Price Menu in Hospitals?!

Businesses try to implement various strategies such as differentiation, low price, and rapid response to stay ahead in competition and to attract more customers. But, when it comes to hospital industry, there is nothing much to do to increase profit other than improving internally such as adding new services, outsourcing some work, improve quality, increase profit margin etc. Most of the hospitals have successfully increase their revenue by charging higher amount to insurance holders and get away with it as not many people pay attention to it.

But, it may change soon. Steven Sonenreich, CEO of Mount Sinai Medical Center in Miami Beach, announced that he would bring transparency to industry by posting prices comparing to Blue Cross and Aetna. In early May, the center for Medicare and Medicaid Service released data from 3,000 hospitals that accept government insurance. According to this data, price of most of the treatments vary as much as by three times. And these hospitals get away with it because insurance companies have to pay that amount and patients pay fixed co-pay.

However, with increasing cost of Health care, insurance companies have changed co-payment plans from fixed co-pay to percentage of total billed amount. Therefore, patients will be more aware about how much they will be charged. Thus, availability of price information can benefit both hospitals and patients. After the announcement, Brian Keeley, CEO of Baptist Health in South Florida stated that the hospital industry is headed in that direction. Thus, in short time, all hospitals nationwide will follow the steps of Mount Sinai Medical center.

Now the question comes to mind is why Sonenreich wants to be first to be in industry where secrecy of price has been working out perfectly. If it were some other industry, being first to market would be smart move. Therefore, the reason for being first to market in my opinion is to build reputation and favorable word of mouth when every hospital at least in Florida has adopted this. Thus, their plan seems to attract more patients in long run.

Furthermore, as we have discussed in chapter one that measuring quality of services is much more difficult than physical products. And hospitals rely on attracting more customers by providing better quality services. Most consumers make purchases based on assumption that higher the prices better the quality, as we talked about in chapter 6. For example, more than 80% students chose Rolex as better quality where I think other watches were better quality for their price. Similarly, with availability of price information in hospitals, I think people with go to the hospitals that charges more. But, as Sonenreich stated that they are the lowest cost hospital in area, they might lose patients to competitors because of the price transparency. Thus, their decision of transparency might hurt them in long run.

Do you think the transparency in hospital cost will make us more conscious about where we go? And how will if affect the Mount Sinai Medical Center?

CBS on the Go!

With increasing number of people traveling for work and for pleasure with availability of faster Internet has increased the demand for live TV programs on Internet. Recognizing these consumers’ wants, CBS announced investing in Syncback. Syncback is a company, developing technology to stream local TV programs live to computers, tablets, and smartphones. This technology uses authentication system that checks that only authorize users, subscribed from local area, are watching streamed programs. Thus, it gives control over programming and viewer to TV channels.

This decision of making investment and becoming the part of the owner of Syncback has various operation management reasons. One of the main reasons is threat from Internet it self and companies like Aereo, Inc. It provides local over the air programs by streaming them to the customers by charging $8 to $12 a month. However, these programs suppose to be free and Aereo is doing this without TV channels’ permission. Therefore, channels like FOX, ABC, and CBS have sued Aereo, Inc. and trying to control over the air programming by streaming them by them selves using technology like Syncback.

Furthermore, there is no legal live streaming of the TV programs online, only alternatives are Netflix and, through which viewers can only access past aired episodes and for that they have to wait few days. CBS has seen potential in this opportunity and is trying to take it. If their research is successful, they can get more subscribers, as they will be one of few live streaming TV channels. At the same time, with Syncback’s Authentication technology, they will be able to control their programs and limit them to only locals. With other services, they do not have this control.

The third reason for investing in Syncback is related to supply-chain management. As the Coca-Cola Company produces their own bottles to reduce the cost; thus make more profit because they have resources to do that. Similarly, CBS had excess of fund, which they can invest and by investing in Syncback they can earn more money through subscribers by charging monthly fee, as they are part owner. Where as, if they had sold their rights to broadcast, they would have gotten only fraction of money as royalty, and also lose some control over programming as they sign off the rights. Thus, according to CBS, pairing with Syncback would add value to their company in long run.

The concern that bothers the stakeholder of CBS is that is it good idea to invest in company that is still in introduction cycle with trial and error, while there are other alternatives that people already use to access TV shows online for free. Because of that reason, the stocks of the CBS have not had any positive effects on them. Personally, I think that investing in Syncback was a smart move and will definitely bring profit to CBS.

Do you think investment in Syncback was right move? Or they should have just sold the rights for streaming? Do you think that the online service should be free to current subscribers?