(Article I wrote for the Society of Physician Entrepreneurs)
Hospitals, imaging centers, physicians and laboratories set arbitrary pricing to cover costs, waste, salaries, slush funds, etc but this “price” has nothing to do with value. Obviously the patient receives the service or product that they need but not at the price it is worth. The price is decided by the cost of doing business, meeting owner expectations, business models, etc.. The price should be based on a blend of cost and outcomes. This is the concept of value based care.
The real value of the service or procedure or test is based on cost, reasonable expenses and what a person will pay for the item on the open market. For instance, would you pay $100 for a lollipop? Certainly not. But if Picasso took the same lollipop and modified it with some paint and signed it in pen, would you then pay $100 for essentially the same material? I would even though it is just a lollipop with some paint from a hobby store.
True value in a purely market-driven forum is derived from perceived value and necessity. As a society we have a duty to one another through our unspoken social contract not to price gouge but this is exactly what happens in our current system. The only ones who are protected from the inflated prices are those who cooperate through the use of commercial insurance and insiders like other physicians. It will take decades to topple the current regime. No one likes to be dethroned and people hold onto their money sources tighter than they hold onto their children.
As an example of how difficult it is to change cultures to accept “what should be” or “what is inherently right” look to the civil rights issue. Equality among men strikes at the essence of morality with a deeper cut than the right to health care. Unfortunately, our current medical system is operating in a circa 1950s mentality as noted in the landmark case Brown v. Board of Education. We have a “separate but equal” payer system – there is a disconnect between cost and value.
As consumers and members of the same human family, we need to find an avenue to challenge the status quo billing practices through:
1. our selection of providers, i.e. those who contract directly with patients and earn their living with each encounter;
2. mediation or arbitration or small claims court to fight for reasonable par pricing;
3. value based medical systems, i.e. clinics, that market to patients by demonstrating their outcomes and remedies for adverse events.
On a personal note, even as an insider, I am currently “negotiating” with a large national pediatric group on the invoice for my newborn son’s 36 hour stay in the hospital after delivery. If I had been the attending (I am a pediatrician,) the total bill would have been $850 as submitted to insurance with the expectation that I would received ~75% of the charge. This group charged me $2900+ for the same service. I am looking at avenues to challenge their pricing to reflect what is fair market value. I feel bad for all the families who do not know how to negotiate the bill. I am looking into a small claims case for price gouging.