While many patients are attracted to our surgical prices, many patients are scared off by our pricing. ”There is simply no way a facility could provide quality care at those prices,” many say. This saying is also common among those facilities who want no part of healthy competition, in an attempt to cast aspersions on our quality. Let’s break this down.
First, I would like to point out that we could have posted prices double what we posted, and still be the cheapest surgical option in this region (if not in the country). Perhaps even triple. One reason we didn’t do this is because we meant to maximize access to care, listing prices that most individuals (sometimes with the help of their family and friends) could afford. We also used our actual cost as our starting point, adding a marginal profit that allows for equipment upgrades and repairs. This is how every other business does business. Finally, we wanted everyone to know that we were profitable at these prices (as low as they are), to better expose those claiming to “not make a profit” while charging multiples (sometimes more than 10 times) what we had listed online.
Many times, the amount charged (and paid) for an item indicates quality. This is largely true when market discipline is present and consumer preferences rule the day. This is absolutely not the case in health care, one of the more powerful arguments and evidence that market discipline does not rule this industry. The price/quality relationship in the health care syndicate is distorted to the point that it is actually inverse! That’s right. The less you pay, in all likelihood, the better the quality. This counterintuitive point deserves an explanation.
If you are confident in your ability to provide extreme value, you are not only willing to compete, but you are anxious for competition, as this provides the ultimate opportunity to put your service, product or skills on display. This is yet another reason that those who are most willing to embrace the discipline of the free market are the ones who are also the most confident in their abilities and not at all afraid to embrace price transparency. In short, if you are wiling to compete your prices are….well…they are competitive!
If your prices are ridiculously high and you are still busy, you are probably engaging in abusive, cartel-like practices, more than likely because you have successfully created barriers to entry for potential competitors in your locale with the help of greedy legislators. You not only don’t have to care about what patients and customers think about your pricing, you don’t have to worry about their perception of your quality, as “what choice do they have?” ….after all.
Large health systems, having bought their referral sources (physician practices, usually) don’t have to compete and their quality suffers as a result. The prices charged by these same hospital systems are ridiculously high just as you would expect. The patients will keep rolling in as the doctors who work as their employees must refer “their” patients within this same hospital system or face the wrath of the administration. The services rendered at these hospital systems don’t have to be any good and they don’t have to be reasonably priced, as the patient referrals are guaranteed.
Lower healthcare prices signal an absence of the cartelization of health care and the signal the presence of some level of competition. Try to think of lower-priced physician and facility services as an indication of a desire to satisfy patient needs and demands, a desire to help patients rather than bankrupt them.
I know this has been redundant, but the idea is counterintuitive and I wanted to be clear at the risk of boring you.
G. Keith Smith, M.D.