A Study of Service Quality, Corporate Social Responsibility, Hospital Image, and Hospital Value Creation in Medan

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ERSJ_Vol.XX.Issue 4B

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ERSJ_Vol.XX.Issue 4B

European Research Studies Journal

Volume XX, Issue 4B, 2017

pp. 125-133

A Study of Service Quality, Corporate Social

Responsibility, Hospital Image, and Hospital Value

Creation

in Medan

Arlina Nurbaity Lubis1*, Prihatin Lumbanraja1, Rodiah

Rahmawaty Lubis2 Beby Kendida Hasibuan1

Abstract:

Globalization and emerging market created fierce global

competition toward healthcare services industry. Retaking

public trust required an overhaul of local hospital's value

creation. Value is the key concept to win the customer's

heart.

This paper examined the value-creation based on inpatients

as co-creator concept. A second-order analysis was

conducted to evaluate the ten aspect of service quality as

we want to evaluate each's importance factor.

Medical personnel is considered as the most important

aspect to deliver services in healthcare industry. Hospital

value improved by delivering good services and

building hospital image. CSR must improve hospital image

to increase hospital value.

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Keywords: Value-creation, hospital image, CSR, Service

Quality.

Department of Economic and Business, Universitas

Sumatera Utara, Medan

Department of Medical Study, Universitas Sumateara

Utara, Medan

email: arlinalubis10@gmail.com

This research is under research grant Non-PNBP USU

2017

Creation in Medan

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1. Introduction

A key concept to win customers' heart is through creating

the value for customers. It also has been viewed as key

success factor in marketing approach (Kotler & Keller,

2012; Sheth & Uslay, 2007). According to Vargo and

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[the healthcare]

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Lusch (2008), firm could not deliver the value itself, but

offer the value to customers. Customers acted as

"co-creator" while realizing the actual value. Thus, one's value

can only be created by including customers' point of view.

Edvardsson et al. (2005) proposed a perspective to view a

firm's services as value creation process. Since then,

services perspective become one of the root in value

creation. However, it had not been analyzed in a manner to

evaluate the relation between services on a firm's value.

We previously stated the existence of ‘creator', which

refer to the firm activities, and ‘co-creator', which refer to

customer, as the core of create one's value. Firm's

activities viewed as internal process that determine the

proposition of value. Ronnback et al. (2009) claimed that

these internal factors were the central source the destroyed

value. Since the services was outsourced , the intended

value was never experienced by the customer.

This study aimed to evaluate the role of both firm

activities and customer in value creation process. The firm

provide services and conduct corporate social

responsibility (CSR) which aimed to improve the value

to its customers. A corporate reputation acted as mediator

in order to achieve the desired value . Globalization

effect in addition to the newly emerged market of ASEAN

Economic Community (AEC) pushed competition to a new

level. In healthcare services industry, many people believe

in services provided by a firm which perceived as the most

valuable for them. In Indonesian's case, many of its people

believe in services provided by other countries than local

services. As result , it will be more benefit to other

country than Indonesia. Thus, improving local healthcare

services value become an important matter. A firm

delivered value to customers in order to attract them to

product or services provided by the firm. However, the

crucial factor of these activities lies on customers'

perspective toward the proposed value. Customer will seek

for the most valuable one while deciding their product or

services consumption. Value creation become more and

more important to be analyzed. Local's healthcare services

should create a more valuable services to regain people's

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trust for local services. Lubis et al. (2016)'s work on

service dimension of healthcare services in Indonesia

showed that customers perceived 10 aspects on service

quality dimension. However, the previous study did not

empirically analyze its impact on value creation. The

current study aimed to evaluate the importance of each

aspect of service quality in healthcare in addition to

evaluating its impact on value creation.

2. Healthcare Service Quality Approach

A.N. Lubis, P. Lumbanraja, R.R. Lubis, B.K. Hasibuan

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Service quality approach originally proposed by

Parasuraman et al. (1985) on five dimension , (1)

tangibility, (2) empathy, (3) responsiveness, (4) reliability,

and (5) assurance. The basic of service delivered to

customers were based on these five dimension .

However, Lubis (2016) expanded the model in accordance

to inpatients' perspective of hospital's service quality in

Indonesia. The previous study categorized service quality

based on 10 aspects, namely (1) patient educational

services, (2) staff-professionalism, (3) food aspect, (4)

assurance, (5) responsiveness and convenience services, (6)

empathy, (7) cleanliness, (8) well-educated staff, (9) people

trust-gaining services, and (10) reliable services.

The current study used the ten-dimension of hospital

services quality aspect as we conduct the research in

Indonesia. The first part of this study aimed to evaluate the

most important aspect that constructing service quality

as whole . The second part of this study evaluated the

effect of service quality on both corporate images and

value. Many of previous study treated service quality

and corporate images as unrelated variables.

However, as we speak of customers, they experienced the

service delivered to them. The experience may build their

perception toward hospital which will feed public with

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information and shape its corporate image.

2.1 Corporate Social Responsibility Approach

Previous work on CSR claimed a four-level of CSR act

which grouped to two groups (Schermerhorn, 2016). The

first one cooperate with law while the other consists of

persuasion area which be more voluntary act. Today's

social-environment strongly reacted to CSR activities. As

far as reputation is concerned, CSR will be more likely to

improve hospital'scorporate image as long as they

conduct the act of CSR. Previous works showed a strong

relationship between CSR and corporate image (Gazzola,

2014; Susanto, 2012; Giannakopoulou et al., 2016;

Hapsoro and Suryanto, 2017; Pena-Miguel et al., 2017).

However, CSR may also affecting the organization to

lose its publicimage (Ihlen et al., 2012). As people

become more aware to ethical behavior, social

responsibility factor become a bigger factor to be

considered as strategic tools. Brandão et al. (2012) claimed

that CSR in hospital governance helped to generate the

desired value. In today's competitive market, a good CSR

practice will improve hospital value for a long term as it is

practically improve its effectiveness and efficiency while

delivering services. However, Gherghina & Vintia's

study (2016) showed that there is no effect of CSR on

hospital value in form of stakeholder-related CSR but

environment-related CSR. Srivastava et al. (2012) warned

that CSR could damage corporate value if not managed

well.

2.2 Healthcare Image Approach

The concept of corporate image had been widely

suggested by many studies . In accordance with

Bromley's work (2001), corporate image can be

viewed as collective thought or a distribution of

opinion among stakeholders about one's

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Creation in Medan

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entity . Corporate image may also be defined as the

reflection of one's organization from time to time over the

eyes of stakeholders and expressed through their thought

and words (Miles and Covin, 2000; Tsitsakis et al., 2014).

Many scholars used the definition of embodiment of

people's experience on organization's services (Fombrun,

1996), however there is no unambiguous definition yet.

Based on previous work, the corporate images lies on

people's thought. Public's thought of the corporate gave

the signal of its capabilities and desired performance in

future. It represent corporate attributes as whole and

will affect people's behavior toward the organization

(Dolphin, 2004). Corporate images become important to

create hospital's value based on customer's perspective.

2.3 Healthcare Value

Value, in general, is defined as assessment of trade-off

between cost and benefit or cost-benefit function (Day,

1990; Zeithalm 1988). People tend to evaluate something

to be more valuable as they gain more (mostly monetary

gain) from other (Gronross and Helle, 2010). Value

creation is considered as process to improve the

customers' well-being which related to create a better-off

situation for the customers. The term of ‘customers' made it

clear that fulfill every customers' value is hard to achieve.

One person's value to other is different. For example, one

may viewed a luxury bed in hospital as value while

other do not see its benefit. Previous works showed that

value-creation related to customers' experience toward the

value proposed by organization .

3. Data and Methodology

A number of 150 inpatients from three private hospital

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in Medan were participated in this study. The study used

questionnaires to collect the inpatients' thought related to

service provided by the healthcare, hospital image, CSR

program, and hospital value. The questionnaires were

built based on operational variables (Table 1). The study

was conducted from January to March 2017.

Table 1. Operational Variables

Variable Name

Type of

Description

Variable

Healthcare Value

Dependent

Inpatients' perceived value of healthcare services

based on financial performance, effectiveness, and

efficiency services.

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Service Quality

Independent

A multi-dimensional approach of delivering

healthcare services

Corporate

Social

Independent

Inpatients' opinion toward the healthcare's CSR

Responsibility

program

Healthcare Image

Independent,

Healthcare's reputation on inpatient's mind

Mediator

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The data were analyzed using second-order construct

analysis using SmartPLS. The study evaluated the

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dimension of service quality to determine the service

quality construct. Bootstrap analysis was used to test the

significance of each path.

3.1 Model Specification

The study aimed for evaluate the construct of service

quality and evaluate the factors to improve healthcare

value. We proposed the path model based on our objectives

(Appendix 1). We also formulated the model to improve

healthcare value as follow:

(1) Where Value represent the healthcare overall

perceived value, SERVQUAL represent the perceived

service delivered by the healthcare, CSR represent the

perceived CSR program, and IMAGE represent the

healthcare reputation.

3.2 Validity and Reliability Model

The structural model's validity was evaluated through

convergent and discriminant validity. The convergent

validity model was based on each constructs' average

extracted variance (AVE) value which should be at least

0.5 (Table 2). The model's discriminant validity was based

on Fornel-Lacker Criterion (Hair et al. 2014). The model's

reliability was based on internal consistency reliability.

The value of each constructs' composite reliability should

be more than 0.7 (Table 2 and Appendix 2).

Table 2. Validity and Reliability Criteria

Construct

AVE

Composite Reliability

Assurance

0.528

0.848

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Cleanliness

0.737

0.892

Corporate Image

0.554

0.944

Corporate Social Responsibility

0.945

0.990

Empathy

0.685

0.867

Food Aspect

0.852

0.945

Healthcare Value

0.624

0.965

Patient Educational Services

0.596

0.937

Patient Trust

0.707

0.950

Reliable Services

0.627

0.833

Responsiveness and Convenience Services

0.676

0.892

Staff-Professionalism

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0.691

0.929

Well-Educated Staff

0.580

0.846

Table 2 showed that the proposed model and indicators had

been fully passed the validity and reliability model and

may be analyzed furthermore with the estimate

analysis

3.3 Estimate Result

The first part of second-order construct analysis was to

evaluate the importance of each aspect of service quality in

healthcare services. We evaluated the importance

Creation in Medan

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based on regression weight of each construct while

explaining the service quality construct. Table 3

summarized the regression weight of service quality

construct.

Table 3. Service Quality Construct

Construct

Regression Weight

Service Quality

Well-Educated Staff

0.917

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Staff-Professionalism

0.900

Patient Educational Services

0.886

Food Aspect

0.787

Responsiveness and Convenience Services

0.784

Empathy

0.742

Reliable Services

0.686

Assurance

0.670

Patient Trust

0.517

Cleanliness

0.094

Table 3 showed that the most important aspect of

delivering services in healthcare industry is the staff or

medical personnel. They play major role to improve

service experienced by the inpatients . The medical

personnel have to be well-educated and professional to

their role . The other aspect was related to the food

provided by hospitals. Many of current inpatients

commented that the food was far from enjoyable. Based on

our result, inpatients pay less attention toward hospital's

cleanliness. The second part of our study was to evaluate

the value-creation based on co-creator, inpatients, point of

view. The proposed model suggested hospital's reputation

as mediating variables, thus there should be direct,

indirect, and total effect. Table 4 summarized the path

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coefficient of our proposed model.

Table 4. Direct, Indirect, and Total Effect

Independent

Dependent

Mediator

Direct Effect

Indirect Effect

Total Effect

Variable

SERVQUAL

IMAGE

0.729*

CSR

0.195*

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SERVQUAL

IMAGE

0.405*

0.348*

0.752*

CSR

VALUE

-0.088

0.093*

0.005

IMAGE

0.447*

*Significant at level 5%

Table 4 showed that both service quality and corporate

social responsibility positively affecting hospital's

reputation. The effect of service quality on corporate

image is dominant. According to the definition of

corporate image as we stated before, inpatients'

experience or interaction with the service provided by the

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hospital played major role shaping the hospital's

image . The better service provided and experienced by

inpatients, the better corporate image will be born.

Corporate social responsibility also helped to form the

corporate image. As the social environment

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sensitive to CSR practice, the slightest act of CSR may

improve corporate image. Both service quality and CSR

provided 67.2% explanation of the corporate image's

variance (R-squared = 0.672). Our result showed that in

order to improve hospital's value, the hospital should

pay more attention on creating reputation and

delivering a good services to inpatients. CSR,

however, can only indirectly improving the value

through the hospital's brand image. The most important

aspect is delivering the service. Inpatients interact with

services and assess the value based on their experience

toward them. The concept of customer or inpatients as

co-creator also supported based on our study. Our model

explained 64.3% of hospital value's variance with

R-squared of 0.643.

4. Conclusion

This paper gave a deep insight of healthcare services

quality. Based on 10-aspect of services quality, most

important aspect perceived by the inpatient was related to

human resource. In order to deliver a better service

quality, healthcare should improve their staff for both

knowledge and how to care with their customers.

Cleanliness did not serve as important factor for

inpatients. The inpatients rather indifferent with their

room's cleanliness as long as they get a better

services and happy with the staff. This paper examined

the new paradigm delivering healthcare services quality,

CSR program, and healthcare corporate image to create

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corporate value. PLS bootstrap indicated that improving

healthcare corporate value could be reached by

improving healthcare services and corporate images .

CSR program did not directly affect corporate value.

However, CSR did improve its corporate images

which indirectly built the corporate value . Thus,

corporate should be aware that CSR will do nothing unless

public perceived it well while improving corporate

image in public's mind.

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Repetitive word: delivering

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[the human or a human]

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[In order to _→ To]

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[an important or the important]

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Repetitive word: improving

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[valuecreating _→ value-creating]

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Appendix 1. Research's path model

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Appendix 2. Composite Reliability Model

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[a case or the case]

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