Case | HBS Case Collection | August 2016

VMD Medical Imaging Center

by Susanna Gallani and Eva Labro

Abstract

VMD Medical Imaging Center, a local independent provider of medical imaging services, is facing some important challenges. Despite efficiency improvements and cost cutting initiatives carried out over the past few years, their profitability is shrinking; their prices are becoming uncompetitive; and their main customer, a large regional research and teaching hospital, is threatening to seek alternative, more cost-effective, suppliers. The case addresses a number of important challenges that firms typically face with respect to designing and maintaining their costing systems, including the need to keep the costing system in line with the business processes of the firm throughout its life cycle; the setting of transfer prices, which highlights the interdependencies between costing systems and pricing strategies; and the demand-induced death spiral, which is brought about by a shift in sales mix from labor intensive to technology intensive imaging services. In addition, this case offers an opportunity to develop the class discussion in multiple directions, at the discretion of the instructor, such as the role of costing systems in organizations, the relationship between costing and strategy, and the facilitating role of costing with respect to cross-functional coordination.

Keywords: Costing; Death Spiral; Transfer Pricing; Activity Based Costing and Management; Competitive Strategy; Medical Specialties; Health Industry;

Language: English Format: Print 6 pages EducatorsPurchase

Citation:

Gallani, Susanna, and Eva Labro. "VMD Medical Imaging Center." Harvard Business School Case 117-002, August 2016.

Related Work

  1. Teaching Note | HBS Case Collection | August 2016 (Revised June 2018)

    VMD Medical Imaging Center

    Susanna Gallani and Eva Labro

    VMD Medical Imaging Center addresses a number of issues related to the role of costing systems in organizations and the challenges impacting their design and maintenance as the organization grows and develops over time. This teaching note begins by offering detailed suggestions for effective class discussions centered on the main issue addressed by the case (i.e. the need to revisit the costing system in light of a change in the demand mix for the services offered by the organization). In the second part of the teaching note, the authors provide suggestions for several additional avenues along which instructors can develop further discussion about the integration points between costing systems and other important activities, such as strategy definition and execution, transfer pricing, and cross-functional coordination.

    Keywords: Strategy; Cost Management; Management Systems;

    Citation:

    Gallani, Susanna, and Eva Labro. "VMD Medical Imaging Center." Harvard Business School Teaching Note 117-003, August 2016. (Revised June 2018.)  View Details
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About the Author

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Susanna Gallani
Assistant Professor of Business Administration
Accounting and Management

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