HealthcareProfitability

Profitability and pricing analysis for a pediatric specialty practice

Problem

A pediatric practice set its prices without data: it did not know which patients sustained its income or what each session was really worth.

Solution

The analysis showed where income is concentrated and what each type of patient contributes, and set the break-even threshold for a price adjustment.

Dual Intervention

We rebuilt collections by patient and month, measured income concentration, modeled a pricing scenario and designed a patient record.

17%

of patients accounted for nearly half of income

3 months

of financial analysis and design

Fewer than one in five patients generated nearly half of annual income. All of them received care from more than one specialty. The owner suspected as much, but the records, kept by practitioner, did not show it.

The challenge

The practice treated children, and demand was growing. No analysis supported the price of a session. Discounts were granted case by case, with no written criteria. Management hesitated to raise fees for fear of losing families and lacked the data to gauge that risk. Without a record of why patients left, attrition could not be measured.

What we did

We rebuilt collections by patient and by month for one full year and part of the next. We ranked patients by contribution and separated single-specialty care from multi-specialty care. We compared the list price with the income actually earned per session and with the fees of other providers, as reported by the owner. We modeled a price-adjustment scenario and calculated its break-even point. We also designed a single patient record covering admissions, dropouts and the reason for each.

What we identified

Concentration: 17% of patients generated nearly half of income. One-seventh of them accounted for half. The owner's estimate of who sustained the business proved accurate.
The value of integrated care: a patient treated across several specialties contributed more than four times as much as one treated in a single specialty.
Fragility: a handful of patients was enough to cover the year's fixed costs. Monthly income fell by more than half between the best and the worst month, while costs barely moved.
Price: income actually earned per session fell more than 10% short of the list price. According to the owner, other providers charged a quarter to a half more.
Scenario: a rise of about 15% in income per session kept total income whole even if volume fell by 12%. How demand would react remained unknown.

Results

This case corresponds to the diagnostic and design phase. Implementation is the client's decision.

A hunch confirmed: the owner's perception became a number.
A decision with a threshold: the analysis sets how much volume loss a price adjustment can absorb.
Measurement made possible: the record allows active patients, admissions and dropouts to be counted, with reasons. Adopting it is up to the client.