Consumer price-quality assumptions about health services
Consumers tend to equate price to quality in ordinary healthcare decision making. They generally hold a belief that whenever a price is set, it is a true reflection of the underlying quality provided by healthcare providers. Due to this inherent assumption, consumers of health care services are constantly willing to spend more on health in order to move from a low-quality health plan to an average health plan (Kotler, Shalkowitz, & Stevens, 2008).
However, the assumptions made by consumers in the health sector have not yielded the results as anticipated. The assumptions have not been rational since the results show that even high-cost health providers have delivered poor services, or their services have not been consistent with the prices tagged to these services.
There are numerous non-monetary cost factors that consumers of health services face, and they include the following:
- The general performance of health care centers with respect to quality and successful operations or medication.
- Ease of access to such services or products is critical to consumers of health services. Consumers will choose providers whose services are more accessible to them than those that either is far or have inherent challenges in getting services (Kotler, Shalkowitz, & Stevens, 2008).
Governmental influence on price setting in the health care system
Though market determinants (forces of demand and supply) have a bearing on price setting in a decentralized market system, governments continue to influence price trends in health sectors. Such influences come in the form of political, regulatory, or judicial policies. According to Kotler, Shalkowitz, and Stevens (2008), judicial influence has been witnessed through the debate on “grey markets” where drugs are imported from low-cost to high-cost countries. Through this, price setting by pharmaceuticals has been regulated to greater limits.
Government spending and investment in human resources have continued to bear a lot of indirect influence on the prices of health services. Since governments are largely responsible for the provision of health infrastructure, their investments hugely impact on costs of health services. For instance, in spite that the US government continues to offer high-quality health services on a comparative scale, claims have been leveled about its constrained investment that has caused increasing costs of health care (Kotler, Shalkowitz, & Stevens, 2008).
On private health service providers, the government continues to influence the kind of service and prices through service restrictions. In the US, for instance, state laws, i.e., mandates, have required that insurance companies offer specific benefits to their members. Examples of these mandates include infertility treatment and chemotherapy treatments, which have stretched the limits of what health insurance companies should cover (Kotler, Shalkowitz, & Stevens, 2008).
Intermediaries and the cost of health care products and services
Supply chains play a great role in prices charged to end-users in the health sector. To a great extend, distribution channels influence final prices charged on services rendered or products consumed by health users (Kotler, Shalkowitz, & Stevens, 2008). The more there are channels, the higher the product cost hence higher final prices. Costs incurred in the distribution process are finally transferred to consumers, which translates into higher consumer prices.
On a comparative analysis, a distribution channel with fewer intermediaries will, to some extent, leave consumers better of due to reduced additional costs that would otherwise have been passed on to them. Kotler, Shalkowitz, & Stevens (2008) noted that though participants in a distribution.
Kotler, P., Shalkowitz, J., &. Stevens, R. J. (2008). Strategic Marketing for Health Care Organizations Building a customer-driven health system. San Francisco, CA: John Willey &Sons.