Healthcare management principles and practices

Healthcare management (Strategic operations plan)

The financial section of this strategic operations plan will take into consideration both projected revenues and expenses and will try to anticipate these based on the existing business model. For that, it will look at pricing strategies, essential in the impact these can have on business demand and projected revenue. It will also look at best practices required to maintain profitability and the general financial health of the fertility clinic.

Basic Budget

In its very basic form, the basic budget will include the revenue and the expenses. The revenue will be primarily formed from the fees that customers pay for the clinic's services. Other forms of revenue could result from cooperating with different scientists in order to try new procedures at the clinic. With all the components of an infertility treatment, the average cost for such a treatment is likely to be around $7,500. To this, the fertility clinic will add a 10% premium, based on the pricing strategy described below. The average revenue per customer will thus reach $8,250.

One can evaluate that the clinic will be able to have around 600 customers in the first years, considering an average of 50 patients in a month (one can also consider that the numbers in the first couple of months will be smaller, as the clinic builds a presence in the market). The total expected revenue in the first year of operation will be $4,950,000.

In terms of expenses, the most important component will be the wages that the employees receive. There are several issues to be considered here. First of all, some of the employees are highly specialized, with many years of practice and, most often, with PhDs in medical science. Their wages are likely upwards of $200,000, although, as previously showed in the report, they can also share some of the profit, meaning that they can be offered lower wages for a share of the profits.

Another important category of expenses are marketing expenses, particularly in the first months to a year of operation. The clinic will be relatively unknown in the beginning, so a targeted marketing strategy, focusing on the segment of consumers and in specific locations (hospitals, other clinics, magazines such as "Parents" etc.), will be preferred. Travel expenses and other administrative expenses (rent, utilities) will have to be added.

It is important to note that the initial investment is also likely to be quite consistent. If one considers that the clinic will simply start with an empty building, everything, from high-tech instruments to furniture needs to be purchased. Such an investment, particularly in all the high-tech tools previously mentioned, will probably cost as much as $1,000,000.

In order to maintain profitability, the focus should be on the revenue side, namely on ways to maximize revenues. There are at least two different areas to be explored here: customer retention and new customers. Customer retention refers to those clients who have already used the clinic's services, but unsuccessfully, namely pregnancy has not occurred. It is more difficult to have them return, but the solution in this case is the quality of services. The idea is to have them believe that everything possible was done in order to improve their fertility and the quality of service is essential in this case. The main competitive advantage that the company can have on the market is the quality of services and the entire focus of the business should be directed towards maximizing this.

Pricing strategies

In terms of pricing strategies, theoreticians such as Gregson (2008) agree that identifying and selecting the right pricing strategy is one of the key elements in having a successful business. Determining the appropriate pricing strategy is a complex undertaking that needs to take into consideration a series of factors, including the consumer profile, the nature of the business, the overall economic conditions etc.

Nagle and Holden (2002) propose nine factors that psychologically influence the consumer in his purchasing decision and that determine price-sensitivity. One of these factors or laws is referred to as the "price-quality" effect. The price-quality effect proposes the idea that buyers become less sensitive to price when higher prices signify higher quality. What this means is that the consumers are likely to ignore higher priced services (or products) if they perceive the high quality these services have,

The fertility clinic should have a pricing strategy that is based exactly on this idea. The services that the clinic offers are among the best, not only compared with other medical facilities in the region and country, but specifically compared to other fertility clinics. The quality of service should be the differentiating factor and competitive advantage of the clinic on the market. The fact that it offers services of such quality will allow it to charge a premium price and, indeed, the pricing strategy should be that of premium pricing.

Premium pricing is defined by Gittings (2002) as that type of pricing that keeps prices high so as to encourage a positive perception, from a price perspective, among consumers. In the case of the fertility clinic, this concept can be definitely nuanced. The perception that the consumer should have is not necessarily one of luxury service (although, given the overall price, it is), but that of a service where the best professionals, the best instruments and the best available medication is used.

The psychological explanation behind this strategy is simple: the consumer comes to the fertility clinic because the family has not been able to conceive and appeals to external assistance with that objective in mind. As a family, it will want the best available on the market, so that the chances of conceiving will increase. Such a consumer is determined to stop at nothing in order to have a child and will expect to pay a premium price, something that will, in the consumer's mind, signify dedication and commitment to the end goal.

Preventing internal and external frauds

According to Colby (N.a.), there are three steps involved in a fraud process: committing the fraud, concealing the fraud and converting non-cash items into cash. He also emphasizes the importance of monitoring "red flags," namely looking for signs that the fraud is likely to occur or that it has already occurred. At the same time, control is an essential instrument in the entire prevention or identification process.

An important note about preventing internal and external frauds should be made when it comes to the staff being part of a comprehensive profit sharing mechanism. It is acceptable to believe that the risk of internal fraud will decrease if employees feel that it is more to their benefit for the clinic to operate well and for fraud to be avoided.

External and internal fraud can also be prevented with an annual external audit. This can be done at the end of each fiscal year and has numerous advantages, such as (1) increasing credibility for the clinic in front of potential future investors; (2) reducing the risk of external and internal fraud in the future and (3) identifying potential such actions occurred over the past year.