A live baby or your money back: The marketing of in vitro fertilization procedures .Management Science

Abstract A large number of clinics that offer in vitro fertilization (IVF) have begun to aggressively market the following options to couples seeking to have a genetically related baby: (1) an a la carte program where the couple pays $7,500 per attempt regardless of the outcome; or (2) a money-back-guarantee program where the couple pays a $15,000 up-front fee that covers up to three attempts -however, if after three cycles there is no live birth delivery, then the full $15,000 is refunded. If the couple contemplating these two choices knew the success probability for each attempt, then a simple analysis would show whether the a la carte or money-backguarantee program is better. Unfortunately, it is difficult for couples to gather the relevant data and even more daunting to adjust the aggregate data to their own situation. In this article we assemble the most recent available data and develop a model that allows patients, clinics, and public policy advocates to assess the a la carte vs. moneyback-guarantee programs. The most surprising result of our analysis is that the moneyback-guarantee program appears (for the patients) to be "too good to be true." That is, with reasonable projections from the most recent data, the money-back guarantee yields a substantial negative expected profit per couple for the clinics. More importantly from the patients' perspective, the money-back-guarantee turns out to be the better option for all couples with less than 0.5 success probability per cycle. (The breakeven probability is even higher if risk aversion is considered.) Virtually all traditional IVF patients can be considered to have per-cycle success probabilities well below 0.5. Can it be that clinics are offering money-back-guarantees that both lose money for the clinics and give the patients a deal that is far better for them than the traditional a la carte payment method? After a detailed analysis of the key variables -i.e., success rate per attempt, heterogeneity of couples' base rates of success, individual couples' "learning" on successive attempts, and cost to the clinic per attempt -nothing makes these money-backguarantees profitable for the clinics. Since presumably clinics are not in business to lose money, the analysis must be missing something major. Based on the kind of aggressive marketing (e.g., mass media) for the money-back guarantees, we believe it is bringing in younger and less infertile patients than those who were in IVF clinics prior to 1996. In other words, the marketing of money-back guarantees may be inducing couples who would previously have used -successfully -other less invasive procedures with fewer potential side effects and less risk of multiple births to decide, "Why wait: let's jump to IVF now and we'll get our money back if it doesn't work." We show that under this scenario the money-back-guarantees can be profitable for the clinics. The implications of earlier use of IVF are then considered for patients, clinic managers, and from an overall public policy point of view. Although the clinics that make profits and the couples who either receive a baby or their money-back are unlikely to complain, there are some significant downsides to the marketing of IVF money-backguarantees that need to be understood. Just as mothers everywhere tell their children, "When something looks too good to be true, then it is too good to be true!"