People often compare the higher education and health care markets. Both are widely dispersed industries with local, regional, and national entities. Both have seen dramatic cost increases in preceding decades. And, to some degree, this cost escalation has been fueled in part by third-party payers: insurance companies for healthcare, and easy government loans for higher ed.
Another common area is branding. In both fields, there are a few national, high-prestige brands that relatively few people can access – the Mayo Clinic and Harvard, for example. The most renowned institutions in both categories serve a national and even global market, but none have expanded in a big way to leverage the strength of their brand.
In particular, elite colleges and universities have typically limited enrollment even as demand has increased. The most selective schools in the US could easily double their enrollment while maintaining exceptionally high standards, but the costs of greatly expanding campuses and faculty would almost certainly exceed incremental revenues. And, of course, the brands might suffer at the same time as entry became marginally easier.
Still, both universities and hospitals have occasionally added additional campuses to offer greater access. The Mayo operates facilities in Florida and Arizona in addition to its flagship Minnesota location. Yale has a campus in Singapore, while Carnegie-Mellon has one in Silicon Valley.
Now, a new initiative by the Cleveland Clinic may be pointing the way for big-brand universities to leverage their name and expertise. The Wall Street Journal describes the Cleveland Clinic’s newly forged connection with Community Health Systems, a for-profit hospital operator:
The new tie-up, which will involve quality-improvement efforts and other areas, comes as top medical names are creating more affiliations with health-care providers around the country. These can take many forms, but often resemble a sort of health-care version of the franchise arrangements common in other industries: The leading center shares clinical protocols and advice, and the local hospital, which typically pays a fee, can publicize the relationship to prospective patients.
In College Branding: The Tipping Point, I talked about the pressure institutions that lacked a strong brand would face in the coming years. The combination of shifting demographics, weaker employment opportunities, new instruction technologies, and inability to contain costs will almost certainly lead to an increasing number of institutional failures in higher ed in the coming years. The schools that will feel the pressure most will be those that have failed to distinguish themselves from others in any meaningful way.
The Cleveland Clinic deal, along with a somewhat different arrangement at the Mayo, the Mayo Clinic Care Network, suggests a way for some universities to expand their footprint without building new campuses. While online courses and degree programs are approaches that are being adopted by many schools, franchise-like affiliation with local and regional institutions offer the possibility of a blended approach that still incorporates a physical campus.
There could be major advantages to those local and regional schools, too. Faced with increasing competition for a declining student population, a branded offering could make a huge difference. What if a school offering courses in software development could brand their offerings with a “Stanford” or “Carnegie Mellon” label, and deliver much of the coursework electronically with lectures and course materials from leaders in their field? That could sway applicants looking to get the best return on their college investment. Other classes could be conducted in the traditional manner locally, or schools could adopt a hybrid approach with local teaching assistants supplementing remote lectures. There exists a potential to reduce overall costs, too, if a significant number of courses could be delivered by electronic means. These courses will come with their own expenses, of course, and the overall effect on tuition paid by the student remains to be seen.
The biggest obstacle to these co-branded or franchised offerings is the danger of brand dilution. Scarcity drives the appeal of elite schools – only a small number of students are admitted each year, and this increases the value of their eventual degrees. If students could attend dozens of “Columbia University” affiliates around the country, would the a “real” Columbia degree seem less unique and valuable?
This could be resolved by carefully co-branding, verifying that the partner institution was following specific guidelines and offering branded content, but not awarding degrees from the elite partner. Of course, a slightly more hungry brand-name school might decide to throw caution to the wind and offer a richer partnership with other schools that promised a branded degree, too.
A co-branding approach won’t solve the fundamental problems facing the thousands of colleges and universities in the U.S. But, it’s an approach that could allow a handful of prestigious schools to extend their footprint in a major way. And, for those local/regional schools that meet the criteria for co-branding and adopt the concept, the opportunity to attract more students in an increasingly difficult environment could be a competitive advantage.
It’s also possible that a for-profit college system could make a connection with a big brand, much as happened with Community Health Systems and the Cleveland Clinic. For-profits are far more likely to aggressively pursue such relationships, and won’t have to deal with objections from tenured faculty, powerful alumni, big donors, and other stakeholders. At the same time, the appeal of such connections to elite, well-branded universities may be limited for now. The for-profit sector has been tarnished by minimal admission standards, low rates of degree completion, and high loan default rates, hardly the kind of brand association a world-renowned university would seek out.