Diagram Reading & Insight

Question

Hi Experts,

I have a doubt about the use of the first diagram in this case. Combined with the information 'the sales are falling because more doctors are opening their own labs', how can we generate useful insight from this chart? I personally find it difficult for 2 reasons:

1. There is no comparative information between the past and the present, so we really cannot tell which doctors are opening their own laboratories. It would be more persuasive if we have information like e.g. the revenue contributed by doctors who send 10 patients jumped from 10% to 5%.

2. Even if we agree with the assumption that ' doctors who send more patients to the lab are more likely to open their own lab', how can we know that those who sent only 1 patient to the client's lab doesn't have their own lab so they only send 1 per day? In a word, the market overview in terms of the revenue contribution of the client cannot represent the entire market situation. there are som many uncertainties.

It would be great to know how you think of the diagram.

Thanks!

Answer 1

Hello,

Your considerations are reasonable, but the aim of this diagram is to answer question 5: "To which extent could this threaten ACR’s profits?".
First of all, you should calculate the number of patients that makes opening a lab profitable (8 customers/day) and then you can make the assumption that "doctors with more than 8 patients on average per day will tend to start their own laboratories". In this way you can calculate that you could have a loss equals to 5% of total revenues.
Is it clear?
Best,
Luca

Answer 2

I am not sure I entirely follow your questions but here is what we can say

35% of doctors refer only 1 patient per day and 54% refer 2 patients or fewer per day. That can indicate one of 2 things
- The lab provides specialty services for which volume is not in very high demand from a lot of doctors
- The lab provides services that many doctors can also provide themselves by investing a small amount so the lab either gets overflow from there or patients from where doctors don’t have their own facilities
Given that we know that we know more doctors are opening their own labs it is clear that that the majority of patients are from doctors who have their own labs but either send over capacity here or for some specialized tests that they don’t currently have the instruments for
There are a few steps that lab can take
- Offer more specialized tests that are not cheap/easy for doctors to invest in
- Lower prices to lower incentive for a doctor to have their own facility
- Market to new doctors to increase their referrals