Question

Are healthcare providers generally either price takers or price setters exclusively? Explain your answer. Describe two common pricing strategies used by price setters and their implications for financial survivability. Why does utilization management play such an important role in pricing and service decisions under capitation?

Answer 1

Price taker in simple refers to accepting the charges or fees which is fixed or scheduled by the organization or the market. Price setters are one who sets their own limits on the fess or charges from the patient for their services. Hence healthcare provider are both price taker and price setters. Eg .Providers cannot change the fess structured by federal government's Medicare or Medicaid hence making them proce taker.If they set an individual clinic the price is set by them which are not fixed for each patient called as price setters.

The common strategies used by price setters and their implications in financial survivability are

Full cost pricing strategy collection of the entire expenditure

Marginal cost pricing strategy collects only the costs which are variable

By providing the most quality care to the patient forces the clients to seek them for a better and faster cure though they are expensive. This can be a financial loss for patient but financial gain for providers

• Use of highly sophisticated technologies in patient care and setting prices for their usage in the services.
• The utilization management enables to identify what has been used and how much is needed to replace it. Then the cost is divided appropriately as fixed and variable cost under capitation and collected.