Transplantation Market Overview

The market for organ transplantation is quickly becoming a mature one, which carries certain implications for a program's pricing and cost structures. Ten years ago, when liver transplants or lung transplants were more rare, transplant centers could charge more because very few others could provide the same services. Today, however, with many more providers in the marketplace, both hospital and physician transplantation services have become commodities to a large extent.

When a product or service becomes a commodity, it becomes essentially interchangeable with other similar products as far as the market and prices are concerned. In the case of the transplant marketplace, the ability of a competitor to do the same transplant in the same way as another center becomes what is known as a substitute. Commodities and their substitutes are subject to price sensitivity, where demand is tied inversely to cost—as cost goes down, demand goes up.

While transplants are not completely price sensitive because of the limit on organ donors, the commoditization of transplants has caused a very important cross-price elasticity, which affects the maximum amount payors are willing to pay for a center's product or service. How much a payor values the product and how much a center thinks the payor values the product will directly affect cost and pricing strategies.

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