Vasquez, Jan Maui

BSBAMMOUMN 2-A
Service Culture
Activity No. 4
Setting Prices and Implementing Revenue Management

Case Study

Guidelines and Instructions:

1. Read the whole case entitled: “MDVIP: Become a Priority, Not Just a Patient”
2. Observe a maximum of 400 words per question and proper citation.
Format:
1. Observe up / down / left and right margin
2. 1.5 Spacing
3. Font Size: 12
4. Font Style: Arial Narrow
5. File: PDF
Case:
MDVIP: Become a Priority, Not Just a Patient
Faced with the mounting pressure of practicing family medicine, Dr. Charles Ray knew something
had to change with how he was running his medical practice. Dr. Ray’s current practice consisted
of nearly 3,000 patients that he normally saw only when they were already sick. Trained in the
areas of preventative medicine, Dr. Ray felt he never really had the opportunity to use his training
effectively to prevent illness and promote a healthy lifestyle for his patients before they fell ill.
Moreover, due to the increasing number of patients, the average time for each visit was
approximately eight minutes, and the appointment schedule was often booked out nearly a week
in advance. As a result, sick patients were often waiting seven to 10 days to actually get an
appointment. Complicating matters even further, insurance companies often dictated the final fees
for many services and paid doctors a fraction of what was actually charged to patients. Over the
years, Dr. Ray found himself feeling stressed out over the patient load, his family life was suffering
due to the number of nights he was on call, and most importantly, he felt like patients were not
getting the quality of care that he was actually able to provide. Upon attending a medical
conference, Dr. Ray learned of a new business model for physicians like himself that was being
promoted by a firm named MDVIP. MDVIP is a network of approximately 300 physicians in 26
states who emphasize preventative, personalized health care. MDVIP offers what many call
“concierge medical care,” where physicians offer individualized health care for an annual fee. The
annual fee buys patients a higher level of care, more personalized attention, easier access to
physicians, and is paid for in addition to regular medical fees. The business model allows
physicians to decrease the size of their practices dramatically and focus on preventative as well
acute patient care. More specifically, physicians who adopt the MDVIP patient care business
model promise to keep their patients as healthy as possible by providing unprecedented value and
services, including: A smaller practice size, which allows time to focus on wellness, prevention,
and the best treatment available. In Dr. Ray’s case, the size of his practice would be reduced from
3,000 to 600 patients. An executive annual physical and personalized wellness plan. The executive
annual physical is a $2,000 value covered by the patient’s annual fee. The personalized wellness
plan focuses on preventative healthcare activities in the hope of avoiding healthcare problems
before they occur. Specialty care from premier hospitals and research facilities in the country, such
as Cleveland Clinic, Memorial Sloan-Kettering Cancer Center and UCLA Medical Center, as part
of MDVIP’s Medical Centers of Excellence. MDVIP’s Medical Centers of Excellence provide
patients additional care for those situations that are beyond the care abilities of the local physician.
Twenty-four-hour physician availability and same or next day appointments. Due to the smaller
size of the practice, patients can obtain appointments the same day, or, worst case scenario, next
day appointments. In addition, patients receive the physicians direct cell phone number for 24/7
access. Each member patient also receives a personalized website that offers a secure messaging
feature where patients can contact their physician directly by email. Moreover, adult children under
the age of 25 as well as out-of-town guests also have access to the physician for no additional
charge. State-of-the-art technology including your own personal health record CD. The CD is
wallet-sized, contains all the individual’s personal health information, and can be carried as easily
as a credit card. In fact, MDVIP recommends that its patients carry the medical CD at all times,
and suggests placing the CD between an individual’s driver’s license and insurance card in case
of a medical emergency. Access to other MDVIP physicians throughout the country for urgent or
emergent care to provide patients with piece of mind when they travel. As the network of MDVIP
physicians continues to grow, member patients can access other providers, if necessary, while
traveling throughout the country. Physicians invited to join the MDVIP network are carefully
screened to assure patients that they are receiving the “gold standard” in terms of quality of care.
The network selects physicians based on their medical expertise and philosophical relationships
with their patients. MDVIP selects physicians who believe in preventative care and want to
emphasize preventative care in their practices. The annual cost for patients to participate in a
MDVIP practice is $1,500. The amount may be tax deductible and may be reimbursable through
FSAs (Flexible Spending Accounts) or HSAs (Health Savings Accounts). As Dr. Ray considered
adopting the MDVIP business model, he wondered how his patients would respond.
Guided Questions:

1. Discuss the value provided by the MDVIP business model. Do you believe that MDVIP offers a good
value to patients?

Since MDVIP alters the typical business model used by doctors, it will provide clients an excellent
service that is worthwhile. Dr. Ray has difficulty trying to adhere to the typical model used by another doctor.
He was unable to provide his patients with the services he required since he wasn't making enough money,
had too many customers, and wasn't allotting enough time to each of them. The consumer, on the other
hand, had to plan an appointment a day in advance and may have waited up to 10 days to meet with the
doctor. Customers find this to be a very helpful offer since they need to spend less time at the clinic because
they can book a meeting with a doctor for the following day or even the same day. Patient’s saves energy
cost since it reduces the time spent in the lounge or on the phone making an attempt to succeed in the doctor.
Reduces psychic cost since it reduces the strain of planning a meeting and looking ahead to the services.
within the case of financial cost, customers might even see the services as an expensive choice however at
the same time they can save time and energy and target obtaining well faster therefore for several this
advantage could be price additional than what they're truly paying bucks wise.

2. Based on the 10 factors that influence price sensitivity described in the text, select five of these
factors and discuss whether patient demand for health care is elastic (patients are typically price
sensitive) or inelastic (patients are typically less price sensitive).

• Perceived substituted effect is low on medicine. There are not many options to choose you might go
to natural medicine acupuncture or any other type of alternative medicine but still for severe cases
you will have to end up at a physician. Since substituted are low price sensitivity low making medicine
inelastic demand won’t change in case of a change in price.
• Unique value effect, if you have pain in a specific part of the body you have to see a specialist which
offers unique services and treatments. As it is a unique necessity demand is inelastic.
• Switching cost, if a person feels comfortable with that doctor and trusts that doctor switching cost are
higher and they will do their best to stay with that doctor even if they have to pay more making
demand for health care inelastic.
 • End-Benefit, the benefit at the end of the row is to improve the health of the patient or treat some
symptoms or cure a sickness. People will pay or will do whatever is in their hands to take care of
their health and get better. Making patient demand for health care inelastic.
• Shared cost, people have to share the cost of medicine with insurance companies making people a
little bit less sensitive to price and allowing them to look for help when they need it. In conclusion
health care medicine is demand inelastic.

3. If Dr. Ray reduces his practice to 600 patients, discuss the pros and cons of three possible
strategies for making arrangements for his 2,400 patients that will no longer be his responsibility.

The first possibility that Dr. Ray has is to referee his clients to other physicians. The advantage is
that it is quick and it is less trouble. The disadvantage is that he is losing customers and that many will look
at him in a negative way. His second possibility is to expand the business and look for another doctor who
will like to develop a partnership. In this way Dr. Ray can highly suggest his partner and provide them with
an easy switch system so they can be confident about this new doctor. The advantage is that he will have
more control about what happens with his clients. He will be able to still earn some money from the
partnership. The disadvantage is that maybe people will still see him as their main doctor and will try to reach
him anyway. Other disadvantage is that they need to find a way to make the transition as smooth as possible
so they don’t lose customers. His final option is to actually just tell them that he is moving into this new
business model. There many more negative consequences to this model than any other but it is still an option.
People may lose all confidence on him. He might leave people with any other option and obligate them to
look for a new doctor. The advantage is that is less work.

4. Discuss the ethical or social responsibility issues that Dr. Ray faces as he considers signing on
with MDVIP.

The biggest ethical and social responsibility Dr. Ray faces is the fact that he is going to leave 2,400
patients without a primary care doctor. Many might be clients of many years which might complicate even
more the problem since they might not want to change. The other factor is that many might trust Dr. Ray and
like having him as doctor but might not be able to afford MDVIP. As doctor one of his main considerations
should be the health of his patients and he will be leaving many of them in search for a new doctor. The other
important problem is what might happen if he has more than 600 customers willing to join MDVIP. How can
he choose who will join and who will not join? Is he going to choose by first come first serve, is going to
choose by who needs it more etc.? He will really have to think about how to manage the extra demand of the
service he might get.