Pricing Strategies Healthcare Organization, Term Paper Example

Pricing strategies in my healthcare organization, Kaiser Permanente, typically involve interactions between wholesale acquisition cost (WAC), maximum allowable cost (MAC), average wholesale price (AWP). However, targeted disease intervention is also a common concept that is employed. Since Kaiser Permanente is a for-profit company, their primary aim is to maximize profit of the sales of pharmaceutical drugs and medical devices. As such, it is necessary to account for costs when formulating that pricing strategy.

As mentioned in an earlier assignment, one of the ways that Kaiser Permanente strives to stand out compared to other pharmaceutical companies is through its targeted disease intervention programs. These programs are typically cost effective because they require focus on acquiring a specific disease intervention and then determining ways to ensure that it is distributed as much as possible. The ability to distribute the intervention depends mainly on the company’s ability to market it themselves and to form partnerships with various business, schools, and healthcare facilities. As a consequence, the pricing strategy must achieve a perfect balance so that it allows the company to make a maximal profit while ensuring that the intervention is sold at a lower price compared to that offered by similar healthcare companies. Ultimately, as more and more interventions are offered, Kaiser Permanente will be able to make a greater profit, which will allow them to reduce the total cost per intervention. However, the final cost offered to each third party organization must take into account WAC, AWP, and other associated costs, such as transportation and labor.

A specific targeted disease intervention that should be considered is the flu shot. While Kaiser Permanente partners with many companies to ensure that their employees are vaccinated via their wellness program, the company also issues the vaccination through its clinics and other facilities. According to Kaiser Permanente’s website “Flu shots are available at no charge to our members when given at a Kaiser Permanente medical facility” (Kaiser Permanente, n.d.). As a consequence, it is clear that the targeted disease intervention program issued by the company in Southern California operates differently than it does elsewhere in the country. Kaiser Permanente has enough subscribers that it is able to offer the intervention “free”; it is clear that the subscription fees issued by the company are significant enough and widely purchased so that the company is able to use this feature to market itself, in turn generating a greater customer base. This pricing strategy is novel because while it still accounts for the pricing of the intervention itself and its associated costs, it does so in a way that cost is not considered directly per intervention; rather it examines the potential for gaining additional revenue based on its offering to the public.

While this is one method that the company uses to formulate pricing strategy, reallocating funds from other aspects of the business to allow certain features to be possible, Kaiser Permanente does not enact this policy across the board. Articles such as “The Kaiser Permanente prenatal smoking-cessation trial: When more isn’t better, what is enough?” demonstrate the fact that Kaiser Permanente is a healthcare company in many aspects and one of its most important functions is as a healthcare research institution (Ershoff et al., 1999). This emphasizes a completely different aspect of Kaiser Permanente’s pricing strategy that is directly related to the supply and demand of certain interventions. Since Kaiser Permanente is a healthcare provider in addition to a research institution, it is necessary to point out its function as a stakeholder in the publication of certain research articles due to the literature’s ability to identify needs for certain products and the extent to which they are needed. Ultimately, this could help drive profit either by making individual interventions more expensive or by increasing individual need for the product. This is the second unique indirect approach to pricing the Kaiser Permanente uses to remain competitive with other healthcare providers.

Articles such as “What ‘Health Care Costs’ Really Means” claim that healthcare costs are out of control (Brownlee et al., 2012). While this is clearly true in some cases, Kaiser Permanente shows that in some situations pricing can be controlled by using several novel pricing strategies to their advantage. However, it is essential to note that Kaiser Permanente is unique in these attempts due to its size and prominence in certain areas. Since Kaiser Permanente has established itself as a reputable company, its research reports are believable even though it is clear that there may be some conflict of interest and their targeted disease intervention programs are desirable because they appear to be free. If Kaiser Permanente wishes to remain competitive, all it must do is simply continue onwards with this trend because very few companies have the resources necessary to mimic its success. Briefly, it is important to consider than Kaiser Permanente has some direct pricing interactions as well, although this mostly pertains to medical equipment (Kaiser Permanente, n.d.). However, the company has strived to keep prices low to keep competitive in this aspect of the field as well.

References

Ershoff DH, Quinn VP, Boyd NR, Stern J, Gregory M, Wirtschafter D. (1999). The Kaiser Permanente prenatal smoking-cessation trial: When more isn’t better, what is enough. American Journal of Preventative Medicine, 17(3): 161-181.

Kaiser Permanente. (n.d.). Durable Medical Equipment. Retrieved from http://mydoctor.kaiserpermanente.org/ncal/facilities/region/redwoodcity/area_master/dep artments/durablemedicalequipment.jsp

Kaiser Permanente. (n.d.). Flu Shot Clinic Locations. Retrieved from https://healthy.kaiserpermanente.org/health/care/!ut/p/c4/FcpBDoIwEEDRs3iAyUCxVt1BLRdwoXU3GSo0tIXU6vmF_N3LxxduJfr5kYpfEgV8omWXistXXsLwAUoDvMMXH_s5r3dHmSe0O22wZhojoU0LMPHkdqNcPAeH9lb1RotegG47A3VtKmi1vECnanUSUjVGHnGN8dzE9vAHktow-w!!/