THINKING BUSINESS
a blog by Chris Barrow

Supply and demand

It’s THE basic economic rule. When OPEC meet they decide to release or restrict the supply of oil to a world hungry and dependent on fossil fuels. When the Bank of England meet they decide to release (as yesterday) or restrict the supply of cash to a world hooked on consumerism. Affluenza. And when you cannot get hold of a cabbage patch doll, a tamagotchi, a Tracy Island or a Wii – everybody wants one and the price goes up. Bear all that in mind when an orthodontist asks me this question:

I have a great contract with my PCT and they want me to take more. The waiting list in my practice for NHS treatment is no more than 12 weeks. We have difficulty in selling private treatment options and I would like to do more private work and eventually wean myself off the NHS. How do I balance these conflicting facts?

Good question. So lets look at supply and demand. In the NHS, who is the supplier? The PCT. And so they have the power. They can meet (like OPEC) and decide to release or restrict the supply of UDA’s or UOA’s – and in so doing, they can affect if not control the price. Over time, the dentist becomes dependent. In the Private sector, who is the supplier? The dentist. And so the dentist has the power. The dentist decides how many clinicians are doing how many sessions in how many surgeries. And as the supply diminishes, the price moves upwards. So if you have a 30-month wait for NHS ortho treatment, you will sell lots of Private. If you have a 12-week wait for NHS ortho treatment, you will struggle to sell Private. Simple economics. The bungee jump is to tell the PCT that you will not accept any more work – and, as my dentist said yesterday, “run the risk that they will send work to the competition and gradually reduce your quota as a form of anti-selection.” That’s absolutely right. They have the power. A mate of mine used to run a business that sold potatoes to Marks & Spencer. One day, M&S decided to source their spuds elsewhere (overseas) – his business collapsed overnight. M&S had the power. Who has the power in your business?

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