ABSTRACT
Pricing of alcoholism treatment services has become more complicated as a result of such changes of prospective payment systems, the increasing intensity of competition, and the growth of preferred provider organizations and health maintenance organizations. To maintain or enhance the bottom line, it is necessary to look into the other component of profitability—volume and to examine the relationship between price and volume. It is becoming increasingly clear that there is market sensitivity to changes in prices in the health care sector (Mason, 1987). Although inflation in the economy has decreased significantly, it is still high in the health care sector. As a consequence, pressures from health care services’ consumers continue, and insurers and employers are negotiating selective contracting arrangements (Mason, 1987). Pressures such as these have made the task of setting prices a critical factor in strategic planning.
