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Statement: A trust hospital pays its pathology laboratory a fixed share of the fee charged for every test performed there, and has instructed the laboratory to hold down testing that a patient does not need. In the two years since the share was introduced, the tests ordered for each patient admitted have risen by half, while the hospital's admissions have scarcely moved. Which of the following courses of action follows from the statement?

Competition practiceLogical / Critical
  • AThe laboratory should be instructed a second time to hold down testing that a patient does not need
  • BThe fee charged to the patient for each test should be reduced
  • CThe laboratory should be paid a fixed sum each month in place of a share of the fee, so that what it earns no longer rises with the number of tests it performs
  • DThe hospital should engage a second pathology laboratory alongside the present one

Step-by-Step Solution

The hospital has asked for fewer tests while paying more for more tests, and the payment has plainly proved the stronger of the two. What follows is to take the conflict out of the payment, and a fixed monthly sum does exactly that: the laboratory's income stops moving with the count, and the instruction is no longer working against the hospital's own cheque. Repeating the instruction leaves the payment as it is and has already been tried once. Cutting the fee lowers what a patient pays for each test and gives the laboratory reason to order more of them, not fewer. And a second laboratory paid on the same terms simply doubles the very payment that caused the trouble.
Answer: C) The laboratory should be paid a fixed sum each month in place of a share of the fee, so that what it earns no longer rises with the number of tests it performs

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