Case-Study # 3 answers

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Florida National University *

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Medicine

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Dec 6, 2023

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Case 6 MDVIP: Become a Priority, Not Just a Patient Faced with the mounting pressure of practicing family medicine, Dr. 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 preventive 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 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 700 physicians serving over220,000 patients in 43 states who emphasize preventive, personalized healthcare. 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 preventive 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 preventive health care 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, in the worst-case scenario, the next day. In addition, patients receive the physicians' direct cellphone number for 24/7 access. Each member patient also receives a personalized website that offers a secure messaging feature where patients can contact their physicians 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 patient'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 peace 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 preventive care and want to emphasize preventive care in their practices. The annual cost for patients to participate in an MDVIP practice ranges from $ 1,500 to $1,800. 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. Discussion Questions 1) Using the Buyer's Perception of Value presented in Figure 6.1, discuss the value provided by the MDVIP business model. Do you believe that MDVIP offers a good value to patients? 2) Based on the 10 factors below 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). Price Sensitivity Factors Proposed Relationship Perceived substitute effect Price sensitivity increases when the price for Service A is higher than the price of perceived substitutes. Unique value effect Price sensitivity increases as the unique value of Service A is perceived to be equal to or less than the unique value of perceived substitutes. Switching costs effect Price sensitivity increases as switching costs decrease. Difficult comparison effect Price sensitivity increases as the difficulty in comparing substitutes decreases. Price-quality effect Price sensitivity increases to the

extent that price is not used as a quality cue. Expenditure effect Price sensitivity increases when the expenditure is large in terms of dollars or as a percentage of household income. End-benefit effect The more price-sensitive consumers are to the end benefit, the more price-sensitive they will be to services that contribute to the end benefit. Shared-cost effect Price sensitivity increases as the shared costs with third parties decrease. Price Sensitivity Factors Proposed Relationship Fairness effect Price sensitivity increases when the price paid for similar services under similar circumstances is lower. Inventory effect Price sensitivity increases as the customer's ability to hold an inventory increases. 3) If Dr. Ray reduces his practice to 600 patients, discuss the pros and cons of three possible strategies for making arrangements for the 2,400 patients who will no longer be his responsibility. 4) Discuss the ethical or social responsibility issues that Dr. Ray faces as he considers signing on with MDVIP. 1) The MDVIP business model provides a unique and differentiated value proposition to patients. Using the Buyer's Perception of Value, we can analyze the components of this value:  Product value : MDVIP promises a higher quality of care with a smaller patient load, allowing for more personalized attention, preventive care, and easy access to physicians. The executive annual physical and personalized wellness plan further enhance the perceived quality of care.

 Service value : MDVIP offers 24/7 physician availability, same or next-day appointments, and secure messaging features for direct communication with physicians. This level of service is significantly better than the traditional healthcare model.  Convenience : Patients have access to state-of-the-art technology, including a personalized health record CD that can be carried at all times. This convenience factor is crucial in emergencies.  Image value : MDVIP collaborates with prestigious medical centers of excellence, reinforcing its reputation for providing top-tier healthcare.  Monetary cost : While the annual fee may seem high, it covers the executive physical, personalized wellness plan, and other added services, making it an attractive option for those seeking a higher level of care. Considering these factors, MDVIP does offer a good value proposition to patients who prioritize quality, service, and convenience in their healthcare experience. However, the value perception may vary depending on individual patient needs and preferences. 2) Five factors influencing price sensitivity in healthcare and their elasticity are:  Necessity : Healthcare is often considered a necessity, which makes it less price-sensitive (inelastic). People are willing to pay for necessary medical services even if the cost is high because their health is at stake.  Substitutability : In healthcare, the availability of substitutes can influence price sensitivity. If there are limited alternatives for a specific treatment, patients may be less price-sensitive (inelastic).  Urgency : Urgent medical needs tend to make patients less price-sensitive (inelastic). When facing a medical emergency, patients are willing to pay whatever it takes to address the issue.  Income : Patients with higher incomes may be less price-sensitive (inelastic) because they can afford to pay for healthcare services without significant financial strain.  Perceived value : Patients who perceive high value in a healthcare service, such as MDVIP's preventive care and personalized attention, may be willing to pay a premium, making them less price-sensitive (inelastic). Overall, patient demand for healthcare tends to be inelastic due to the essential nature of healthcare services and the priority placed on health and well-being. 1. Perceived Substitute Effect : Patient demand for healthcare is often inelastic. Healthcare services, especially those related to critical medical needs, often have limited substitutes. When it comes to health and well-being, patients prioritize getting the necessary care regardless of the price, making demand relatively price-insensitive.

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