Pricing Strategies in the Healthcare Industry

In healthcare, pricing is a complex activity that creates confusion given the nature of products offered in healthcare and patient protection policies. Nevertheless, like any other industry, the healthcare industry engages in pricing strategies to meet different objectives. Different pricing strategies are employed in healthcare depending on the intended outcomes. The healthcare sector tends to use pricing strategies that are different from those of other sectors because health products such as insurance are more pervasive (Garrison & Towse, 2017). Normal markets work on the principles of supply and demand, but this approach cannot hold in the healthcare sector. Garrison and Towse (2017) assert that there is a risk of supplier-induced demand affecting prices. As a result, laws, and regulations have to be implemented to counteract this possible effect. Healthcare providers are therefore required to avoid influencing the demand for services.

Value-based pricing is one of the approaches employed in healthcare to address the issue of individualized care. Value-based pricing is a healthcare strategy for deciding the price of products while considering the client’s psychological, productive, and economic factors. The aim is to deliver healthcare products that are tailored to meet the unique needs of the clients. According to Hirpa et al. (2020), there is a growing consensus on the importance of providing patient-centered care in healthcare. In this respect, patient-centered care refers to offering clients care that meets their individual preferences, values, and needs. The rationale behind patient-centered care is based on the argument that there is a higher chance of improving clinical outcomes, patient satisfaction, and quality of life if care meets patient preferences and needs (Hirpa et al., 2020). An essential aspect of value-based pricing is that it is aligned with patient-centered care because it seeks to deliver the most critical care services to the client. The value-based pricing strategy requires the healthcare institution to understand the needs of the clients and their perception of the institution.

Another pricing strategy employed by healthcare bodies is price skimming which often targets clients with a significantly high income. The approach entails setting products as service costs at a high value that only attracts high-income clients. The strategy is effective in instances where there is an introduction of a new high-end service or product. The strategy aims to achieve maximum profits once a new investment is established. As time goes by, the price is lowered to accommodate customers in low-income groups. The pricing strategy is associated with income as a determinant of health. It is established that low-income adults are more likely to experience adverse outcomes due to chronic illnesses than high-income adults (Chokshi, 2018). Health inequality due to social-economic factors is a major factor that is influenced by the price skimming strategy.

The healthcare industry also employs a competitive strategy in dictating the price of healthcare products. The competitive pricing technique is similar to that of other sectors where the set price targets business competitors. In this approach, pricing is unstable because an organization must keep track of competitors’ reactions and adjust the price accordingly. Healthcare organizations employ this strategy to prevent competitors from attracting clients who are already customers of the organization. The approach can be very risky considering that products tend to vary between business competitors.

Overall, the healthcare industry is a unique sector due to the sensitivity of the services and products it offers. However, since it is in the profit-making business, the industry must design pricing strategies aligned with acceptable healthcare practices. The pricing strategies are designed to attract different types of customers, such as high and low-income earners. Also, pricing strategies in healthcare focus on competing healthcare service providers.


Garrison, L. P., & Towse, A. (2017). Value-based pricing and reimbursement in personalised healthcare: introduction to the basic health economics. Journal of Personalized Medicine, 7(3), 10.

Hirpa, M., Woreta, T., Addis, H., & Kebede, S. (2020). What matters to patients? A timely question for value-based care. Plos one, 15(7), e0227845.

Chokshi, D. A. (2018). Income, poverty, and health inequality. Jama, 319(13), 1312-1313.

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