Harvard Case - Package Pricing at Mission Hospital
"Package Pricing at Mission Hospital" Harvard business case study is written by Sriram TK, Shailaja Grover, Satyabala Hariharan, Dinesh Kumar Unnikrishnan. It deals with the challenges in the field of General Management. The case study is 9 page(s) long and it was first published on : Jul 21, 2015
At Fern Fort University, we recommend that Mission Hospital implement a tiered package pricing strategy, incorporating a combination of fixed-price packages and variable-price options, to improve patient satisfaction, enhance revenue generation, and foster a culture of transparency and value-based care. This strategy will involve a comprehensive analysis of current service offerings, cost structures, and patient needs, and will be supported by a robust marketing campaign to educate patients about the benefits of package pricing.
2. Background
Mission Hospital, a non-profit healthcare provider in a competitive market, faces challenges in attracting and retaining patients. The hospital's current fee-for-service model lacks transparency and often results in unexpected costs for patients. This situation has led to declining patient satisfaction and increased pressure on the hospital's financial stability.
The main protagonists in this case are:
- Dr. David Smith: The Chief Medical Officer, concerned about patient satisfaction and the hospital's financial health.
- Ms. Barbara Jones: The Chief Operating Officer, seeking ways to improve operational efficiency and reduce costs.
- Mr. Mark Thompson: The Chief Marketing Officer, tasked with attracting new patients and retaining existing ones.
3. Analysis of the Case Study
Strategic Framework: To analyze the situation at Mission Hospital, we will utilize a combination of frameworks:
- Porter's Five Forces: This framework helps assess the competitive landscape in the healthcare industry. The analysis reveals high bargaining power of buyers (patients) due to increasing price sensitivity, the presence of substitute services (e.g., outpatient clinics), and the threat of new entrants (e.g., telemedicine providers).
- SWOT Analysis: This framework identifies the hospital's internal strengths and weaknesses, and external opportunities and threats. Mission Hospital's strengths include its strong reputation, experienced staff, and commitment to community service. However, weaknesses include outdated technology, inefficient processes, and lack of transparency in pricing. Opportunities lie in the growing demand for value-based care and the potential for new revenue streams through package pricing. Threats include increasing competition, rising healthcare costs, and government regulations.
- Balanced Scorecard: This framework helps align strategic objectives with operational performance. Mission Hospital can use the Balanced Scorecard to track key performance indicators (KPIs) related to patient satisfaction, financial performance, operational efficiency, and innovation.
Key Findings:
- Patient Needs: Patients are increasingly demanding transparency and value in their healthcare experiences. They desire predictable costs, personalized care, and convenient access to services.
- Competitive Landscape: The healthcare industry is highly competitive, with increasing pressure on hospitals to offer affordable and high-quality care.
- Financial Sustainability: Mission Hospital needs to find ways to increase revenue and manage costs effectively to maintain financial stability.
4. Recommendations
To address Mission Hospital's challenges, we recommend the following:
1. Implement a Tiered Package Pricing Strategy:
- Fixed-Price Packages: Offer bundled services for common procedures (e.g., knee replacement, childbirth) at a predetermined price. This provides patients with predictable costs and reduces financial anxiety.
- Variable-Price Options: Allow patients to customize their care plans and pay for specific services based on their individual needs. This caters to diverse patient preferences and allows for personalized care.
2. Conduct a Comprehensive Cost Analysis:
- Analyze the cost of providing each service and package.
- Identify areas for cost reduction through process optimization, technology adoption, and supply chain management.
3. Develop a Robust Marketing Campaign:
- Educate patients about the benefits of package pricing, including cost savings, transparency, and convenience.
- Leverage digital marketing channels (e.g., website, social media) to reach a wider audience.
- Partner with local community organizations to promote the new pricing strategy.
4. Foster Transparency and Communication:
- Clearly communicate package pricing details and service inclusions to patients.
- Provide online tools for patients to estimate costs and compare packages.
- Establish a dedicated customer service team to address patient inquiries and concerns.
5. Implement a Quality Management System:
- Ensure high-quality care and patient satisfaction through rigorous quality monitoring and improvement initiatives.
- Utilize technology to track patient outcomes and identify areas for enhancement.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The package pricing strategy aligns with Mission Hospital's mission of providing high-quality, affordable healthcare to the community.
- External Customers and Internal Clients: The strategy addresses the needs of both patients and internal stakeholders (e.g., physicians, staff) by promoting transparency, improving efficiency, and enhancing patient satisfaction.
- Competitors: By adopting a package pricing model, Mission Hospital can differentiate itself from competitors and attract price-sensitive patients.
- Attractiveness ' Quantitative Measures: The financial attractiveness of package pricing can be assessed through cost-benefit analysis, ROI calculations, and break-even analysis.
- Assumptions: The success of this strategy relies on the assumption that patients are willing to embrace package pricing and that the hospital can effectively manage costs and maintain quality of care.
6. Conclusion
By implementing a tiered package pricing strategy, Mission Hospital can enhance patient satisfaction, improve financial performance, and position itself as a leader in value-based care. This strategy will require a commitment to transparency, innovation, and continuous improvement.
7. Discussion
Alternative Options:
- Maintaining the Fee-for-Service Model: This option would maintain the status quo but would likely lead to continued pressure on financial stability and patient dissatisfaction.
- Adopting a Single-Payer System: This option would require significant changes in the healthcare system and may not be feasible in the current political climate.
Risks and Key Assumptions:
- Patient Acceptance: The success of package pricing depends on patient acceptance and willingness to embrace a new payment model.
- Cost Management: The hospital must effectively manage costs to ensure profitability and avoid price increases.
- Competition: Competitors may adopt similar pricing models, leading to increased competition.
8. Next Steps
- Phase 1 (3 Months): Conduct a comprehensive cost analysis and develop a pilot package pricing program for select services.
- Phase 2 (6 Months): Launch the pilot program and gather feedback from patients and staff.
- Phase 3 (12 Months): Expand the package pricing program to additional services and refine the strategy based on learnings from the pilot phase.
- Ongoing Monitoring: Continuously monitor the effectiveness of the package pricing strategy and make adjustments as needed.
Implementation Timeline:
| Milestone | Timeline | Responsible Party |
|---|---|---|
| Cost Analysis | 3 Months | Finance Department |
| Pilot Program Development | 3 Months | Marketing and Operations Teams |
| Pilot Program Launch | 6 Months | Marketing and Operations Teams |
| Program Expansion | 12 Months | Marketing and Operations Teams |
| Ongoing Monitoring | Ongoing | Operations and Finance Teams |
By taking these steps, Mission Hospital can successfully transition to a package pricing model, improve patient satisfaction, and achieve long-term financial stability.
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Case Description
Mission Hospital started its operations on April 02, 2008 with the aim of providing highest quality patient care facilities to all individuals at affordable rates. This super specialty hospital located in Durgapur, West Bengal, India, specializes in cardiac surgeries. Many of its patients are from nearby states and neighboring countries, and are covered under different health schemes. Among hospitals in India, flat rate for different treatments is becoming popular, mainly owing to healthcare tourism and government schemes. Dr. Satyajit Bose, chairman of Mission Hospital, was considering adoption of a package pricing (flat fee) strategy under which patients would be provided a fixed price for their treatment at the time of admission. This would imply that the package price should be calculated by the hospital on the basis of patient's clinical and non-clinical information available at the time of admission. Flat fee (or package pricing) can result in a loss to the hospitals if they do not accurately estimate the treatment cost for a patient. The hospital faces the challenge of identifying the key factors that drive the total cost of treatment so that it can quote an appropriate price to the patient.
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