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X-Mozilla-Status: 0011 Message-ID: <[log in to unmask]> Date: Tue, 13 Aug 1996 13:31:04 +0000 From: Martin Evans <[log in to unmask]> Organization: Syntegra X-Mailer: Mozilla 2.0 (Win16; I) MIME-Version: 1.0 To: [log in to unmask] Subject: Re: Quids in References: <[log in to unmask]> Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Joseph Chacko wrote: > > Bowing to ever-increasing pressure to run the practice like a business, > we have spent a year trying our hardest to reduce prescribing costs > without compromising patient care........... > > My question to you experienced businesspeople is, > > "What is the optimal strategy when offered fiscal incentives > by the government, considering your position as one of many players > in a game where the objective is to maximise long-term profit?" > A gentleman called Prof. Michael Porter in the US has made a 'heap'out of analysing competitiveness in industries and strategies for how best to maximise profit. He identifies five sources of pressure on profit - 1. direct competitors - not really relevant in general practice whatever the recent changes 2. new entrants - highly regulated for NHS general practice 3. substitute products - could possibly happen through BUPA primary care scheme or community trusts offering primary care, but again main barriers are professional structures and political resistance to change 4. supplier power - general practice does not bear the costs of drugs directly, labour is relatively cheap or in the partnership! 5. buyer power - the BIG one! The NHS is your major buyer and can use its near monopoly buying power to minimise your cost to it. There appear to be at least four options to maximise profits: 1. diversify to increase the number of buyers, reduce an individual buyers power and increase prices 2. cut the costs of your business - become one of the lowest cost (not price) producers 3. 'play the buyer's system' - remember that the buyer cannot model the cost structure of each individual general practice - they see two or three 'average' general practices (non-dispensing, dispensing, fundholder etc.) If you can design your services so that you are 'untypical' in a way that maximises income against costs you will be more profitable than practices who are providing an 'average' service. i.e. you try and bias your business towards profitable niches. 4. enter into a partnership with buyer - the ideal is where the buyer and supplier have aligned objectives. This is difficult where there is a one to many relationship so it would require large 'multi-funds' to be set up. Examples are found in automotive industry where car assemblers have set up long term relationships with suppliers - it allows massive reductions in administration and audit work (Ford are supposed to have reduced its purchasing dept. headcount by a factor of 10+!). But it does require a degree of trust that I have yet to see between FHSA and GPs sadly! Best Wishes, Martin Evans ([log in to unmask]) %%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%