to lower costs, resulting in immediate productivity benefits; however, this strategy has an enduring negative effect on customer satisfaction and ultimately hurts profitability in the long run.

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Notes

  1. Reliability involves doing things right the first time, which often requires standardized service procedures and practices rather than customization and relationships (Anderson et al. 1997). Assurance refers to courtesy and employees’ ability to gain customers’ trust, so it is more of an individual employee characteristic and thus is less contingent on staffing levels. Tangibility (appearance and quality of physical facilities and environment) has a less “human” element.

  2. For each SBU, we computed unit-EPD by estimating the following proportion: unit total gross patient revenue/hospital gross revenue per equivalent patient day. We calculated hospital gross revenue per equivalent patient day as the total gross inpatient revenue / [number of inpatients × length of average inpatient stay].

  3. Vector autoregressive models can be used to investigate the long-term effects of service attributes. However, these were not feasible in our case because the number of observations in our data set was insufficient for the number of parameters to be estimated.

  4. We also conducted a sensitivity analysis by estimating a series of nested models with and without the unit-type dummies. As illustrated in Appendix, our main findings are robust.

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Acknowledgements

The authors appreciate the constructive guidance of the editors-in-chief and three anonymous reviewers.

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Authors and Affiliations

  1. School of Management, Xiamen University, 422 Siming South Road, Xiamen, Fujian, 361005, China

    Jun Ye

  2. College of Business and Economics, Lehigh University, 621 Taylor St, Bethlehem, PA, 18015, USA

    Beibei Dong

  3. College of Business, Iowa State University, 2167 Union Drive, Ames, IA, 50011-2027, USA

    Ju-Yeon Lee

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  1. Jun Ye
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  2. Beibei Dong
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Correspondence to Beibei Dong.

Appendix Robustness analysis

Appendix Robustness analysis

In the main estimation, we included a set of unit-type dummy variables (i.e., inpatient, outpatient, and emergency room) that control for the differences between clinical units. To test the sensitivity of our findings to the inclusion/exclusion of these variables, we conducted a robustness analysis by estimating a series of nested models with and without the dummy variable of practice type and compared the model fit. As Table 4 shows, the findings are robust, which provides further support for our findings. To evaluate and compare the goodness of fit across models, we also ran F tests. For profitability (model 5 vs. model 6) and customer satisfaction (model 3 vs. model 4) equations, the inclusion of the practice-type dummies significantly improved the model fit (F(2, 229) = 3.58, p = 0.029; F(2, 230) = 3.08, p = 0.048). For cost equations (model 1 vs. model 2), the presence of the practice-type dummies did not significantly improve the model fit (F(2, 230) = 0.45, p = 0.638). Therefore, the inclusion of the practice-type dummy generally improves the model fit.

Table 4 Model comparison: with and without the practice-type dummies
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Ye, J., Dong, B. & Lee, JY. The long-term impact of service empathy and responsiveness on customer satisfaction and profitability: a longitudinal investigation in a healthcare context. Mark Lett 28, 551–564 (2017). https://doi.org/10.1007/s11002-017-9429-2

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