Prices Vary by almost Seven to One
Patients pay as much as 683% more for the same medical procedures, such as MRIs or CT scans, in the same town … often within a few minutes’ drive.
Change: healthcare looked at … price differences for several procedures: MRIs, CT scans, ultrasounds and PET scans. For a pelvic CT scan, they found that within one town in the Southwest, a person could pay as little as $230 for the procedure, or as a much as $1,800. For a brain MRI in a town in the Northeast, a person could pay $1,540 — or $3,500.
Full article on the variance of health care costs.
No surprise here.
Wouldn’t it be nice for healthcare to have a real price system? Where consumers benefit from shopping around…
When medical providers are not competing on price, it’s no wonder that prices can vary by a factor of seven. For the most part, in health care the list price is a fiction. List prices are not the point where markets clear and quantity supplied equals the quantity demanded. Rather, list prices are a starting point for negotiations with the insurers. The way this game works is that the higher the list price, the better the discount. The problem arises when an unsuspecting (uninsured) patient gets caught in this web and finds themselves on the hook for astronomical fees. If they had only negotiated up front and offered advance payment, the price would likely have been closer to what the insurers pay.
Identical things often have radically different prices (e.g., the price of soda pop purchased from the hotel mini-bar is much more than Sam’s Club).
But the higher health care prices don’t seem to carry any added value (e.g., convenience). So I think Devon is right: health care prices are fiction.
Looks like a knowledge problem; I’m sure given today’s technological capabilities the free market could create the capabilities to better inform consumers. It also makes me wonder about knowledge sharing among providers.
Change:healthcare, which provided the survey, is a business which facilitates price transparency for the benefit of employers. Castlight is a competitor, as is Medibid. I wish them all success.
Nevertheless, it demonstrates how bizarre the system is. Can you imagine a business that went to employers offering to save them money by helping their employees find the best price for shoes or cabbages or airplane tix? Businesses like Change:healthcare show us how much friction is in the system.