Healthcare Marketing: Good Samaritan Society Pricing Strategy
This paper examines the pricing strategy employed by the Evangelical Lutheran Good Samaritan Society (ELGSS), a nonprofit healthcare organization operating 238 nursing and healthcare facilities across the United States. Rather than applying a uniform corporate pricing model, the Society relies on a combination of Cost-Plus Pricing and a Price-to-Market approach at the individual facility level. The paper explores how labor costs, government staffing mandates, local market conditions, and nonprofit status each shape the organization's pricing decisions, and argues that this dual strategy allows the Society to remain competitive while covering operational costs.
- Introduction to the Good Samaritan Society: Overview of ELGSS as a nonprofit healthcare organization
- Cost-Plus Pricing Strategy: How costs drive pricing across individual facilities
- Market-Based Pricing Considerations: Local market conditions and room rate variation
- Relationship Between Cost and Price: Cost as the primary pricing consideration
- Conclusion: Pricing in a Nonprofit Context: Dual strategy balancing competition and nonprofit mission
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What makes this paper effective
- Grounds its analysis in a specific real-world organization, giving the argument concrete focus rather than relying on purely abstract theory.
- Clearly connects pricing theory (Cost-Plus and Price-to-Market) to the operational realities of a nonprofit, multi-facility healthcare provider.
- Identifies multiple external constraints — government staffing mandates, Medicare requirements, local market saturation — that complicate standard pricing models.
Key academic technique demonstrated
The paper applies a named marketing framework (Cost-Plus Pricing) directly to a case organization, showing how theory adapts to real institutional constraints such as nonprofit status, regulatory requirements, and geographic variation in labor costs. This case-application method is a foundational undergraduate business writing skill.
Structure breakdown
The paper opens with a brief organizational profile, then introduces the two pricing strategies used by the ELGSS. Subsequent paragraphs develop each strategy in turn — first Cost-Plus, then market-based adjustments — before synthesizing their relationship. The conclusion reaffirms how the dual approach serves both competitive and operational goals within a nonprofit model. The structure is linear and thesis-driven, appropriate for a short analytical business essay.
Introduction to the Good Samaritan Society
The Evangelical Lutheran Good Samaritan Society (ELGSS) is a nonprofit healthcare organization operating 238 nursing and healthcare facilities throughout the United States. Rather than applying a single corporate pricing strategy across all locations, the Society allows individual facilities to set their own prices using a combination of two approaches: a Cost-Plus Pricing strategy and a Price-to-Market approach.
Cost-Plus Pricing Strategy
The Cost-Plus strategy involves "simply building price from the cost up, usually on a percentage basis" (AMA, par. 1). The Good Samaritan Society sets budget goals for each facility based on local expense and revenue projections. Expense projections are grounded in the market costs of items required to operate the business.
"The greatest expense in a healthcare facility is staffing" (Gebo). State and local governments mandate specific staffing levels as a condition of facility licensure. The federal government imposes additional staffing requirements on any facility that receives federal revenue through the Medicare Program. Because of these mandates, the cost of labor is largely determined by supply and demand. The services provided to elderly residents are priced by building on the total costs of operating the facility up to a targeted profit margin.
Market-Based Pricing Considerations
The second consideration for the ELGSS is the local market surrounding each facility. Daily room rates vary from one facility to the next and are based on the level of care required by each patient. Where the local market is saturated with available beds, the ELGSS aims to remain within the prevailing market price while still meeting its projected expenses. This price-to-market approach ensures that individual facilities remain competitive without departing from the cost-driven foundation of the overall strategy.
Conclusion: Pricing in a Nonprofit Context
A great number of factors shape the pricing decisions of the Evangelical Lutheran Good Samaritan Society. Operating across multiple states requires each facility to independently assess both its expense environment and its local revenue opportunities. Being a nonprofit organization does not prevent the Society from pricing its services with a profit margin in mind; however, profit maximization is not the overarching guide for its pricing strategy. The Cost-Plus approach, tempered by local market awareness, keeps individual facilities competitive while enabling the Society to deliver quality care to the elderly population it serves.
Bibliography
American Management Association. A Baker's Dozen of Pricing Strategies. 1997–2003. Retrieved 9 Aug. 2003 from http://www.amanet.org/seminars/editorials/pricing_strategies.htm.
The Evangelical Good Samaritan Society. 7 August 2003. http://www.good-sam.com.
Gebo, Paula. E-mail to the Good Samaritan Society Business Office. 8 Aug. 2003.
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