The word document is the actual assignment. Excel file to be used for data for regression analysis. PDF is an overview of the company.
Package Pricing at Mission Hospital Here are some questions for you to answer in an excel file, which may also serve as a platform for you to understand the entire case and to come up with a broader analysis and a good set of recommendations. For each question, besides your numerical results, briefly explain your findings. 1. Develop a linear model to observe if there is an association between total cost and body weight 2. Is it possible to conclude that a patient weighing 51 kg is likely to spend at least INR 1000 more than a patient weighing 50kg at 5% significance? 3. Provide some understanding on what would be the probability that a treatment cost may exceed a package price of (lets say) INR 10,000 or 30, 000 or any other value of your interest. 4. Build a model between total cost and gender and help us understand how much more expensive may be the treatment for males vs females. 5. Build a model to understand the treatment cost of marries vs unmarried patients. 6. Develop a multiple regression model and identify statistically significant predictors that Mission Hospital can use to determine treatment costs. 7. Make sure that, besides a clean and well-organized Excel file. You also prepare a clean, well organized and visually appealing powerpoint observation that may potentially be directed to an audience of board members at the hospital. Free-format on your powerpoint file. Prepare around 7 +/- 2 slides and include more slides as an Appendix (if you want to). Remember to state clearly the Motivation (the problem to solve), and a clear and strong Message, including a clear line of action. IMB 527 Sriram T K, Shailaja Grover, Satyabala Hariharan and U Dinesh Kumar, Professor of Quantitative Methods and Information Systems, prepared this case for class discussion. This case is not intended to serve as an endorsement, source of primary data, or to show effective or inefficient handling of decision or business processes. Copyright © 2015 by the Indian Institute of Management Bangalore. No part of the publication may be reproduced or transmitted in any form or by any means – electronic, mechanical, photocopying, recording, or otherwise (including internet) – without the permission of Indian Institute of Management Bangalore. PACKAGE PRICING AT MISSION HOSPITAL SRIRAM, T. K., SHAILAJA GROVER, SATYABALA HARIHARAN AND U. DINESH KUMAR Package Pricing at Mission Hospital Page 2 of 9 Dr. Satyajit Bose was watching the fresh green paddy fields from his Toyota Innova while driving on National Highway 2 (NH 2) from Burdwan to Durgapur in West Bengal, a state in East India. He turned to Professor Dinesh Kumar and said: “Driving on this highway is like doing yoga: the greenery of this place relaxes your mind. The natural beauty of this stretch of land can rival any place in this world”. Prof. Dinesh nodded in acceptance; West Bengal was not new to him as he had spent a few years teaching at the Indian Institute of Management, Calcutta. However, his mind was preoccupied with the main reason for visiting Dr. Bose and Durgapur. Dr. Bose was the chairman of the Mission Hospital (a multispecialty hospital) at Durgapur. Although the hospital treated patients of all illnesses, their specialty was cardiology. Mission Hospital was a very popular not only amongst the locals, but even patients from many neighboring states as well as countries such as Bhutan and Sri Lanka visited it for different types of treatments. They conducted on average 150 heart surgeries every month and were in the process of increasing the monthly capacity to 200 heart surgeries. Exhibit 1 depicts the major cardiac surgeries performed at the hospital. Dr. Bose mentioned the problem he was facing as the chairman of the Mission Hospital. He said: “Professor, the business model in health care is changing fast. As a hospital, we publish the price list for many treatments. We also negotiate package prices with many state governments for specific ailments; these government schemes are created for the benefit of economically weaker sections of the society. The package pricing is also creating intense competition between the hospitals; there is a price war for each treatment. But we don’t know whether this is the right strategy. Sometimes, I feel that we should charge like the olden days where the patient pays for all the costs associated with the treatment and the consultancy fee”. In India, many hospitals tend to charge flat rates (or package price) for several treatments. This has reduced the uncertainty associated with treatment costs for patients. India has also been one of the popular destinations of medical tourism, and customers of medical tourism expect a flat rate. Healthcare packages have been customized to suit various needs and preferences of these customers, including the choice of hospital, city, travel, hotel stay, and visit to nearby tourist attractions. Exhibit 2 shows the package price for few cardiac surgeries from a leading medical tourism service provider. Apart from medical tourism, many hospitals quoted a flat fee for treatments such as heart surgery, knee joint replacement, etc. for local patients. Irrespective of the actual expenses and the duration of treatment, the patient would pay only the agreed flat price since it was a contract between the patient and the hospital. Many state governments in India insisted on such contracts as there was a perception in the public that hospitals insisted on unnecessary diagnostic tests whose profit margin was high. Dr. Bose commented that there was a high risk involved with package pricing since the actual cost could far exceed the package price. He said: Package Pricing at Mission Hospital Page 3 of 9 “It is like buffet pricing in restaurants, in which a customer pays a fixed price and can eat as much as he can. However, restaurants have control over the menu, but hospitals don’t have any control over the number of days it will take to cure a person, because it depends heavily on an individual’s body!” There were some decisions Dr. Bose had to take: whether to use package pricing or traditional pricing; how should one come up with package pricing; and how to use package pricing as a competitive strategy in the market, since he was expecting many new hospitals to come up in Durgapur in the next couple of years. ABOUT THE MISSION HOSPITAL The Mission Hospital was set up in April 2008 with the objective of providing high-quality health-care services to all individuals at an affordable cost. It was a unit of Durgapur Medical Centre Private Limited. Located on three acres of land in Durgapur, Mission Hospital was a 350-bedded hospital known for providing state-of-the-art facilities to its patients. When asked about the ideology behind setting up this hospital, Dr. Bose said: “Our mission is to decentralize super-specialty healthcare, and deliver it to every doorstep in eastern India, beyond the metropolis, and heal patients with dedication, honesty and tender loving care”. Some of the ultramodern features available at the hospital included seven operation theatres with laminar airflow and high-efficiency particulate arrestance (HEPA) filters, mother and childcare units, a 24-hour accident and emergency department, blood bank, and a fully computerized pneumatic chute system. Mission hospital became the first super-specialty corporate hospital in eastern India outside Kolkata. It provided patients the flexibility of availing many government and non-government schemes for treatments, thereby attracting people from nearby areas as well. Many patients came from neighboring states and countries. Mission hospital paid special attention to understanding the needs of the patients and providing them with service that was responsive, efficient, courteous and helpful to improve the level of patient satisfaction. It has been investing a substantial amount in the training and development of its staff to maximize their potential. Mission hospital promoted a patient-centric approach that also ensured the safest possible environment. PACKAGE PRICING FOR TREATMENTS Under a fixed package pricing system, a patient was provided a quote on the treatment cost at the time of admission. The price for the treatment was tailored for each patient individually based on the surgery/treatment required, medical health, room charges, and other individual-specific factors such as age, weight, blood group, etc. The treatment charge was considered as “fixed” for a patient irrespective of the actual cost incurred by the hospital in treatment. In such a system, any variation in the planned treatment does not affect the price quoted by the hospital to the patient. The hospital receives the payment determined ex ante at the time of admission. Package Pricing at Mission Hospital Page 4 of 9 Mission Hospital was considering adoption of fixed package pricing to increase customer confidence and make its pricing policies more transparent while providing the best care available to its patients. This meant providing a quote for the total amount to be paid by the patient that included all costs associated with the treatment such as consultation fees, operation theatre charges, anesthetist fees, laboratory tests, medications, room rent, and taxes. There were to be no hidden costs and the patient paid no more or less than the quoted price. PACKAGE PRICING: WHY, AND WHY NOT? Both the hospital and the patient could benefit from this system. Patients are usually anxious that the hospital may recommend unnecessary tests and medicines to increase the bill. There is always an uncertainty as to how much one may end up paying to the hospital. This is important in the Indian context where only 30% of the population had some kind of financial tool to cover medical expenses (Financial Express, 2013).1 Package pricing insured the patient against any risk of cost escalation during the course of the treatment. Even if the stay of the patient was extended for any reason such as a medical complication, it was taken care of by the hospital. Hence, such a system eliminates any price uncertainty. Another advantage of this system is that