Our Global Pricing Study results for healthcare provider companies are here. Find out why price management remains essential for the year ahead and what you can do to maximize your business growth.
Global healthcare providers aiming for commercial excellence in 2024 must adopt a more nuanced pricing strategy.
Our recent ‘State of Pricing’ report from our Global Pricing Study (GPS) reveals that 70 percent of healthcare providers successfully passed on cost increases but many failed to reach growth targets. This highlights that the historical strategy of ‘one-size-fits-all’ price increases is no longer sustainable – a more nuanced strategy to pricing excellence is required.
In our article, we outline key insights from the GPS report for healthcare providers and offer practical recommendations to optimize 2024 pricing structures.
Pricing trends: Past insights and 2024 imperatives
90 percent of providers signal low price elasticity, unaffected by volume decline, yet only 40 percent of price targets are attained due to market competition and customer resistance.
Upon closer examination, it is clear that price increases for cash payments often don’t stick, either being discounted away to individual patients or not applied by local clinics.
On the reimbursement side, many contracts are ‘locked in’ to old pricing, making it impossible to implement an increase until renewal time. And as payer margins continue to be squeezed, companies find it increasingly challenging to implement price hikes. Nevertheless, more than 70 percent of healthcare providers plan to raise prices this year.
The provider pricing priority for 2024 - Differentiated price management
Many providers already prioritize price management but anticipate constraints on revenue upside given pricing pressures and new competition.
To combat these challenges, healthcare providers must adopt a nuanced price management approach instead of relying on a one-size-fits-all method. Many providers are ready to explore new strategies, including those highlighted in our GPS report, which identifies key steps for pricing excellence in 2024.
How to master pricing excellence in 2024
- (Re)determine price position – Assess and adjust market price positioning, ensuring premium prices reflect value, quality, and competitiveness.
- Implement differentiated price management – Customize prices based on regions, service types, or time to tailor pricing to varying costs and target market demands to get the right price to the right patient.
- Adapt pricing models – Explore novel discounting methods and innovative pricing tools, such as dynamic pricing fueled by AI and machine learning, to predict and adjust prices based on market demands and patient needs.
- Optimize service mix – Introduce more structured and tailored packages to facilitate up- and cross-selling and ensure patients choose higher margin solutions.
- Implement new fees for higher willingness-to-pay segments – Introduce fees for additional services based on patient needs, for example, adding a ‘new patient’ check-up service.
- Identify new services to offer – Develop and optimize service offerings to attract new types of patients, such as those needing complex surgical interventions vs. simple interventions or standard check-ups.
- Monetize all service offerings – Examine and refine the pricing for additional services, including re-bookings, to ensure fairness and optimize revenue.
- Optimize financing options and payment plans – Provide easier access to finance and flexible payment plans, such as ‘Buy Now Pay Later’, to fill the patient funnel and drive customer loyalty.
- Modify negotiation and concession strategy – Review and adjust negotiation tactics with insurers, suppliers, and partners to improve commercial growth without compromising quality.
- Review pricing clauses – Update pricing clauses in contracts to pass on inflationary pressure.
Healthcare providers need to prioritize price management for commercial success in 2024. Providers can no longer rely on undifferentiated price increases for sustainable business growth. With increased market competition and well-informed customers intensifying the pressure, sophisticated price management strategies are urgently needed to achieve commercial success.
At Simon-Kucher, our expertise is grounded in decades of strategy and pricing work. We excel in helping healthcare providers optimize their pricing models. If you want to tackle price pressure and drive business excellence, reach out to our team today.