Cambridge Transplant Center Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Cambridge Transplant Center Case Solution

If the price is set significantly lower than the average reimbursement amount paid by current payers, what impact would that have on future negotiations with those payers?

If the price set is significantly lower as compared to the average reimbursement amount of $120000, which is paid by the current payer i.e. LTNET, it would lead the hospital towards many negative implications and consequences, such as: the hospital would lose its strong relationship with LTNET, which in turn would make it challenging for the hospital to cover the fixed cost and generate higher amount of returns over the period of time. Additionally, the lower price of transplant tends to affect the growth potential of the hospital more as compared to the amount of reimbursement offered by current payer, hence it would put the hospital at risk of losing its market share as well as its long term sustainability in the market.

Furthermore, if the price of transplant is lower as compared to the amount of reimbursement, it would make the Center reluctant to be benefited from the tax-advantage and employer-funded health benefit plan, which in turn would signal the market that the Center is not able to provide low-cost as well as high-quality patient care as compared to its peers as well as its own benchmark data. In the same manner, the Center would not be able to generate higher returns as it would not receivethe amount of reimbursement, due to which the major portion of profit would go into cover the fixed cost. The weak relationship between Center and its current payer would also affect the future partnership as well as its partnerships with other payers, due to which the long-term sustainability and growth of the Center would be adversely affected. Additionally, the long-term consequences of the low price than the reimbursement amount paid from current payer include: low opportunities for development, lower flexibility, reduced profit returns, high amount of fixed cost and inability to perform more transplants in the future.

Alternatives

Taking under consideration the current situation emerging within the organization;alternatives presented to the Center, are as follows:

Utilization of economies of scale

One of the alternatives-presented to the Center is the efficient utilization of the economies of scale. According to the plan, the phase four’s cost would be based on marginal rather than the entire cost and the marginal cost of each transplant is lower as compared to the average cost. Additionally, the Center could reduce the marginal cost of the patients by efficient and adequate utilization of the resources.

Reduce length of stays

Another alternative-presented to the company, followed by the issue of increased cost, is to reduce the length of the stay. The strategy of reducing the length of stay would not be feasible for the Center, taking under consideration the the fact that around 70 percent of the cost of phase four incurs within 24 hours. Thus, there is a non-linear relationship between total cost and length of the stay, which tends to vary from one patient to another based on the level of illness.

Outsource transplant management

The Center could exploit the opportunity of outsourcing the management of transplant to LTNET, with specialization and experience in the similar services. By-doing so, the Center would be able to make sure of cost-effectiveness and best management of the transplant services....................

This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.

Cambridge Transplant Center Harvard Case Solution & Analysis