Sample Health Care Essay on Health Services Organizations Place and Price Decisions

Health services organizations place and price decisions

Description of the Products/Services and the target Market

APS healthcare service provider has been at the forefront in delivering health services that are specially tailored with focus on improving the health services in way that it lowers cost and improves the quality of life of the people. It is a sub company of UAC with their headquarters in New York. The target market is the US and Puerto Rico, which it has been serving for twenty years. Their main market opportunity was that there was need to provide quality services to their customers and the broader communities they served. Based on this, their main competency is delivering innovative health care services that will positively impact on the lives of people.

It brings wealth of experience and technological knowhow in service provision; something that makes them unique in the market. The technology aspects connect the people to the services they need that would increase the service delivery while also generating a lot of profits through increased sales.

The services that they offer revolve around Medicare/Medicaid and include disease management by helping the vulnerable members of the community get medical solutions. They do this by educating them on the best healthy behavior that can impact positively on the life of the people while strengthening relationships with their customers. They also offer behavioral healthcare service through having well administered services, children welfare and drug abuse services.

Before deciding on the price, APS must segment the customers by grouping them based on similarities and the potential of buying (Tanner and Raymond, 2012). The target market for this healthcare company is the general demographic population consisting of children, youths and adults of all the ages in the US and Puerto Rico.

How the organization arrives at their pricing of services

According to Armstrong and Cotler (2007) price can be understood to be the amount charged to get a product/service that will allow customers to get the benefits of such products/services.

Most organizations arrive at their prices based on what the competitors have to offer. This puts a lot of weight on prices that will beat those of the competitors, the standardized prices of products currently available and the frequent changes in the products or services. Non price factors of the features of the product/services, the quality of promotion and distinct features are also taken into consideration when deciding on the pricing.

Healthcare service providers have a series of selection of the pricing strategies that they can use to arrive at their prices. This can be summarized to include geographic pricing that designs prices based on the location of the organization, others include discount, promotion, differentiated, image, channel and time pricing strategies.

This organization uses cost based pricing that brings out pricing aspect based on the costs that the organization incur in providing the services and products in addition to the cost of purchased supplies.

The price is set up such that: Price = Variable cost + Average fixed cost + Fixed profit percentage

 This pricing strategy is designed so that when the unit services or products are offered or provided the ultimate return on investment will be more that the cost involved translating to increased profits. The cost based pricing is done but with consideration on the geographical location of the target market, where pricing is arrived differently for the different customers in different locations. It is asserted that knowing the consumer behavior will allow for improved and better understanding and forecasting on the motives behind their buying (Schiffman and Kanuk, 2007).

Do you think the pricing strategy is appropriate? Can it be improved to better meet its customer’s needs?

This pricing strategy is appropriate for this healthcare company as it is easy to design and implement. The organization just needs to calculate on the cost and add some amount on the unit cost of a product or service. For example if the price to purchase a packet of drug is $40 the company can simply charge $50 for the product to their customers, the same as the service on healthcare provision. This pricing strategy is also simple in the case where the cost of a product or service falls or reduces it is easy to adjust. In the case above if the cost of a packet drops to $35 then the price would definitely also fall to $45. This strategy also makes it easy for the organization to defend its prices as it will simply be charging above the cost of a product or service. This pricing is appropriate within the healthcare industry because of the unpredictable changes in cost of manufacturing or offering services brought about by the government or other regulating bodies.

This strategy can be improved by examining the market and competition thoroughly to establish the weaknesses available. This is because different healthcare organizations may get their products and supplies from different suppliers who in turn may charge differently; this means that individual companies may incur different costs in getting products and so different prices. This may make organizations to charge differently.

Is the organization hindered or helped in their pricing decisions by government or payer restrictions. If so, how do these restrictions impact their pricing strategy?

The organization is hindered by the government, for example, Obamacare, which advocates that all public and private payers have the obligation of negotiating own payments with the providers and that all rates will be binding to all payers. This affects the pricing as there is inability for the health service providers to resist the pricing power.

The government also hinders the pricing through continuous price regulations together with the cost of operations. This act makes it difficult and frustrates the producer or healthcare service providers to compete for the clients in the market and so the need to offer incentives to the customer that would considerably bring down the level of services.

The delivery network and distribution strategy used by the organization

Healthcare companies should choose the best delivery methods and networks that would increase access to their products and services in the market while cutting on costs and ensuring the security of the different products or services offered by the organization. There are different models that can be employed by different organizations.

APS healthcare uses a horizontal delivery network since it uses the concept of “Provider Relations”, which means that it collaborates and works with different medical practitioners to reach their customers. The APS staff visits such facilities providing the education, capacity building together with the services and products. The horizontal model would ensure less control as it depends on the others in the chain to do their part. The success would benefit each and every person in the value and it has lower capital requirement since it allows others to hold different assets of distribution.

The organization uses an exclusive distribution based on agreements with other service providers through Provider Relations that will allow them offer the products and services to the different geographical locations. This strategy is appropriate as it reaches a greater number of target markets using less resource and also the fact that it can allow the provision of limited or scarce products and services.

There are several factors that influence this strategy and they include the type of product or service to be distributed, the services and products that are offering competition, the customers or clients and their motivations behind buying.

It is customer focused since it takes into account the competing companies’ product and services and the gap that is still not met based on service. In other words it ensure the provision of services that are unique that are lacking in the market. The major channel members in the chain are medical provider and specialty pharmacy who in turn distribute to the traditional distributor and specialty distributor, who offers the products or services to the target customers.

Recommendations to the value delivery network

Several changes can be recommended for this company’s value delivery network to help reach more customers. These would include ensuring that there is better market segmentation based on the different products and services to the different customers, having greater agility in the network to reduce the incurred cost and promoting flexibility in service delivery, and having in place measurements that would assist gauge the success of the model or network. In addition is aligning service delivery through networks that will portray global standards to reach more market and ensuring that the network can provide greater collaboration across the value chain to increase the client base.


Armstrong, G., & Kotler, P. (2007). Marketing: An Introduction. (8th ed).New

Jersey: Pearson Prentice Hall

Schiffman, L., & Kanuk, L. (2007). Consumer behavior. Upper Saddle River, NJ: Prentice Hall

Tanner, J., & Raymond, M. (2012). Principles of Marketing Version 2.0. Flat World