Why? Because people behave very predictably. For those whose insurance is still largely subsidized (i.e., traditional PPO plans) or those with means, they will gravitate to the high cost providers. For those who have to pay their own costs (i.e., high deductible plans) or those without insurance and limited means, they tend to the low cost providers.
Without adequate information, people will make decisions based on price alone. Now, I suspect the first counter argument from companies exposing price information in this manner is that they do, in fact, provide both quality and satisfaction information. To which, my response would have to be, courtesy of Jack Nicholson in As Good As It Gets, “Sell crazy someplace else. I’m all stocked up.”
Let me just say that I believe the industry wants to accurately assess quality in the form of outcomes, and it would like to understand consumer satisfaction. Nevertheless, it is in the proverbial Dark Ages where this is concerned. In other words, we could probably do as well by picking our doctors’ prowess by the circumference of their craniums.
As a result, companies that enable patients to shop for doctors and other providers based on price are interfering with the laws of supply and demand, and quite honestly, doing it irresponsibly
To give you an example, imagine your nearest academic medical center/health system. We all have one relatively nearby. I have two (within 10 miles). These systems are powerful suppliers in our geographic market, and as you might suspect, incredibly important to the different insurance companies competing in this region. After all, an insurance company without one or both of these providers in their network would look pretty anemic. And that would make it pretty hard to sell their insurance to employers. As a result, both systems wield a lot of power when negotiating reimbursement rates (“prices”) with payers.
Now, there are also a bunch of smaller suppliers, including the dwindling independents who struggle to survive. They have far less power than the health systems. They desperately need to be in the various insurance networks to pull in as many patients as possible, but they are not as essential to the insurance companies, and consequently have much lower rates.
Mind you, this price-setting process has little to nothing to do with the quality of the providers. It’s based solely on bargaining power. Hence, the bigger the system, the higher the prices.
Imagine a large employer in this market who hears about this great solution that can help steer its employees to the lowest cost providers. Again, I’m sure there’ll be promise that these low cost providers are all of the highest caliber, and that may or may not be true. To be honest though, the head of HR stopped paying attention after running a quick calculation on the potential savings. Even without being privy to the details, I can tell you that health system based providers are easily 60% more expensive (based on contracted rates) than their independent counterparts.
The employer would be foolish not to push this solution on to its employees. After all, with so many employees on high deductible plans, it’s in their interest to see the cheapest providers too.
Let’s assume this is a really big employer in this local market and they are effective in driving their employees to all the independent providers. All of sudden, the health system notices that their business is falling. They hire McKinsey to do a study to find out what is happening. A year later, after much research and many great questions, the study concludes that the health system has fallen victim to a classic “bait and switch” scam. Of course, the health system will threaten to break the contract, raise it’s fictitious MSRP prices, represented by its chargemaster, and generally put a squeeze on all the patients that belong to the offending payer that effectively colluded in the scam.
Ironically, in the process, the market’s prevailing rates will be set by… oh, yes, the excessive leverage of the payer over its weakest providers. I feel pretty comfortable in describing this as the commoditization of healthcare. For that matter, any solution that supports the ability for patients to shop for doctors predominantly (again, I would argue it’s currently being done exclusively) based on price is bad for doctors, bad for consumers, and bad for the industry.
Don’t get me wrong, the current system is horribly wrong and we desperately need to fix it, but the answer doesn’t lie in tinkering with the absurd mechanisms of the current Rube Goldberg nightmare. Maybe we should just…
David is the Founder and CEO of Medlio, healthcare’s only social CRM – a new technology designed to help providers better engage with their digitally-empowered customer base. He has more than 14 years of health technology experience as both an independent consultant and entrepreneur. During this period, he started and ran a primary care medical practice for 8 years, which gives him unique insights to the front-line challenges faced by provider organizations.
