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Dear Hospital C-Suite: Why Your Prices Matter To Me
Chad Shields

By: Chad Shields on April 18th, 2017

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Dear Hospital C-Suite: Why Your Prices Matter To Me

It’s no secret that healthcare prices have skyrocketed over the last 20 years.

It seems like everyone has a personal story (or knows someone) who has had sticker shock for a healthcare service.

Back in 1997, I underwent back surgery, and you might laugh when I tell you how much I paid for it out of pocket:

$25.

Yes, you read that right. With no zeros at the end. TWENTY-FIVE DOLLARS.  And that included the multiple visits to my surgeon. Fast forward 20 years, and I needed a second back surgery. Guess how much that same surgery cost me today?

$8,500.  Not exactly gas or grocery money this time.

Granted, there are a lot of factors at play here, but my high deductible and out of pocket expenses had a lot to do with the cost of my surgery this time through.

Being in the healthcare industry for over 23 years now, I have a really good understanding of how the system(s) work.  In order for me to budget for my surgery, I had to get quotes from the surgeon and the hospital.  Unfortunately, this wasn’t just two simple phone calls…it took many calls to different people, before I could get the information that I needed.  20 years ago, I honestly didn’t care…it was $25. But today I care.

This had me thinking about a layperson to the healthcare industry. How frustrating – or worse yet – how surprising would it be to get a bill or several different bills after the surgery with that kind of price tag?

It really comes down to this: Patients want to know how many Benjamins it will cost them when they walk through the hospital’s doors.

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So what does this mean for the hospitals? Don’t they have a responsibility to their community to be transparent in pricing, especially when hospitals tell us their mission and purpose is to serve the community?

Let’s look at New York as an example. According to a study conducted by the New York State Health Foundation, they discovered that many New York state hospitals are 1.5 to nearly 3 times more expensive than neighboring hospitals (Gorman Actuarial 2016).

To make matters worse, the study shows there is not always a correlation between a hospital’s pricing and the quality of care the patient receives. Hospitals with high market leverage have greater bargaining power over the insurer, so they can raise the prices without necessarily improving the quality of the care.

When higher fees are charged to the patient because they received superior care from superior doctors, higher charges can almost be justified. 

However, if a patient chooses a larger hospital with higher market share (without necessarily better quality of care) and later find out there is a lower cost option with the same quality of care – where do you think the patient will go next time?

That is the risk (and arguably the recklessness) that hospitals are taking today and it’s simply not a sustainable model.

So this begs the obvious question to hospitals that are priced out of their market:

How do you plan on supporting your commitment to your community?