Cambridge Transplant Center Case Study Solution
Cambridge transplant center is a highly reputed hospital operating with 400 patient beds. The hospital is the leading in the sector of area of organ transplantation. The company has been growing not only on financial basis, but the number of patients along with successful transplantation is also increasing rapidly. As a result, reputation of the hospital is also increasing. As a result, hospital is currently performing 500 transplants per year, which includes liver, lungs and pancreas transplantations. With the increasing successes of hospital, it has been analyzed optimistically that it will perform much better in the future. However, to be more successful it is important for the company that there should be proportionate increase in the number of organ donors. In order to solve this problem, Cambridge Transplant is making an agreement with Supplier Company, known as Life Care Transplant Network (LTNET), as it is the largest transplant benefits in the country.
The process of transplantation is more costly than other hospital services as it require costly materials and sponsored items are highly valuable such as organs. Therefore, in order to be cost effective, hospitals have to outsource these organs from reputed companies, such as LTNET. The process of transplantation is based on five different phases. It has been analyzed that only in first phase, company can estimate its cost due to its work nature. However, it is very difficult to estimate operational costs for other phases. Company have been charging patients collectively for all of these phases and additional cost would be implemented, if there would be replantation for any other purpose.
In negotiations, it has been decided that phase 1, 2 and 5 would be set at discounted charges. Moreover, the cost of phase 5 cannot be negotiated as this is not controllable. And the phase 3 would decrease the financial risk, therefore, it would be reimbursed on cost basis. Therefore, it has been analyzed that only cost of phase 4 could be negotiated due to its nature of operations.
Currently, the company is using cost structure of collective costing system. Under this costing structure, the cost of product or service is not distinguished between its nature such as fixed, variable, direct and indirect. But the costing is charged wholly on the basis of transplantation service received by the customers. Therefore, by analyzing, it has been determined that lower prices are charged by the customers which is resulting in greater costs paid by the company.
Secondly, yes, the hospital should take note on long term pricing strategy as it is the highly reputable hospital and provide premium services to patients, which I not given in any local hospital. Moreover, by facilitating customers with reduced price will facilitate them with value added services. In addition, by making long term pricing strategy will help the hospital to project its future financials, if the company would require to take any important decision regarding capital investment.
On the other hand, it may decrease company’s market value or market share as today, the company is making profitability according the market share, but by making specific strategy night decrease company’s revenue and disturb its stream.
Cambridge Transplant Center Harvard Case Solution & Analysis
Lastly, if the lower price would be set than the amount paid by current payers, the hospital may lose the trust of current payers as they are paying higher prices. However, with the increased of services by making negotiations may increase the loyalty of current payers because of the significant increase in the services facilitated by customers.
Perhaps, by analyzing the over all situation and the cost structure of the company it has been analyzed that 60% of the cost for the cost structure constitute to fixed cos while the other 40% constitutes to variable cost.The categories under fixed cost includes the Nursing, ancillary, operation and laboratory. While the radiology, drug and other cost are included in the variable cost...................
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