SECA 8

 Provide an assessment of your company's current differentiation (or product quality) strategy.

Kaiser Permenante has developed an excellent health promotion concentration as its product quality strategy.  Health promotion as a strategy can be applied to improve the health gain of different organizational structures and processes that determine healthcare services and thus improve the outcome of the services. This also includes improvement of the hospital setting as material and social framework in which services are provided- and thus improve health impact.  This health promotion maintains and improves health, be it by protection or development of positive health.

    * Why has the company adopted this particular strategy?

My organization has adopted this particular strategy for cost containment and to improve satisfaction of stakeholders.  This quality strategy is especially relevant because health outcome and impact have a direct relationship to the primary task of the organization, but it can be used for other organizations as well.

    * What is the impact of the strategy on profitability (or organizational sustainability)?

The strategy has greatly improved the profitability of the organization.  This health promotion strategy has reduced the prolonged length of hospital stay of patients.  This has allowed the hospital to reduce costs and improve the profitability of stakeholders.

SECA 10

    * How does your organization determine the prices charged for its products?

Kaiser Permenante has its own policy for setting prices for tens of thousands of different items on its price list. Kaiser uses the estimated amount it costs to provide the service or item as the major factor. In addition to that, Kaiser has to factor in the various payment arrangements they have with insurance companies.  Some of these arrangements make it necessary to set a base price that is higher than the cost to provide the service in order to get paid enough to cover the costs.

    * To what extent does it use multi-part pricing, bundling, price discrimination, time-of-use pricing, and other strategies?

Kaiser has functioned in the pricing domain with the bundling strategy.  Medicare, Medicaid, and HMO (which followed the government’s lead) set the prices they pay for services independently of individual hospital prices. With the increasing gap between billed charges and the prices paid by most payers, Kaiser was forced to bundle it’s health care services into one plan.  This system is characterized by the fact that the bulk of payers never pay full charges as they would do in a retail market.  Therefore, Kaiser adopted the bundling price strategy.

    * How do your company's pricing policies compare with best practice methods for selecting prices?

Shaped by each provider’s unique payer mix of health insurers and government reimbursement systems, which combined pay the vast majority of healthcare bills, current pricing strategies are as complex and varied as the hospitals that employ them.  When developing a pricing strategy, organizations must consider as series of objectives: meeting mission and providing community benefit, balancing budgets while remaining competitive, and complying with relevant laws and regulatory standards. The bundling price strategy has created a non-linear relationship between government payments, chargemaster prices, and other measures.  Other measures such as multi-part pricing, time-of-use pricing also offer a non-linear relationship, therefore pricing reform in the healthcare system has become a huge concern.

SECA 9 Rivalry

Identify your organization's main rivals. Assess their relative strengths and weaknesses. How would your rivals assess your relative strengths and weaknesses in the competitive arena?

Kaiser Permanente, the nation’s largest nonprofit HMO group, has many rivals such as Aetna, Blue Cross/Blue Shield and United Healthcare.  Some of the relative weaknesses of these organizations are lack of beds, operating theatres, and laboratory facilities.  Operating theatres, laboratory facilities, and hospital beds usually require new buildings and more employees (nurses), thus uselessly increasing the cost of treatment.  This increase in cost may decrease the marginal revenue for some of these hospitals.  The strengths of these medical groups would have to be access and the specialized medical treatment.  Since Kaiser is a separate specialized network, some healthcare providers are able to join more than one organization.  Some physicians can see physicians within the Aetna and Blue Cross network.  With the opportunity to be your own boss, some specialists prefer to join these other networks due to increase revenue. With Kaiser, physicians are salaried, so no matter how many patients one sees, the salary remains the same.    Since specialties reimbursement is usually higher, they feel they can make more money by joining these networks. 

Others would view Kaiser Permanente strength as more private/preventative care/electronic medical records/community work. For example, many facilities offer private beds with more private care.  Since Kaiser spends a lot of money on preventative care, majority of their patients do not require in-hospital care.  This allows Kaiser to provide a facility with a more one on one service for its patients.  Kaiser has also specialized with preventative care. They offer numerous classes for diabetes and high blood pressures.  These classes allow Kaiser to reduce the amount of patients who come to the hospital with end-stage organ damage. Their electronic medical records allows for reduce medical errors.  The weakness the Kaiser poses would have to be geographical locations. For example, if you belong to the Aetna network, a patient would be able to go anywhere in the nation to obtain healthcare. With Kaiser, they are only located in select state.