HOW TO ESTABLISH A PRICING STRUCTURE?Financing eye care institutions in poor countries

Sasipriya K M

Lions Aravind Institute of Community Ophthalmology, Madurai, India

Pricing Structure: Underlying principle

•Organisation’s Mission

•Business model

Pricing Structure: Considerations

•Understanding the community

•Service volumes

•Encouraging greater footfalls in the hospital

Understanding the income levels

The bird of gold: The rise of India’s consumer market – May 2007, McKinsey Global Institute, p.12

Above cost – market rates

Pricing that would encourage patients to pay

Willingness to pay:• Sample size: 1271 households (one person represented)• 96% of the patients were willing to undergo cataract

surgery• 57% were willing to pay irrespective of availability of free surgeries • 31% were willing to pay if free surgeries were not available

• Of these, 27.8% were willing to pay at Rs. 500 – 1000/-• 45% were willing to pay between Rs. 300 – 450/-

Unpublished report: Household Willingness to Pay for cataract surgery in Rural India - Muralikrishnan Radhakrishnan, Rengaraj Venkatesh,

Vijayakumar Valaguru & Kevin Frick

Willingness to pay for phaco surgeries: an example from Aravind Theni

Madurai 9,082

Tiruvelveli 9,224

Theni 5,180

Coimbatore 9,717

Pondicherry 11,184

Revenue per Surgery

April May June July August September0%

10%

20%

30%

40%

50%

60%

70%

40%47%

38%34% 35% 38%

59% 62% 61%57% 57%

52%

% of PHACO surgeries 2010

2011

An example from hinterland

Cataract surgeries:

2009 -10 2010 - 11

Paying 3,370 3,623

Subsidised 529 759

Outreach 2,331 2,648

Total 6,230 7,030

Surgical revenue (patient receipts)

23% 35%

Consider 1,000 persons requiring cataract surgeryin a community

On the basis of the economic profile…

Profile Surgeries

Pricing

Very poor(30%) 300 Free

Poor(20%) 200Subsidized

Low Middle(25%)

250 Cost +

Middle(20%) 200 Cost ++

High(5%) 50Cost +++

Total (100%)

1,000

Rate(Rs.)

Revenue

0 0

750 150,000

3,000 750,000

5,0001,000,0

00

10,000 500,000

2,400,000Cost of 1,000 Surgeries (Rs.1,500/surgery): 1,500,000

Surplus: 900,000

Pricing strategy: is beyond hard money!

•Quality of the services •Designing the services taking into account the “other costs” to the patients

•Transparency •Standardisation •Utilisation of the resources

Thank You

Better pricing strategy =

Service volumes + better quality + financial health!