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What is VALUE?

What is VALUE? FACE MASK = COST, PRICE or VALUE?

Malaysian Valuation Standard 1 says:

Market value is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

Definition of Price

Price is the amount of money paid by the buyer to the seller in exchange for any product and service. The amount charged by the seller for a product is known as its price, which includes cost and the profit margin. For example- If you buy a product for Rs 250, then it is the price of that product.

Definition of Cost

Cost is the amount incurred on the inputs like land, labour, capital, enterprise, etc. for producing any product. It is the amount of money spent by the company in the manufacturing of a product. For example- If a company manufactures shoes, then the expenses incurred on raw materials, salaries, rent, interest, taxes, duties, etc. determines the cost of the product.

Definition of Value

Value is the usefulness of any product to a customer. It can never be determined n terms of money and varies from customer to customer. For example- If you are going to a gym by spending 1000 bucks a month, the output seen is worth the expense, then it is the value that you create for a gym, regarding the service being offered there. Here the worth is its value.

I would like to refer to the article:

Private Hospital Under Investigation After CHARGING Patient RM200 For Face Masks Nurses Used

RM201.60 charged for 3-ply face masks by the hospital, link here.

Imagine checking your hospital bills to find that exorbitant fee. Netizen Hilman took it to Facebook to express her sheer shock as a private hospital in KL charged him RM201.60 for 18 face masks used to treat her daughter.

“You charged me RM201.60 for 18 pieces of face mask. Meaning that you charged me RM11.20 per piece? Seriously WTF???!!!! Where is your ethical and professionalism in conducting a medical business?”

The Malaysian Pharmaceutical Society (MPS) had an article published in The Malay Mail below:

Why the leeway for private hospitals over mask profiteering? Pharma firms ask

Link here

Let me assume the stories from both sides:

PRIVATE HOSPITAL (SELLER)

The benefits you can get from us when we take care of your illness. The value is not just the face mask. We have all the expertise of cutting edge technology and the best in the region.

Similarly to properties, the value of the property is about the benefits the buyer can get owning the property – including its surroundings, its accessibility and prestige, capital value appreciation, etc.

PATIENT (BUYER)

The price of face mask is a control item – RM1.50 per piece. How can it be profiteering to RM11.20 per piece? What technology that has been used which enhanced the face mask to its exorbitant price? It is 7.46 times inflating the price!

The Malaysian Pharmaceutical Society (MPS) has the standpoint that pharmacies which sold over the RM1.50 were imposed fine, but the Private Hospital was not taken action by the enforcement agency, yet merely under investigation.

The case

There is likely some deliberation over this issue. The end of which will not be nice to any of the three parties (Private Hospital, Patient and the Community). The Private Hospital has already suffered from the bad publicity. The patient has been under tremendous stress. The community of pharmaceuticals will be even more scrutinized.

To go back to the basics…

What is VALUE? It is an amount exchanged from a willing seller and a willing buyer in arm’s length (after some marketing promotion) who are knowledgeable, prudent and without compulsion.

My own definition might be easier to understand. Value is the benefit perceived and it is not Price or Cost. The willingness of the patient to be treated in such an establishment is viewed as Benefit the patient perceived to receive (recover from illness).

As long as there is no negligence on the part of the hospital, value (of its service – NOT individual COST used) is rather a perceived BENEFIT, and not the COST or PRICE of the FACE MASK. On this there must be also another point to be evaluated, which is – did the patient had NO CHOICE but to end up in this facility? Looking at the many private medical facilities in the Capital City of Kuala Lumpur, this could not be the case. So, if the patient knowingly sought treatment in this hospital because it appeared to be the best, that is the perceived BENEFIT of a voluntary choice.

In fact, COVID-19 has thought us many things, eg. the issue of ventilators. Imagine a fully-equipped hospital keeping ICU equipment, ventilators and staff (specialists), all these cost money (salary, electricity, maintenance). Who is to pay for them?

Patients – yes. How many? How much?

Imagine the worker using PPE, including Face Masks, how to itemize each and every item and making a sum to be charged to individual patient? And, how many potential patient is to be allocated to make such payment budget?

So, the cost of private medical facility is a lot more than just a face mask pricing or mark up. It is not so simple.

Ref:
http://keydifferences.com/difference-between-price-cost-and-value.html#ixzz4TBAZn8LK

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