A Healthcare Dilemma: Value-Based Solutions vs. Cost-Sensitive Choices
Image created by Rudy Chidiac. © Open Medical 2024. All Rights Reserved
There is a dichotomy in healthcare between a cost-sensitive market and the desire for a value-sensitive model.
Contradicting needs and choices
The healthcare industry, in its relentless pursuit of cost-effectiveness, gravitates towards digital solutions with the lowest cost. Yet paradoxically, it wants the value that is typically associated with the highest-cost option.
But the two are not compatible; they do not marry well.
You can’t walk into a luxury brand store hoping to get a high-quality handbag for the price of one you can buy at an off-price retailer. The quality and value of a designer handbag are reflected in its price, and expecting to get the same value at a lower price is unrealistic.
In the context of healthcare, this issue becomes even more pronounced.
An unhappy marriage
Healthcare organisations often choose the cost-sensitive supplier, but they still want higher value. This puts the supplier in a difficult position. They can either absorb the cost and try to provide the value, but this is not sustainable, especially for a new company. Eventually, the strain becomes too much and the entire operation collapses.
Alternatively, the supplier can hold their ground and say no, that’s not what you are paying for. But this results in an unhappy relationship, filled with tension.
This arises because of a misalignment between perceived value and cost. There is an expectation for a certain level of value, but the cost is not proportionate to this expectation.
Take, for example, someone who attributes very little value to shoes. They will rarely pay more than £50 for a pair and know their cheaper shoes will need to be replaced in a couple of years. That’s fine because they don’t value the shoes and understand that the cost reflects the quality.
The problem is that healthcare technology doesn’t work this way. There is the cost of transformation. You can’t change solutions every year; you’re more likely to be stuck with the technology for years because the cost of change is too big.
Know what you’re paying for
So healthcare organisations need to change their mindset when considering digital solutions. They need to determine what value they want from these solutions and what they’re willing and able to pay for.
Do they value sustainable, long-term, value-based solutions that will improve their processes in the long run? If so, are they willing to pay for it?
From a supplier's perspective, it is crucial to consider what value they are providing and how to price it accordingly. There needs to be a balance struck between offering value and maintaining a sustainable business model.
But by pushing for cost-sensitive solutions rather than value-sensitive ones, healthcare is shooting itself in the foot. When focusing solely on cost, they risk missing out on the long-term value that comes with investing in higher-value solutions.
