Hospital market segmentation is the process of categorizing hospitals into different segments based on certain characteristics or variables.

Not all hospitals are alike and so it is important to segment them in order to better understand the hospital market.

Now, whether you are simply studying this market or are developing products or services to offer this market, knowing and understanding key hospital segments is important.

Hospitals that fall into different segments often cater to a different set of patients and so (just like consumers) have different needs and wants.

In this article, we will perform hospital market segmentation using the following variables: hospital type, ownership, location, size, and medical services offered.

The Importance of Hospital Market Segmentation

When it comes to hospital care, each patient’s needs are different.

In most cases, patients will choose a hospital based on their medical needs. If someone needs a heart transplant, they may need to go to a hospital that specializes in cardiology and heart transplants.

Similarly, patients may choose a hospital based on whether or not or to what extent their health insurance will cover their hospital bills. Some insurance companies are linked to certain hospitals and will only cover bills from the hospitals in their network.

In an emergency, people may choose the closest hospital or one that the ambulance takes them to.

As you can see different hospitals offer different value to patients based on a variety of factors and circumstances.

But how best to study this market? That’s where hospital market segmentation comes in.

By understanding the different segments within the hospital market, we can compare different hospitals, we can compare hospitals across different geographies and if you have a commercial interest in hospitals we can get product-market fit by targetting your products to those hospitals that are most likely to need them.

Variables for Hospital Market Segmentation

There are many different ways to segment the hospital market, and in this article, we will discuss hospital market segmentation along these axes:

  1. Hospital type (e.g., teaching, community)
  2. Ownership (e.g., private, public)
  3. Location (e.g., urban, rural)
  4. Size (e.g., small, large) and
  5. Medical Services Offered (e.g., primary care, specialty care).

Most hospitals will fall into more than one segment but not in all of them. For example, a rural hospital may be a small hospital that only offers primary care.

A teaching hospital, on the other hand, could be a large hospital located in an urban area with a medical school and a research department offering both primary and specialty care.

Let’s take a look at each of these hospital market segments in more detail.

Segmentation based on Hospital Type

Hospitals can be segmented based on their type, which can give us some insight into the hospital’s target market.

The main types of hospitals are:

Teaching hospitals

These hospitals are typically affiliated with a medical school and offer both primary and specialty care. They tend to be large hospitals located in urban areas.

They also often conduct research and so may offer new and innovative treatments. They tend to attract patients with rare forms of illnesses which require specialists who are not always available at other hospitals.

Community hospitals

These hospitals are smaller than teaching hospitals and are often located in rural areas. They offer primary care and some specialty care but not at the same level as teaching hospitals.

They tend to be less expensive than teaching hospitals and so attract patients who are price-sensitive or in cases when insurance does not cover the cost of treatment at a larger hospital.

Specialty hospitals

These hospitals focus on one particular area of medicine, such as cardiology or obstetrics. Because they are specialized, they tend to be located in urban areas where there is a higher demand for their services.

Specialty hospitals also tend to be more expensive than other types of hospitals because they offer a higher level of care and their staff is almost entirely composed of specialists in their field.

Children’s hospitals

Children’s hospitals, as is obvious, focus on children’s illnesses or cater only to children. They also tend to offer services like vaccinations, which are not always available at other hospitals.

While most doctors at a children’s hospital are pediatricians, children’s hospitals sometimes are located close to or even attached to regular hospitals.

This way, if a child needs a specialist, they can be easily transferred to a larger hospital. Or the children’s hospital could use services from the larger hospital like radiology services or the blood bank.

Sometimes, the children’s hospital and the normal hospital will also share common services like a restaurant.

Segmentation based on Hospital Ownership

Hospitals can also be segmented by their ownership, which can give us some insight into how a hospital is managed and its financial situation.

The main types of hospital ownership are:

Private hospitals

These hospitals are managed by a private company or individual. They tend to be for-profit hospitals which means that their main goal is to make money.

And so the target market for private hospitals includes patients who are willing to pay for the higher quality of care.

They are often smaller than public hospitals and may not offer as many services. However, they can be more flexible in their pricing and so may be able to offer lower prices for some services.

Some private hospitals are run by charities and these tend to be more focused on providing care for the poor and so may offer free or discounted services.

Public hospitals

Public hospitals are managed by the government and so their main goal is to provide care for everyone, regardless of their ability to pay.

They tend to be larger than private hospitals and offer more services. However, because they are run by the government, they may be less efficient and have longer wait times for some services.

Religiously-affiliated hospitals

Such hospitals are managed by a religious organization, such as the Catholic Church. They tend to have similar levels of service as public hospitals but may be more efficient.

They also often offer services like chaplaincy which can be beneficial for patients who want or need spiritual support during their hospital stay.

Segmentation based on Hospital Location

Hospitals can be located in different types of areas, which can affect the type of patients they attract.

Urban hospitals are located in cities and so tend to attract patients from a wide area. They often have more specialists and services than rural hospitals. However, they may also have longer wait times for some services because of the high demand.

Hospitals also exist in suburban areas where real estate can be less expensive and people are able to reach more easily than hospitals in congested urban areas.

Rural hospitals tend to attract fewer patients from smaller areas. They often have fewer specialists and services than urban or suburban hospitals. However, they may be able to offer more personalized care because they have a smaller number of patients.

Segmentation based on Hospital Size

While conducting hospital market segmentation we look at hospital size because it indicates the hospital’s capacity, staff, and also the number of services it can offer.

Small hospitals usually have less than 50 beds and often provide general medical and surgical services. They may also offer some specialist services, but they tend to refer patients to larger hospitals for more complex procedures.

Medium hospitals usually have between 50 and 200 beds and often provide a wider range of services than small hospitals. They may also have more specialists on staff and be able to offer more complex procedures.

Large hospitals usually have more than 200 beds and often provide a wide range of services, including specialist services. They tend to be teaching hospitals which means they train new doctors and offer research facilities.

Segmentation based on Medical Services Offered

One of the main factors that patients use to select one hospital over another (when they have a choice) is the medical services offered.

For example, a cancer patient is likely to choose a hospital that has a strong oncology department and offers cancer treatment services, while a pregnant woman is likely to choose a hospital with a good obstetrics department and a maternity ward.

Some hospitals also offer alternative services such as acupuncture or homeopathy and will attract those patients who looking for such alternative treatments.

Some hospitals may also offer niche services that attract patients from a wide area. For example, a hospital with a good burn unit is likely to attract patients from all over the country.


As you can see the hospital market can be segmented using different variables and analyzed from different points of view.

In this article, we reviewed hospital market segmentation using these variables: hospital type, ownership, location, size, and medical services offered.

Hospitals are able to attract different types of patients based on the segment or segments that they fall into. For instance, a rural hospital that’s relatively small will be able to cater to patients who have regular illnesses which can be treated by a team of generalists.

On the other hand, for specialized treatments or complex procedures patients can be referred to a larger hospital in an urban setting, including to a hospital that is associated with a medical school or a research institute.

And so, businesses that offer products or services to hospitals need to understand hospital market segmentation to be sure that they are marketing the products to hospitals that are most likely to need them.