Question

There are two extremes when it comes to the power of providers to set prices. The first one is the provider has no power and must accept the reimbursement rate set by others. The second one is the provider sets the price and the third-party payers must accept them. Neither sounds like a win-win for all parties involved. We will explore these strategies in this week’s discussion question.

You are the Business Manager for Dr. Jones' medical practice. He is hoping to open in a few months but first wants to determine his prices. He has asked you to recommend if he should set his own prices or accept those from third-party payers. After researching both options, provide a memorandum with your recommendation. In your memo, be sure to first provide a brief discussion of what it means to be price-setter or price-taker. List the pros and cons of each one. Be sure to comment on the strategies that would be used in both scenarios. Finally, end the memo with your recommendation.

Instructions:

1. Post your memo as the initial post.
2. Compare and contrast your memo with your classmates.

Answer 1

Provider as a Price-Setter

When the provider sets the price that the third party is expected to accept, the below Pros and Cos can be considered

Pros:

• Better control over the price across third-Party payers, ensuring uniformity
• Less confusion and Complexity in payment processing including invoicing and taxes
• Avoids indrect competion amonf third-party payers

Cons:

• Difficult to adapt price to specific territory or customer segments
• Can reduce revenue with losing clients who are not happy with the pricing

Provider as a Price-Taker

Pros:

• More client attraction with the flexibility
• Ability to adjust/adapt to market segments by adjusting to suitable pricing.

Cons:

• Conflicts arising due to chances of different pricing in the market
• Forced acceptance of a price might directly impact the revenue generation channel

Recommendation :

Though the Price-Taker approach looks much more customer centric, such a pricing model will lead to overall displeasure generated in the market grdually due to the conflicting prices decided by payers. Having a uniform pricing always makes a product live longer strongly. However, you can adapt to local market conditions and adjuct the pricing accordignly. The most important factir is publishing these prices with clear justification/category. An example could be setting different prices for Metro & Rural Regions