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