Innovation and Policy: Consumer Driven Health Care and the Psychology of Pricing
There is a lot of discussion these days about consumer driven health care. A quick Google search alone generates millions of results. Few, however, have begun to discuss the psychology of pricing and consumer driven acquisition of health care.
Assuming that the individual (in some shape or fashion) finally has the ability to directly spend tax-deffered money on their health care costs through a transparent pricing mechanism (i.e. a hospital website that shows the base cost of a procedure), what do you think about the following:
- Should services be bundled (your "entire stay will costs x") or unbundled (the price of your stay is x, the implant for your joint is y, overnight parking is z)?
- People are more likely to go to a health club the first two weeks after having paid for a membership...should hospitals run "specials" for elective surgeries shortly after people sign up for an HSA?
- We often go to concerts or plays that we'd rather not attend simply because we have a $50 ticket in our pocket...how will consumers interpret "sunk costs" in their acquisition of health care services? Should hospitals run "deals" at the end of the year for people who have significant dollars left in their HSA?
- Will people want to pay up-front or be billed for their health care experience? What will providers want? Will hospitals provide an estimate but ask for your credit card on the front end should you want an "upgrade" during your stay?
These are just a few of the questions that come to mind from the provider side in thinking about the pricing issues related to consumer driven health care. While greater transparency in health care is a good thing, I suspect those providers that employ the research on pricing will fair better than others.
To get started...here is a great article from the Harvard Business School.
Additional Note: I'd like to just thank Tony Chen and the folks at Hospital Impact for their outstanding work in bringing health care issues to light and expanding the presence of the health care blogosphere. Great work Tony!
posted by J. Dinger @ 1:05 PM
2 comments
2 Comments:
Perhaps I'm in the minority, but health insurance is something I like to know I have but hope I rarely have to use.
That said, if I need to come into a hospital (either inpatient or outpatient) for a surgical procedure, I would ideally like to know the price for the entire episode of care including surgeon and anesthesia fees as well as any drugs or imaging that might be required. You may have to exert some effort to get the docs to cooperate and may be able to insist on it as a condition of their practice privileges. Given the cost of hospital services today, it would be nice to include phone service and TV as part of the package. Discretionary upgrades like a private room should be priced separately.
There should either be a price discount for prompt payment or a modest price premium if the patient needs to stretch out payments over a number of months.
Regarding specials, for people who need to get an MRI or X-Ray or a screening colonoscopy on a schedule and the hospital knows that certain times are slow, it can offer specials to stimulate demand for those procedures during slow times.
For a procedure done many times a year like gall bladder surgery, for example, the hospital should take the risk that a certain small percentage of them will involve complications and factor that into its price. If there are problems caused by doctor or hospital staff mistakes, providers should certainly not be rewarded (charge extra) for correcting them.
I also think hospitals would be well advised to start to treat the patient as the customer instead of (or at least in addition to) the 3rd party payer or the employer.
I wonder if these thoughts and the Harvard article adequately encompass the human factor of anxiety over hospitalization. Dislike and fear of hospitals is a built in governor for many patients. On the other hand, physicians and hospitals have an incentive to hospitalize under many financing systems.
I have always been intrigued by the idea of doctors being paid for keeping their patients well. But the practicality is that financial incentives for or against hospitalization are fundamentally unethical.
Ultimately, we must focus on growing health care cultures that promote loving integrity in medicine - in executives and staff as well as in physicians. It may seem eutopian, but caregivers who act out of love will make the best decisions for all concerned.
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