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Date: Tue, 13 Aug 1996 13:31:04 +0000
From: Martin Evans <<a href="/cgi-bin/wa-jisc.exe?LOGON=A3%3Dind96%26B%3D--%26E%3D7bit%26L%3DGP-UK%26P%3D2064650%26T%3Dtext%252Fplain" target="_parent" >[log in to unmask]</a>>
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Subject: Re: Quids in
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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 (<a href="/cgi-bin/wa-jisc.exe?LOGON=A3%3Dind96%26B%3D--%26E%3D7bit%26L%3DGP-UK%26P%3D2064650%26T%3Dtext%252Fplain" target="_parent" >[log in to unmask]</a>)



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