Part II: Filling the Cavities ...with GIS

By Eric Cohen

Mapping applications are rapidly branching into new areas as businesses of all kinds begin to understand the power of GIS.This article is the second in a three-part series that describes real-life applications of GIS in businesses.

The medical industry has been using GIS for many years and in many ways.Medical professionals use GIS to find new areas for growth, to determine which specializations will flourish in specific geographic areas, to determine insurance qualifications, and to plan round-the-clock facility staffing throughout the year.

GIS isn't a magical tool for medical professionals.Before a GIS application can be effective, a medical practice, HMO or hospital must find where its current customers are and where new customers live.A hospital or medical consortium planning to expand must determine whether it is better to open a new practice or simply acquire one that is already in existence.For example, a large eastern dental consortium that included more than 70 different practices wanted to saturate a market with its brand of dental practices.Before it could expand, the consortium had to calculate the optimum number of practices for its targeted MSA based upon the population living in it.It also had to figure out whether it would be better to open new practices in the target area or to acquire practices currently in existence.Finally, the consortium had to determine if the acquisition of new practices would cannibalize their own practices that were already in operation.

The dental consortium found the answers to these questions using a four-step process that included geocoding, customer profiling, customer draw analysis and scorecard analysis.The end result provided the consortium with information about its current patients while helping it to target new patients and to site new practices.

The first step in the process was to use a GIS application to geocode the current patients and to create demographic profiles of those patients.This involved obtaining the latitude and longitude for each patient's home and appending the patients' individual demographic characteristics with a point on a map.

Image courtesy of CACI Marketing Systems

The resulting profiles were further segmented by type of practice.This gave the consortium the opportunity to differentiate patients who used a dentist near their place of work rather than near their home, or those patients who visited a stand-alone practice rather than one in a retail setting.When the profiles were complete, the consortium identified four basic types among their 70 practices: country, urban downtown, suburban/stand-alone and suburban/retail.

These individual practices were then further differentiated by kind of medical specialty in each, such as orthodontics, pediatric dentistry or dental surgery.The result of this analysis was a target list of lifestyle segments by type of practice.With this information in hand, the dental consortium could begin to look at new locations for expansion, merger or acquisition.Moreover, each of the consortium's dental practices was located on both individual and composite maps so that the neighborhood composition around each practice could be better identified.As we say in this business, "a picture is worth a thousand words." And in this case, it was!

The next activity was creating a customer draw analysis, which greatly facilitated an understanding of each trade area that represented each practice.For the consortium, this effort became even more complex because each practice had several trade areas based upon individual specialty areas such as orthodontia or pediatrics.

The steps to creating a customer draw analysis involved using a GIS application to plot all of the customers around each practice on a map and drawing a trade area around those customers.From this information, standard trade areas were generated by the GIS for each practice type (country, urban downtown and the two types of suburban practices identified earlier).The trade areas could be represented in several formats.For example, some were radius rings, some were drivetimes and some others were polygons.In this instance, radii were the best representation because this information was being used to help locate new practices for which driving obstacles often were not known.This is an important consideration in any trade area analysis since both natural and manmade barriers can greatly affect where people will drive and why they choose particular routes.

Image courtesy of CACI Marketing Systems

The consortium's next step was to target segments and typical trade areas for each type of practice.That step involved visually plotting the existing - and competitive - practice locations.A trade area was drawn around each practice.Within each trade area, individual "holes" that represented site opportunities became readily apparent.At the same time, a composite target index was created.This target index was the result of adding the lifestyle segments together and dividing by the number of households in each block group.The consortium then created quintiles and shaded each one differently on the map in its GIS software (using a hot-to-cold analysis).This analysis allowed the consortium to see which of the "holes" were in the hot spots, which were areas the consortium would focus on for new business practices.These "hot spots" take into account competitive locations, highest targeted lifestyle concentrations and the least number of competitors.Hot spots for a practice where competitors existed but where there was no existing consortium location are prime targets for an acquisition or merger opportunity.

The last step was creating a "score card" for each practice.By analyzing all of the demographics and lifestyle segmentation data for the existing practices, the consortium was able to correlate that data to sales generated by each practice.The end result was approximately ten variables with thresholds for each.The locations that show scores above the threshold prove to be successful, while those below, do not.

Health providers such as this dental consortium are learning what their counterparts in retail and real estate have known for years: putting demographic and lifestyle data on maps is an incredibly powerful tool for planning what businesses should be opened and where they should be located.

Published Tuesday, February 23rd, 1999

Written by Eric Cohen

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