RELATIONSHIP BETWEEN RATER AND

CUSTOMER LOYALTY: CUSTOMER

SATISFACTION AS MEDIATOR,
INCOME AND EDUCATION
AS MODERATORS IN
PRIVATE HOSPITALS
IN MALAYSIA

JAMUNA A/P JAIRAMAN @JEYARAMAN

ASIA e UNIVERSITY
2020

i
RELATIONSHIP BETWEEN RATER AND CUSTOMER LOYALTY:
CUSTOMER SATISFACTION AS MEDIATOR, INCOME AND
EDUCATION AS MODERATORS IN PRIVATE HOSPITALS
IN MALAYSIA

JAMUNA A/P JAIRAMAN @ JEYARAMAN

A Thesis Submitted to Asia e University in

Fulfilment of the Requirements for the
Degree of Doctor of Business Administration

November 2020

i
 ABSTRACT

Service quality is the key to gaining a competitive advantage, thus leading to a

substantially reputable organization. The relationship of service quality with customer

satisfaction and customer loyalty is the phenomenon of interest in this study because of

the importance of retaining customers in comparison to gaining new ones. The purpose

of the present study is to understand the relationship between service quality

dimensions (RATER) and customer loyalty of the private healthcare industry in

Malaysia, and examine the role of customer satisfaction as a mediator in the relationship

between RATER and customer loyalty. Further, the moderating effect of education and

income of private healthcare customers on the relationship between customer

satisfaction and loyalty is examined.

The present research adopted a positivism paradigm, applying a cross-sectional

quantitative research methodology to gain insight from private healthcare customers of

various education and income levels. The sampling frame of this study was 10 private

hospitals in Malaysia selected from 137 private hospitals registered under the

Association of Private Hospitals of Malaysia (APHM) using the random-lottery method

sampling technique. 419 customers of private hospitals were surveyed on service

quality, customer satisfaction and customer loyalty. Prior to data collection, a pilot

study was conducted to test the questionnaire developed for its validity and reliability

even though the items used are well-established. Descriptive and inference analyses

were carried out using SPSS version 23 and Variance based PLS-SEM in ADANCO

2.1 to run the analyses. The reliability and validity of the items used to address the

hypotheses postulated for the present study were tested using exploratory factor

analysis (EFA) and confirmatory factor analysis (CFA).

ii
SEM outcome resulted in 9 out of 14 hypotheses supported. The results indicate that

customer satisfaction is influenced by all five dimensions of service quality, whereas

customer loyalty is influenced only by service responsiveness and service empathy. The

research found customer satisfaction is not a mediator between service quality and

customer loyalty. The result also indicated that the income level of private healthcare

customers does not moderate the relationship between satisfaction and loyalty;

however, the customers’ education status did. These findings will allow managers and

marketers to embark on strategies relevant to service quality dimensions to promote

satisfaction and loyalty and noted education is crucial in converting satisfied customers

into loyal customers. The current study suggests marketers improve on creating

awareness of the RATER related services in their establishment.

Keywords: Service Quality Dimensions (RATER), Customer Loyalty, Customer

Satisfaction, Income, Education, Private healthcare

iii
 APPROVAL PAGE
I certify that I have supervised read this study and that in my opinion it conforms to
acceptable standards of scholarly presentation and is fully adequate, in quality and
scope, as a thesis for the fulfilment of the requirements for the degree of Doctor of
Business Administration.

...................................................
Dr Gomathi Shamuganathan
Supervisor

Prof Dr Osman Mohamad Prof Dr Huam Hon Tat

Examiner Examiner

Prof Dr Nor Azila Mohd Noor Prof Dato’ Dr Sayed Mushtaq Hussain
Examiner Chairman, Examination Committee

This thesis was submitted to Asia e University and is accepted as fulfillment of the
requirements for the degree of Doctor of Business Administration.

...............................................................
Prof Dr Juhary Ali
Dean, School of Management

iv
 DECLARATION

I hereby declare that the thesis submitted in fulfilment of the PhD degree is my own

work and that all contributions from any other persons or sources are properly and duly

cited. I further declare that the material has not been submitted either in whole or in

part, for a degree at this or any other university. In making this declaration, I understand

and acknowledge any breaches in this declaration constitute academic misconduct,

which may result in my expulsion from the programme and/or exclusion from the award

of the degree.

Name: Jamuna a/p Jairaman @ Jeyaraman

Signature of Candidate: Date: 1 September 2020

v
Copyright by Asia e University

vi
 ACKNOWLEDGEMENTS

First and foremost, I wish to extend my special thanks to my dedicated supervisor Dr

Gomathi Shamuganathan for all her guidance, teachings and support, without which I

would not have been able to complete this dissertation. Secondly, my deepest gratitude

goes to my family (My dad, my late mum, my hubby Pakianathan Abel, my sons: Isaac

Ronathan and Nathaniel Roy), my siblings and my friends for believing in me

throughout this challenging journey.

I am also grateful to the management teams, administrators and professors of Asia e

University whose support made this research possible. Special thanks go to the

respondents of this study who took the time and effort to complete the survey

questionnaires.

Last but not least, thank you to Professor Dato' Dr. Sayed Mushtaq Hussain for his

advice and encouragement to make all this possible.

May God’s blessings be with you always!

vii
 TABLE OF CONTENTS

ABSTRACT ............................................................................................................ II
DECLARATION .................................................................................................... V
ACKNOWLEDGEMENTS ................................................................................. VII
TABLE OF CONTENTS ................................................................................... VIII
LIST OF TABLES .................................................................................................. X
LIST OF FIGURES ............................................................................................... XI
LIST OF ABBREVIATIONS .............................................................................. XII
CHAPTER 1.0 INTRODUCTION .......................................................................... 1
1.1 Background of the Study ....................................................................... 7
Healthcare Services in Malaysia ..................................................... 7
Service Quality in the Private Healthcare Industry .......................... 8
1.1.3 Relationship between Service Quality, Customer Satisfaction and
Loyalty..................................................................................................... 11
1.2 Problem statement................................................................................ 18
1.3 Research objectives .............................................................................. 19
1.4 Research questions ............................................................................... 19
1.5 Research hypotheses............................................................................. 20
1.6 Justifications and significance of the study ......................................... 26
1.6.1 Theoretical contributions ................................................................. 26
1.6.2 Practical contributions ..................................................................... 27
1.6.3 Contribution to methodology ........................................................... 31
1.7 Chapter summary ................................................................................ 32
CHAPTER 2.0 LITERATURE REVIEW ............................................................ 33
2.1 Service Industry and Quality Management ........................................ 36
2.2 Healthcare Industry and Service Quality ............................................ 38
2.3 Marketing and Consumer Decision-Making Theories ........................ 44
2.4 Innate Characteristics of Services. ...................................................... 48
2.5 Service Marketing Mix ......................................................................... 54
2.6 Service Quality School of Thoughts and Theories .............................. 59
2.7 Service Quality in Healthcare Service Industry .................................. 64
2.8 RATER’s Influence on Customer Satisfaction.................................... 67
2.9 Service Quality and Customer Loyalty ............................................... 74
2.10 Impact of Socio-Demographic Profile of Customer: Income and
Education Status ........................................................................................ 79
2.11 Chapter summary .............................................................................. 81
CHAPTER 3.0 METHODOLOGY....................................................................... 83
3.1 Operational definitions ........................................................................ 83
3.2 Theoretical framework ........................................................................ 84
3.3 Conceptual framework ........................................................................ 88
3.4 Scope of the study ............................................................................... 90
3.5 Research Paradigm ............................................................................ 91
3.6 Research Methodology Approach...................................................... 93
3.7 Research Design ................................................................................. 96
3.8 Target Population, Sample and Sampling Frame ............................. 98
3.9 Sampling ............................................................................................. 99
3.9.1 Probability Sampling Techniques................................................ 100
3.9.2 Non-Probability Sampling Techniques........................................ 102
3.10 Sample Size ................................................................................... 105

viii
 3.11 Data Collection Method................................................................ 107
3.12 Instrumentation ................................................................................ 109
3.12.1 Development of Construct Items................................................. 111
3.12.2 Common Method Bias ................................................................ 113
3.13 Permissions, ethics clearance and informed consent ...................... 116
3.14 Data analysis ..................................................................................... 116
3.14.1 Descriptive Analysis .................................................................... 117
3.14.2 Measurement Error Assessment ................................................... 117
3.14.3 Measurement Analysis ................................................................. 118
3.14.4 Structural Equation Modeling (SEM)........................................... 120
3.14.5 Testing Mediating Constructs ...................................................... 120
3.14.6 Testing Moderating Constructs .................................................... 122
3.15 Findings of the pilot study................................................................ 122
3.16 Chapter summary ............................................................................ 123
CHAPTER 4.0 RESULTS ................................................................................... 124
4.1 Number of participants and response rates ...................................... 124
4.2 Descriptive Analysis ......................................................................... 125
4.3 Descriptive Analysis of Participants’ Demographics ........................ 125
4.4 Descriptive Analysis of Latent Variables .......................................... 128
4.5 Assessment of Data Multivariate Normality ..................................... 134
4.6 Common Method Bias........................................................................ 136
4.7 Assessment of Measurements............................................................. 138
4.7.1 Validity Tests – Using EFA ........................................................... 139
4.7.2 Measurement Assessment using Variance based-PLS .................... 144
4.8 Addressing the research questions..................................................... 151
4.9 Research question 1 ............................................................................ 151
4.10 Research question 2 .......................................................................... 154
4.11 Research question 3 .......................................................................... 155
4.12 Chapter summary ............................................................................ 161
CHAPTER 5.0 DISCUSSION ............................................................................. 162
5.1 General Findings .............................................................................. 162
5.2 Major Findings ................................................................................. 165
5.2.1 Direct Relationship between Service Quality, Customer Satisfaction
and Customer Loyalty ............................................................................ 165
5.2.2 Customer Satisfaction as a Mediator between Service Quality and
Customer Loyalty................................................................................... 182
5.2.3 Income Levels and Education Status as Moderators between
Customer Satisfaction and Customer Loyalty ......................................... 184
5.3 Limitations and delimitations of study .............................................. 187
5.4 Implications of study .......................................................................... 190
5.4 Future recommendations ................................................................... 192
5.5 Summary of study .............................................................................. 193
5.6 Chapter summary .............................................................................. 197
REFERENCES .................................................................................................... 199
APPENDICES ..................................................................................................... 241
Appendix A............................................................................................... 241
Appendix B ............................................................................................... 244
Appendix C............................................................................................... 249

ix
 LIST OF TABLES

Table Page
Table 3-1 Theoretical and Operational Definition ................................................... 84
Table 3-2 The Measurement Items of the Seven Constructs are Adapted from the
Works of Various Researchers ............................................................................... 115
Table 4-1 Description of Respondent Characteristics ............................................ 127
Table 4-2 Descriptive Analysis of Service Responsiveness (SRP) ........................... 128
Table 4-3 Descriptive Analysis of Service Assurance (SA) ..................................... 129
Table 4-4 Descriptive Analysis of Service Tangibility (ST)..................................... 130
Table 4-5 Descriptive Analysis of Service Empathy (SE) ........................................ 131
Table 4-6 Descriptive Analysis of Service Reliability (SR) ..................................... 132
Table 4-7 Descriptive Analysis of Customer Satisfaction (CS) ............................... 133
Table 4-8 Descriptive Analysis of Customer Loyalty (CL) ...................................... 134
Table 4-9 Assessment of Normality ........................................................................ 135
Table 4-10 Harman's One Factor Test Result ........................................................ 137
Table 4-11 KMO and Barlett's Test........................................................................ 140
Table 4-12 Assessment of Scales for Service Quality Dimensions, Customer
Satisfaction and Loyalty......................................................................................... 141
Table 4-13 Items Removed to Enable Distinct Factor Loading ............................... 144
Table 4-14 Initial Factor Loading.......................................................................... 145
Table 4-15 Final Factor Loading ........................................................................... 147
Table 4-16 Variance Inflation Factor (VIF) ........................................................... 148
Table 4-17 Average Variance Extracted (AVE) ...................................................... 149
Table 4-18 HTMT for Discriminant Validity .......................................................... 149
Table 4-19 Fornell-Larcker Criterion for Discriminant Validity ............................ 150
Table 4-20 Construct Reliability ............................................................................ 150
Table 4-21 Goodness of Fit.................................................................................... 151
Table 4-22 R2 and Adjusted R2............................................................................... 151
Table 4-23 Direct Effect of Inferences.................................................................... 153
Table 4-24 Standard bootstrap results and effect size of indirect effects ................. 155
Table 4-25 Effect Size of Income as Moderator ...................................................... 157
Table 4-26 Bootstraps Results for Income as Moderators ...................................... 158
Table 4-27 Effect Size of Education as Moderators ................................................ 159
Table 4-28 Bootstraps Results for Education as Moderators .................................. 160
Table 4-29 Summary of Hypotheses Outcome ........................................................ 160

x
 LIST OF FIGURES

Figure Page

Figure 2-1 A Model of Consumer Decision Making (Adapted from Schiffman &
Wisenblit, 2015)....................................................................................................... 46
Figure 3-1 Service Quality Model ( Adapted from Parasuraman et al. [1985, 1988])86
Figure 3-2 Conceptual research framework Relating Service Quality Dimensions to
Customer Satisfaction and Customer Loyalty........................................................... 89
Figure 3-3 Term and Relationship between Epistemology and Ontology (Adapted from
Hay [2002] and Crotty [1998]) ............................................................................... 91
Figure 3-4 Relationship Between Service Quality, Customer Satisfaction and
Customer Loyalty .................................................................................................. 121
Figure 4-1 Scree Plot of EFA ................................................................................. 140
Figure 4-2 PLS Model............................................................................................ 146
Figure 4-3 PLS Mediation Model ........................................................................... 155
Figure 4-4 Multigroup Moderation Model ............................................................. 156
Figure 4-5 Moderation Model with income as interaction ...................................... 157
Figure 4-6 Education as Moderator ....................................................................... 158
Figure 4-7 Moderation Model with Education as Interaction ................................. 159

xi
 LIST OF ABBREVIATIONS

GDP Gross Domestic Product

MHTC Malaysian Healthcare Travel Council

OOP Out of Own Pocket

PEMANDU Performance Management and Delivery Unit

RATER Service Quality Dimensions

(Responsiveness, Assurance, Tangibility, Empathy and

Reliability)

SERVQUAL Multi-dimensional Research Instrument

EFA Exploratory Factor Analysis

CFA Confirmatory Factor Analysis

SEM Structural Equation Modeling

SPSS Statistical Package for the Social Sciences

TQM Total Quality Management

GNP Gross National Product

OECD Organisation for Economic Co-operation and Development

ASEAN Association of Southeast Asian Nations

GP General Practitioner

TPA Theory of Planned Behaviour Action

TRA Theory of Reasoned Action

TPB Theory of Planned Behaviour

PBC Perceived Behaviour Control

DOSM Department of Statistics Malaysia

CR Composite Reliability

AVE Average Variance Extracted

xii
RQ Research Question

GST Goods and Service Tax

SRP Service Responsiveness

SA Service Assurance

ST Service Tangibility

SE Service Empathy

SR Service Reliability

CS Customer Satisfaction

CL Customer Loyalty

xiii
 CHAPTER 1.0 INTRODUCTION

The service sector contributes about 60% of the gross domestic product (GDP) worldwide

(Central Intelligence Agency, 2017; Lovelock & Wirtz, 2005). The booming economy of

the service industry, such as healthcare, education and banking has resulted in increasing

competition in the market. However, customer demand has also concurrently increased

as technology advancement has enabled them to seek information, make comparison in

terms of what they are receiving and demand better services (Bezerra & Gomes, 2016;

Atilgan, Akinci, & Aksay, 2003). Furthermore, now customers are able to use social

media to share their experiences, forcing service providers to be on their toes at all times

(Bezerra & Gomes, 2016; Amorim & Saghezchi, 2014). Therefore, it becomes a necessity

to differentiate the services offered by being more efficient and innovative. One

innovative area of improvement is service quality. In order to stay competitive, emphasis

is given to improving service quality (Ou, Shih, Chen & Wang, 2011; Seth, Desmukh, &

Vrat, 2005). The healthcare industry in Malaysia has proliferated over the last decade.

This is clearly manifested in the private healthcare sector; however private hospitals in

Malaysia are predominantly in the Klang Valley and the main cities such as Penang and

Johor Bharu where customers are more demanding with regards to service quality

(Malaysian National Health Account, 2016; Teo, 2013). Furthermore, the growing middle

to high-income population in Malaysia aspire better living conditions that include quality

of healthcare.

Countries worldwide are also experiencing higher per capita spending on healthcare as

compared to the increase in per capita income (Hameed, Rasiah & Shukor, 2018). The

escalating cost of private healthcare is a source of various concerns. However, this

expenditure has to be borne by individuals out of their own pocket (OOP). The Malaysian

National Health Accounts (2016) shows that private healthcare expenditure reached
1
RM23,918 million in 2014 and is expected to grow at 18 - 20% a year (Hameed, Rasiah

& Shukor, 2018). Therefore, the current expenditure would have reached a whopping

RM46, 600 million in 2018. The Malaysian National Health Accounts (2016) also

indicates that about 40% of the total health expenditure is via OOP. With such large

amount of money spent on private healthcare, it is inevitable that patients or customers

of private healthcare have high expectations. Moreover, the customer-based decision-

making and involvement in healthcare choices are growing exponentially due to the

expected amount of money spent, affordability and more importantly the knowledge one

has access to on information related to hospitals, medical care and treatment (Thomas,

Beh, & Nordin, 2011; Corbin, Kelley, & Schwartz, 2001). Health economic analysts

predict a shift in higher spending for a myriad of healthcare related services such as

diagnosing and monitoring health rather than those involving treatment (Hameed et al.,

2017). This further implies that medical cost is broken down to various stages as such

customer’s choice of a healthcare institution may be dependent on the stage one requires.

Healthcare services have evolved from traditional illness services towards wellness

concepts (Thomas, Beh, & Nordin, 2011). Therefore, there is a need to understand the

impact of the changing healthcare service on customer’s choice of a healthcare institution.

Furthermore, there is a transformation of healthcare from an industrial age medicine to

information age medicine, leading to the expansion of medical tourism in Malaysia

(Amar, 2004). It is also crucial to understand the healthcare system as an evolving

system. Its integral changes related to lifestyle and preventive measure is the future of

healthcare. Besides driving the growth of this industry, this medical revolution will affect

medical tourism and its contribution to healthcare revenue. This compels private hospitals

to re-evaluate their management system and explore critical components of their value

chain such as service quality, customer satisfaction and loyalty. Malaysia is considered

2
as a medical hub for the ASEAN region. The Malaysian government has listed medical

tourism and its revenue as essential for the country’s economy as such efforts are being

made towards modernising private hospitals to attract foreign travellers.

Furthermore, Malaysian Healthcare Travel Council (MHTC) is targeting 30% increase in

the percentage of medical tourists visiting Malaysia in future (MHTC, no date [n.d.]).

This has propelled private hospitals to initiate measures that would improve their capacity

and service quality enabling them to join in the country’s medical tourism initiative under

the government’s transformation programme. This programme, by Performance

Management and Delivery Unit (PEMANDU) was formed to underpin Malaysia’s efforts

to become a developed, high-income nation by 2020 (Center for Public Impact, 2016).

In the meantime, there is an increasing demand for treatments and “destination” choice

in medical travel. “Destination” refers to a physical location where the medical tourist

spends at least one night. Besides providing medical treatment, this destination has tourist

attractions, products, and other related services that are necessary to meet the stay of a

tourist in the place for at least one day (Carter & Fabricius, 2007). According to the

Medical Tourism Association Report 2013, medical travel contributes a GDP value of

over USD 45 to 95 billion globally. Asia is said to be the leading region for medical travel

(Medical Tourism Association, n.d.). Thus requiring private hospitals to take serious

measures in improving their capacity in terms of resources and service quality.

Furthermore, Sarwar (2013) proclaims that service quality significantly influences

medical tourists’ selection of the destination for medical care. Hence for Malaysia to be

the preferred medical tourism destination, private hospitals will need to incessantly

improve and sustain their service quality.

3
Improvisation of quality through various methods such as new and clean structures and

easy and simple processes lead to reduction of waste that transcend to better cost

management. Besides, quality improvement concomitantly lessens rework and delays

that can burden employees and irritate customers. Subsequently, proliferations of market

share and positive image can be experienced (Till & Nowak, 2000) and eventually, these

interrelated conceptions increase the brand value, a sought after position by private

hospitals (Sudin, 2011; Nasution & Mavondo, 2005; Zeithaml, 2000).

Academic and non-academic research assent the influence of service quality on critical

business elements specifically customer satisfaction, positive word-of-mouth, revisits and

repurchase (Berry, 2016; Seth et al., 2005; Meyer, Silow-Carroll, Kutyla, Stepnick, &

Rybowski, 2004; Sureshchander, Rajendran, & Anantharam, 2002; Newman, 2001;

Lasser, Manolis, & Winsor, 2000; Gummesson, 1998; Zeithaml, Berry, & Parasuraman,

1996). Further association of these elements has drawn many researchers to brand loyalty,

image, reputation and equity (Kotler, Keller, Brady, Goodman, & Hansen, 2016; Hosseini

& Moezzi, 2015; Takahashi, 2014; Butt & de Run, 2009; Caruana, 2002; Fullerton &

Taylor, 2002).

While businesses are intensely in need of significantly improving the above-mentioned

business elements via internal convalescences, it is important to bear in mind that

customer behaviour is also highly dependent on their socio-demographics. Customer

demographics such as personal income, education and gender play a significant role in

determining perception (Kotler et al., 2016; Serenko, Turel, & Yol, 2006; Kim, Park, &

Jeong, 2004). Customer demographics are commonly used to determine target market

and to profile current customers. Past research on customer satisfaction predominantly

examine if there is a difference between profiles in relation to their satisfaction (Rizwan

et al., 2013; Bigné, Andreu, & Gnoth, 2005; McColl-Kennedy, Daus, & Sparks, 2003;
4
Mittal & Kamakura, 2001). For instance, it can be hypothesised that male and female

have significantly different perceptions. However, there is insufficient understanding of

the role played by these profiles in the relationships between a myriad of business

concepts. Some studies indicate socio-demographics such as income moderate the

relationship between the antecedent and its consequences (Rizwan et al., 2013; Bigné et

al., 2005). In some instances, past studies show that customers’ income level directly

influences purchasing decision and loyalty (Sudin, 2011; Nasution & Mavondo, 2005;

Homburg & Giering, 2001). This outcome is commonly interpreted as those with higher

income can make quick decision to purchase better quality products or service or those

that offer value for money (Homburg & Giering, 2001). Besides, those with high income

tend to be educated and have the affinity towards purchasing quality services and products

(Kotler & Armstrong, 2010; Kent & Omar, 2003). If these socio-demographics of

customers were inclined to have different notions in purchase intention and decision, it

would be interesting to comprehend the role played by these socio-demographics in

ensuring one concept to behave in such a way so as to achieve the ultimatum.

Therefore, the current research addressed the research gap in understanding the

intervening role of customer satisfaction in the relationship between service quality and

customer loyalty. It further empirically examined the moderating effect of income and

education of customers in transforming satisfied customers into loyal customers.

The vast majority of service quality research focus on service quality as a whole, though

it can be measured with various dimensions such as responsiveness, assurance, reliability,

tangibility and empathy. Both service quality and customer satisfaction play important

roles in healthcare industry. The industry itself has little or no room for error as it involves

human life. Thus, quality of service of each five dimension is pertinent.

5
There is lack of consensus in the relationship between service quality and customer

satisfaction, whereby some studies view customer satisfaction as antecedent to perceived

quality (Aliman & Mohamad, 2013; Bitner & Hubbert 1994; Bolton & Drew, 1991a;

Parasuraman, Zeithaml, & Berry, 1988) whilst others use service quality as antecedent

for satisfaction (Aljaberi, Juni, Al-Maqtari, Saeed, Al-Dubai & Shahar, 2018; Saravanan

& Rao, 2007; Lee, Lee, & Yoo, 2000; Bloemer, De Ruyter, & Peeters, 1998). However,

the mediating role of customer satisfaction in healthcare service quality is not well

established.

As such, the current study aimed to examine the impact of service quality dimensions on

customer satisfaction and customer loyalty in private healthcare in Malaysia. This study

will establish the relationship between service quality and customer satisfaction and

loyalty using theories and scales established by Parasuraman et al. (1988) and verified by

others (Marković, Lončarić, & Lončarić, 2014; Aliman & Mohamad, 2013; Lei &

Jolibert, 2012; Liu, Guo, & Lee, 2011; Alrubaiee & Al-Nazer, 2010; Walsh, Hennig-

Thurau, Sassenberg, & Bornemann, 2010; Qin & Prybutok, 2009; Harris & Goode, 2004;

Roberts, Varki, & Brodie, 2003; Butcher, Sparks, O’Callaghan, 2001; Oliver, 1997). The

study further examines the intervening nature of customer satisfaction on the relationship

between service quality and customer loyalty in the complex healthcare industry. The

current study further examines income and education’s role on the relationship between

customer satisfaction and customer loyalty. For the purpose of this study, healthcare

setting, healthcare establishment and hospital are interchangeably used. Besides, the

current research also interchangeably uses the term “customers” and “patients”.

6
1.1 Background of the Study

Healthcare Services in Malaysia

Malaysian healthcare system is reasonably developed and this service industry comprises

both public and private sectors (Merican & bin Yon, 2002; Rohaizat & Abu, 2000). The

public healthcare system is mainly subsidised by the government and is responsible in

providing primary, secondary, and tertiary care throughout the country, especially to

those needy at a minimal cost (Merican & bin Yon, 2002). On the contrary, private

healthcare establishments are mainly located in the urban areas, catering service to an

increasingly affluent patient population and are frequently equipped with the latest

medical technology (Ministry of Health [MOH], 1997). Over the past few decades, there

has been an increasing role played by the private sector in providing healthcare for

Malaysians, complementing the Government's efforts in this regard (Rohaizat & Abu,

2000).

According to Malaysia’s telemedicine Blueprint (MOH, 1997), the focus of future

healthcare is on people and services using technology as the enabler to provide high

quality healthcare service. Two decades since the blueprint, technology is seen playing

an important role in every aspect of healthcare services. Technology’s involvement in

information dissemination and education of individuals supports the overall wellness

paradigm (Merican, Rohaizat, & Haniza, 2004). Therefore, customers of healthcare

settings are no longer seen as patients who are ill and need caring, instead they are

customers who need to be educated about their health condition. Furthermore, customer

demands and expectations with regards to medical care are also changing tremendously

along with changing patterns of disease, customer demographics and standard of living

(Binns & Boldy, 2003; Merican & bin Yon, 2002). This contributes to the rapid growth

and improvements in the Malaysian healthcare system. The introduction of private clinics
7
with general practitioner who perform minor surgeries has been extended to private

hospitals which provide hospitalisation, medical specialists, and major surgeries and in

the recent years, health and wellness education (Merican et al., 2004). The shift in the

healthcare model from industrial age medicine to information (wellness education) age

healthcare in the last decade emphasises on preventive healthcare model. This change has

resulted in empowering individuals, families and communities in managing their health

well-being and enhanced quality of life (The Eight Malaysia Plan, 2001-2005). Over the

years, Malaysia has been steadily competing and growing as a medical tourism hub

amongst the Asian contenders. However, countries like Thailand and Indonesia are

simultaneously developing in terms of economy, as such the growth in their private

healthcare sector. With cheaper labour cost and large market size, these countries are

becoming strong contenders in relation to medical tourism. Thus, it is crucial for the

Malaysian private healthcare settings to be distinctively different in their offerings to

remain competitive in the medical tourism sector. Improvements in service seem to be

the most likely area where this distinction can be rendered (Martins & Ophillia, 2015;

Lovelock, Wirtz, & Chew, 2009). Thus, improvements in service quality with better

infrastructures, equipment, selfless medical professionals and support staff, facilitate the

competitiveness (Atilgan et al., 2003). As medical tourism is a government initiative in

the wake of private hospitals, government bodies’ public relations and publicity

campaigns such as “Malaysia loves you” promote service quality, accessibility,

affordability and ease of communication that helps to attract both domestic and

international medical care seekers.

Service Quality in the Private Healthcare Industry

Service quality is the key to gain competitive advantage, thus leading to a substantially

reputable organization (Jain & Aggarwal, 2015; Al-Ibrahim, 2014; Calisir,

8
Bayraktaroglu, Gumussoy, & Kaya, 2014; Mortazavi, Kazemi, Shirazi, & Aziz-Abadi,

2009; Seth et al., 2005; Yang, Jun, & Peterson, 2004; Atilgan et al., 2003). Service quality

is primarily measured using customers’ expectations of the service and what is delivered

(Parasuraman et al., 1988; Parasuraman, Valarie, & Berry, 1985). Therefore,

improvement in the service process, people and physicality of the organization are key to

enhance the service quality (Sreenivaas, Srinivasarao, & Rao, 2013).

Change in the customers’ expectation and perception in terms of facilities, technologies

and other business related factors have led to the parallel change in service quality models

(Jain & Aggarwal, 2015). This is evident in the sequential and systematic development

of a variety of service quality models from 1984 till 2019 (Setyawan, Supriyanto,

Tunjungsari, Hanifaty, & Lestari, 2019; Annuar, & Jaffery, 2018; Sanjaya, & Yasa, 2018;

Ahmed, Tarique, & Arif, 2017; Shabbir, & Malik, 2016; Juhana, D., Manik, Febrinella,

& Sidharta, 2015; Dagger, Sweeney, & Johnson, 2007; Brady & Cronin, 2001; Levesque

& McDougall, 1996; Rust & Oliver, 1994; Parasuraman et al., 1988; Grönroos, 1984).

These developments are necessary in the evolving market in order to remain and sustain

in this competitive world.

Therefore, service quality models remain ambiguous and persistently requiring

modifications based on the industry and changing factors that affect the economy and

customers. Although there are various service quality measurement models, the RATER

(responsiveness, assurance, tangibility , empathy and reliability) is found to be more

suitable for contemporary service quality and helps to measure the interaction between

service provider and customers (Jain & Aggarwal, 2015). One of the predominantly used

instruments for measuring SERVQUAL is RATER which suits a myriad of service

industries such as healthcare, bank and telecommunication (Setyawan et al., 2019;

Annuar, & Jaffery, 2018; Sanjaya, & Yasa, 2018; Ahmed, Tarique, & Arif, 2017; Shabbir,
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& Malik, 2016; Juhana, D., Manik, Febrinella, & Sidharta, 2015; Jain & Aggarwal, 2015;

Lee & Kim, 2012; Naik, Gantasala, & Prabhakar, 2010; Heung, Wong, & Qu, 2000).

Service quality is the cornerstone of marketing strategy, even though the increasing level

of competition and changing environmental factors constantly change the content of the

service quality dimensions (Karatepe, 2011; Lovelock et al., 2009; Asubonteng

McCleary, & Swan, 1996). Quality is the predominant key to search for a reliable medical

facility and this is followed by medical specialists such as cardiologist and oncologist and

reconstructive surgeons. As the current use of Internet and mobile technology is

increasing, it is becoming more imperative for private hospitals to be listed online and

more importantly to be listed as a quality provider.

In order to gain competitive edge, it is critical to have reliable and valid measurements to

assess the quality of the service especially in complex settings such as the healthcare

industry. In healthcare services, overall service experiences such as the quality of

technical equipment, modern surgical equipment, interpersonal skills of doctors, nurses

and admin staff and amenities are commonly used to evaluate quality. In general terms

these factors encompass five dimensions of RATER (responsiveness, assurance, tangible,

empathy and reliability) introduced by Parasuraman et al., (1988). Therefore, the quality

of human interaction with medical care seekers and the consistency of information and

care given during a patient’s journey at the hospital are just two measures of quality in

this context (Johnson & Gustafsson, 2006).

The importance of service has led to the emergence of two schools of thought. The Nordic

school of thought views quality in technical and functional dimensions (Grönroos, 1984;

Karatepe, 2011) meanwhile the North American school of thought uses a five

dimensional model consisting of responsiveness, assurance, tangibility, empathy and

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reliability (RATER). Parasuraman et al., (1988) initially introduced SERVQUAL as

multidimensional measurement scales to evaluate service quality. However, as service

quality in different context is different and is paradoxical, these multidimensional items

were gathered into five specific dimensions that encompass almost all possible aspects of

a service organisation (Eskildsen, Kristensen, JØrn Juhl, & Østergaard, 2004). These five

dimensions with the acronym RATER is the underlying model for a multitude of

academic and non-academic research on service quality. This grounded theory has been

successfully used in measuring service quality in a myriad of service industries including

hospitals in Malaysia (Setyawan et al., 2019; Annuar, & Jaffery, 2018; Sanjaya, & Yasa,

2018; Ahmed, Tarique, & Arif, 2017; Shabbir, & Malik, 2016; Juhana, D., Manik,

Febrinella, & Sidharta, 2015; Jain & Aggarwal, 2015; Lee & Kim, 2012; Naik, Gantasala,

& Prabhakar, 2010; Heung, Wong, & Qu, 2000; Jabnoun & Chaker, 2003; Sadiq Sohail,

2003; Cheng Lim & Tang, 2000).

1.1.3 Relationship between Service Quality, Customer Satisfaction and Loyalty

The innate and unique characteristics of services make quality of service industry are

difficult to be evaluated (Wirtz & Lovelock, 2016; Moeller 2010; Lovelock & Wirtz,

2005). These characteristics of intangibility, heterogeneity, inseparability and

perishability are elaborated in depth in Chapter 2. In a nutshell, intangibility elucidates

the non-existence of something to touch, see and taste in service whilst heterogeneity

describes the inconsistency in the service at different times and by different people. The

inseparability of service explains that the service is consumed as it is produced.

Meanwhile perishability of service indicates the loss of the service as it is rendered as

such it cannot be stored and used later. These characteristics make service unique and

challenging, as service is highly dependent on human interaction whereby inconsistency

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