Becton Dickinson Case
Question 1
How has the healthcare industry changed (pre-1983 to post 1983)? What are the implications for BD? How has BD managed to build up an 80% market share in this market? Which many competitors bigger than BD have tried to enter without success?
In 1983 the entire health care industry was affected by the changes that the U.S government made in how to reimburse hospitals for Medicare patients (40% of all hospital patient days). So, let 's see how the situation was before and after these changes.
Before 1983
Hospitals had been reimbursed for all costs incurred in serving those patients.
Hospitals were rewarded for efficiency.
The buyers at the hospitals were specialist, without purchasing skills or interests in negotiating for prices.
Distributors were making great profits and not paying enough attention to costs.
After 1983
Under the new system, the payment to a hospital was based on national and regional costs for each DRG, not on the hospital 's costs. Moreover, the national and regional averages were to be updated, so that if hospitals improved their cost performance, they would be subject to stricter DRG-related payment limits.
Hospital admissions fell 4%-the largest drop on record; the average length of a patient 's hospital stay fell 5% to 6.7 days, also the largest drop ever.
Multihospital chains and buying groups were formed, with the aim of increasing the hospital 's bargaining and purchasing power for equipment and supplies. In 1985, about 45% of all U.S hospitals were affiliated with multihospital chains, and it was predicted that 65% would be so affiliated by 1990
Individual hospitals belong to a number of different buying groups and often switch from one group to the next.
Distributors are pressed to reduce their costs to balance the lower margins from lower prices.
A primary objective for BD in both tubes and needles was to maintain a leading market share. BD planned to combat Terumo through accelerated new product
How has the healthcare industry changed (pre-1983 to post 1983)? What are the implications for BD? How has BD managed to build up an 80% market share in this market? Which many competitors bigger than BD have tried to enter without success?
In 1983 the entire health care industry was affected by the changes that the U.S government made in how to reimburse hospitals for Medicare patients (40% of all hospital patient days). So, let 's see how the situation was before and after these changes.
Before 1983
Hospitals had been reimbursed for all costs incurred in serving those patients.
Hospitals were rewarded for efficiency.
The buyers at the hospitals were specialist, without purchasing skills or interests in negotiating for prices.
Distributors were making great profits and not paying enough attention to costs.
After 1983
Under the new system, the payment to a hospital was based on national and regional costs for each DRG, not on the hospital 's costs. Moreover, the national and regional averages were to be updated, so that if hospitals improved their cost performance, they would be subject to stricter DRG-related payment limits.
Hospital admissions fell 4%-the largest drop on record; the average length of a patient 's hospital stay fell 5% to 6.7 days, also the largest drop ever.
Multihospital chains and buying groups were formed, with the aim of increasing the hospital 's bargaining and purchasing power for equipment and supplies. In 1985, about 45% of all U.S hospitals were affiliated with multihospital chains, and it was predicted that 65% would be so affiliated by 1990
Individual hospitals belong to a number of different buying groups and often switch from one group to the next.
Distributors are pressed to reduce their costs to balance the lower margins from lower prices.
A primary objective for BD in both tubes and needles was to maintain a leading market share. BD planned to combat Terumo through accelerated new product