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Collective buying power is the ability of a group of consumers or businesses to leverage the group size in exchange for discounts.
Many different companies have used this concept to build business plans. Warehouse clubs function in a similar way by offering products in bulk to consumers who pay membership fees. In the same sense, collective buying power is a cooperative approach to leveraging group size to benefit the consumer by offering
Internet companies have been leveraging this concept, bringing people together online. The company will arrange a coupon offering, that will only go into effect if more than a before agreed upon number are sold. Collective buying power is the ability of multiple individuals or groups to buy goods or services in bulk and at quite a discounted price. This is possible due to the sheer volume of buyers, which drives down prices and allows each group or individual to benefit from economies of scale. Collective buying power is main thing in reducing costs, as it ensures that purchasing decisions are made with consideration for both quality and cost-saving measures.
One example of a business plan that uses collective buying power is found in the dental industry. Discount dental plans negotiate discounts for dental services on behalf of their members. Depending on the details, it may sometimes be considered a win-win scenario for the discount plan members (dental patients) and for dental care providers (dentists, hygienists, dental specialists, etc.). Patients benefit because they are receiving dental services at discounted rates. The benefit to dentists is that, even though they must offer their services at discounted rates under these plans, they are also likely to increase their patient volume. Depending on the size of the discount offered and the number of new patients, this may be financially beneficial for the dental providers.
However, such an arrangement could also result in downsides for both dental service providers and patients. Dentists may end up doing more work while earning the same amount of money. For example, without a discount plan, a dentist may charge $200 per treatment and provide the treatment to 50 patients, earning a total of $200/patient × 50 patients = $10,000. Under a discount plan, the dentist may charge only $125 per treatment, but can provide the treatment to 80 patients, earning a total of $125/patient × 80 patients = $10,000. Note that total earnings under the plan ($10,000) are the same as the earnings without the plan ($10,000). In other words, under the discount plan, the dentist is providing a greater number of services without any increase in earnings to go along with it.
There may also be a downside from the perspective of patients in a high-volume practice scenario like this: A dentist who needs to treat 80 patients instead of only 50, while being compensated the same total amount, will have less time and resources available to devote to each individual patient. This has the potential to become a situation of "quantity over quality", and patients might receive lower-quality care overall. In the U.S., the critical term "Medicaid mill" is sometimes used informally to describe dental or medical practices that compensate for low Medicaid reimbursement rates by seeing a high volume of patients.
Collective buying power should not be confused with "purchasing power", "consumer purchasing power", or "collective purchasing power", which is a consumer's ability or a group of consumers' ability to buy goods and services as distinguished from the amount of money a consumer has.
It should also not be conflated with "buying power" or "consumer buying power", which has two definitions. The first, a consumer behavior definition, found in economic psychology implying the income available for discretionary spending among segments in the population. In short, it is a measure of the ability and willingness to buy goods or services. The second is an industrial definition, which refers to the relative influence an individual or a job function (engineering, purchasing, production) has in a purchasing decision. Power may be based on reward abilities (granting monetary or perceptual benefits), coercion, legitimacy, personality, or expertise.
In the United States, Medicaid is a government program that provides health insurance for adults and children with limited income and resources. The program is partially funded and primarily managed by state governments, which also have wide latitude in determining eligibility and benefits, but the federal government sets baseline standards for state Medicaid programs and provides a significant portion of their funding.
Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are sold at different prices by the same provider in different market segments. Price discrimination is distinguished from product differentiation by the more substantial difference in production cost for the differently priced products involved in the latter strategy. Price differentiation essentially relies on the variation in the customers' willingness to pay and in the elasticity of their demand. For price discrimination to succeed, a firm must have market power, such as a dominant market share, product uniqueness, sole pricing power, etc. All prices under price discrimination are higher than the equilibrium price in a perfectly competitive market. However, some prices under price discrimination may be lower than the price charged by a single-price monopolist. Price discrimination is utilised by the monopolist to recapture some deadweight loss. This Pricing strategy enables firms to capture additional consumer surplus and maximize their profits while benefiting some consumers at lower prices. Price discrimination can take many forms and is prevalent in many industries, from education and telecommunications to healthcare.
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In the United States, a group purchasing organization (GPO) is an entity that is created to leverage the purchasing power of a group of businesses to obtain discounts from vendors based on the collective buying power of the GPO members.
The California Medical Assistance Program is the California implementation of the federal Medicaid program serving low-income individuals, including families, seniors, persons with disabilities, children in foster care, pregnant women, and childless adults with incomes below 138% of federal poverty level. Benefits include ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder treatment, dental (Denti-Cal), vision, and long-term care and support. Medi-Cal was created in 1965 by the California Medical Assistance Program a few months after the national legislation was passed. Approximately 15.28 million people were enrolled in Medi-Cal as of September 2022, or about 40% of California's population; in most counties, more than half of eligible residents were enrolled as of 2020.
Group buying, also known as collective buying, offers products and services at significantly reduced prices on the condition that a minimum number of buyers would make the purchase. Origins of group buying can be traced to China, where it is known as Tuán Gòu, or team buying.
Dental insurance is a form of health insurance designed to pay a portion of the costs associated with dental care. There are several different types of individual, family, or group dental insurance plans grouped into three primary categories: Indemnity, Preferred Provider Network (PPO), and Dental Health Managed Organizations (DHMO).
The Medicare Part D coverage gap was a period of consumer payments for prescription medication costs that lied between the initial coverage limit and the catastrophic coverage threshold when the consumer was a member of a Medicare Part D prescription-drug program administered by the United States federal government. The gap was reached after a shared insurer payment - consumer payment for all covered prescription drugs reached a government-set amount, and was left only after the consumer had paid full, unshared costs of an additional amount for the same prescriptions. Upon entering the gap, the prescription payments to date were re-set to $0 and continued until the maximum amount of the gap was reached or the then current annual period lapses. In calculating whether the maximum amount of gap had been reached, the "True-out-of-pocket" costs (TrOOP) were added together.
A dental spa is a dental facility supervised by a licensed Oral Health Care Provider in which dental services are provided alongside spa treatments.
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The Empowering Patients First Act is legislation sponsored by Rep. Tom Price, first introduced as H.R. 3400 in the 111th Congress. The bill was initially intended to be a Republican alternative to the America's Affordable Health Choices Act of 2009, but has since been positioned as a potential replacement to the Patient Protection and Affordable Care Act (PPACA). The bill was introduced in the 112th Congress as H.R. 3000, and in the 113th Congress as H.R. 2300. As of October 2014, the bill has 58 cosponsors. An identical version of the bill has been introduced in the Senate by Senator John McCain as S. 1851.
Aspen Dental Management, Inc. (ADMI) is an American dental support organization (DSO), a dental practice management corporation that provides business support and administrative services in the US. Its headquarters is in Chicago, Illinois.
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Kool Smiles is a dental services provider, based in the United States. Its headquarters are in the Kool Smiles Patient Support Center in Marietta, Georgia, U.S., in Greater Atlanta and has over 100 offices located across sixteen states.
The 340B Drug Pricing Program is a US federal government program created in 1992 that requires drug manufacturers to provide outpatient drugs to eligible health care organizations and covered entities at significantly reduced prices. The intent of the program is to allow covered entities to "stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services." Maintaining services and lowering medication costs for patients is consistent with the purpose of the program, which is named for the section authorizing it in the Public Health Service Act (PHSA) It was enacted by Congress as part of a larger bill signed into law by President George H. W. Bush.
Brighter is a Santa Monica-based internet and healthcare company that connects dentists, patients, and dental insurers. The company licenses a consumer-driven dental benefits experience to insurance carriers to help them administer dental plans more efficiently and offer patient-friendly services such as online and mobile provider directories, patient reviews, and a proprietary online appointment scheduling feature, Brighter Schedule. The company's founder and CEO is internet entrepreneur Jake Winebaum.
A buyers club or buying club is a club organized to pool members' collective buying power, enabling them to make purchases at lower prices than are generally available, or to purchase goods that might be difficult to obtain independently.
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Dental service organizations, known in the industry as dental support organizations or abbreviated to DSOs, are independent business support centers that contract with dental practices in the United States. They provide business management and support to dental practices, including non-clinical operations.