By Mark Spurlin, CPA
New Healthcare delivery models, services and platforms are rapidly deploying across the nation and consumers/patients have access to an ever-growing pool of options when it comes to how and where they receive care. Bringing a new product or service to market can be a time consuming, risky, complicated and costly endeavor whether you’re a start-up looking to bring something totally new, an established health system or even a small physician practice. Devising a pricing strategy for these services that is commercially reasonable and fair market value should start with the following questions:
- What set’s you, your product or service apart from the competition? (price, quality, distribution, IP/technology, access, etc.)
- What is value to the customer, real and perceived? (actual benefit > actual costs and perceived benefit > perceived cost i.e. quality, convenience, trust, reputation, etc.)
- Is that something others will even be willing to pay a for? (unmet or under met demand, can you create demand)
- Is it something they’d be willing to pay a premium for? (insurance or Medicare sets price or consumer pays out of pocket)
It is just as important to understand what the product or service costs to produce/provide which can be difficult, especially when it’s a new venture. To do this you must have a detailed understanding of the direct and indirect costs, other overhead etc. This will give you the inputs and assumptions necessary to build out a proforma analysis. It is then essential to pressure test these assumptions and refine them as necessary.
While this process can be performed internally, having a third-party fair market valuation can provide added value by not only assisting with regulatory compliance, but also by offering a different perspective and/or offering analysis around alternative models.
At Root Valuation we take the time to also understand the company, the product or services, and the goals of the various stakeholders involved. We take the time to help ensure small miscalculations or misjudgments don’t lead to costly mistakes, and work to identify any value that may have been overlooked.