You are the business manager for Dr. Jones’s new medical practice. He is hoping to open in a few months but first wants to determine his prices. He has asked you to recommend whether he should set his own prices or accept those from third-party payers.
You are the business manager for Dr. Jones’s new medical practice
There are two extremes when it comes to the power of providers to set prices. At one end is the provider who has no power and must accept the reimbursement rate set by others. At the other is the provider who sets the price, which third-party payers must accept. Neither sounds like a win-win scenario. We will explore these strategies in this week’s discussion post.
You are the business manager for Dr. Jones’s new medical practice. He is hoping to open in a few months but first wants to determine his prices. He has asked you to recommend whether he should set his own prices or accept those from third-party payers. After researching both options, provide a memorandum with your recommendation.
In your memo, first provide a brief discussion of what it means to be price setter or price taker. List the pros and cons of each one. Be sure to comment on the strategies that would be used in both scenarios. Finish the memo with your recommendation.
More details;
What Is a Price-Taker?
A price-taker is an individual or company that must accept prevailing prices in a market, lacking the market share to influence market price on its own. All economic participants are considered to be price-takers in a market of perfect competition or one in which all companies sell an identical product, there are no barriers to entry or exit, every company has a relatively small market share, and all buyers have full information of the market. This holds true for producers and consumers of goods and services and for buyers and sellers in debt and equity markets.
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