Diagram 1

Question

Hi, I don't understand why diagram 1 is showing less patient referred means more annual revenue for the client? Surely the driver of revenue here is more tests i.e. more people?

Answer 1

Hi Maryam,

Please make sure to read/process all information in a given case!

As the case states:

"This graph shows the contribution to the total revenue of ACR Medical Labs split up by the different sizes of customers (in this case doctors). For instance all doctors who refer on average 2 patients per day to ACR will contribute in total with $80 million to the total revenue of ACR.

It might seem strange at the beginning that doctors with less referals of patients contribute a higher share of the total profit. This is due to the fact that there are more doctors that refer small amounts of patients to the client than doctors that refer many patients per day.

The more patients a doctor has, the more likely it is that they will start their own lab and not refer any patients to the client. This results in overall lower contributions to the total revenue."