Healthcare Services Pricing

Pricing in Healthcare Services

Pricing can be a powerful lever to drive growth and profitability for healthcare service providers, but getting pricing right is nuanced and complex, presenting a persistent challenge for many. L.E.K. Consulting helps healthcare providers with a full spectrum of pricing and revenue optimization questions, including price setting for new or existing services, price benchmarking vs. competitors, holistic pricing strategies, preparation for pricing negotiations with insurers, and pricing execution.

Given the growing role of business-to-consumer (B2C)/out-of-pocket pay in healthcare and the current higher rate of inflation, we think healthcare service providers need greater near-term focus on enhancing their pricing strategies.

Continue reading about our views in our article on B2C Pricing Strategy in Healthcare and our approach to price benchmarking for healthcare providers here, and our pricing outlook for out-of-pocket healthcare in EU5 Healthcare Markets here. 

Our approach to healthcare pricing strategy

Healthcare service providers face a number of complex pricing questions:

• What is the right price point for our product(s) and/or services?
• How should we optimize our pricing strategy for an individual service or portfolio?
• What new pricing models/strategies do we need to consider and deploy?
• How should pricing strategies vary by care setting? By location? By funding source?  
• How do we create data/systems and decision-making processes to maintain disciplined pricing approaches?

We leverage our deep healthcare knowledge and unique experience within the industry, applying robust analytical and research techniques. With decades of strategic experience within the healthcare space, we know that each pricing problem is unique (reimbursement context, market and competitive dynamics, etc.) and solutions are only useful if there are executable actions to take.

Each L.E.K. case team is composed of healthcare industry experts and hands-on pricing leadership, integrated into a highly specialized team, suited to our clients’ needs. Pricing is approached within the context of the client’s broader growth goals (e.g., penetration goals for a newly launched product) to assess trade-offs and the impact of the pricing initiative.

As part of a comprehensive pricing strategy, we have an end-to-end pricing approach, which is reflected in five steps to optimize pricing in healthcare services across three phases: pricing diagnostics, pricing strategy and pricing enablers.

Healthcare pricing specialists with extensive experience

Our capabilities span the healthcare service provider arena and the spectrum of pricing issues. From broad pricing lever assessment to channel-specific pricing strategy development to strategic competitive response, our healthcare services and pricing specialists have a broad array of experience to inform any strategic need.

Client successes

• Strategic support for a leading dental chain on its pricing strategy: A leading corporate chain of dental practices engaged L.E.K. to develop a pricing strategy across its entire treatment range, considering local competitive dynamics and consumers’ willingness to pay for treatment types. We developed a model to calculate target price point for core treatments at each of the client’s ~300 practices, combining the results of a consumer survey of ~4,000 respondents and a bespoke competitor pricing database of 15 treatments across ~3,000 practices. Our client implemented a five-year pricing strategy based on incremental annual price increases, and substantially improved profitability.  
• Price benchmarking and strategy for a leading European dental group: A leading European corporate chain of dental practices engaged L.E.K. to develop its pricing strategy and assess the opportunities for price increases. We conducted price benchmarking for 350 clinics across seven European markets through a bottom-up methodology, reviewing local competitor prices for over 10 treatments. As a result, we helped the client identify significant pricing upside for the next year.  
• Pricing strategy for a leading provider of care homes for the elderly: L.E.K. was engaged to assist one of the leading providers of residential and nursing care homes for the elderly in the development of its self-pay pricing strategy and development of a home-based dynamic pricing tool. We conducted competitor benchmarking on pricing and care quality for each local area, conducted customer pricing survey and analysis, and developed a dynamic pricing model and recommendations for price optimization in each care home.