Why Don’t Hospitals Compete on Quality?
As explained in a previous Health Alert, it’s more profitable to compete on amenities in a third-party payment system. Here is an update from Colorado:
Concierge service. Jacuzzi tubs. Bacon-wrapped scallops or New York strip steak prepared by professionally-trained chefs and brought to your room.
These amenities can be found at most new hospitals in Colorado and across the country. Gone are the days of sterile, white hallways, fluorescent lights and cloth curtains separating patients in the same room. The newest hospitals offer bountiful natural light, warm-colored walls and floors, soothing art and private patient rooms with large windows and relaxation videos.
Sky Ridge Medical Center in Lone Tree features fireplaces on every floor. Children’s Hospital Colorado in Aurora offers video games in patient rooms. The cafeteria at the new $435 million St. Anthony Hospital in Lakewood includes a soda machine that can make 100 different types of drinks.
HT: Aaron Carroll
If hospitals don’t compete on price and quality, at least they compete on amenities. In the absence of good data on outcomes, I would gladly use bacon-wrapped scallops as the determining factor for choosing my hospital.
Good point, and I think you are right.
so much for “health care rationing”
I like everything you guys have written about quality. Good job.
This trend was in evidence 20 years ago when I worked for a hospital. Patients love these amenities. But most patients would not pay the additional cost if paying out of pocket. Moreover, if patients were paying out of pocket, these amenities would be provided more efficiently.
There is an old argument people often direct towards hospitals… How come a hotel room costs, say, $150 a night but a hospital bed is $1,500? Everything that’s done to you in the hospital comes with a separate bill, so why does the base charge for staying the night run 10 times what a hotel costs. The answer, at least in part, is because the hotel industry is competitive while the hospital industry is not.
OK, but I think we have to be careful here, and put our economists’ hats on.
True, the regulations and incentives are really bad, what with 3rd party payment, non-profit status, rules favoring general hospitals instead of “focused factories”, etc.
But even if the market were free, I think we’d see some of this. Because patients will never be able to really determine which the “best” hospital is, the hospitals will have to compete in providing “extras” for the purpose of signalling quality.
The law enterprise is similar: Why do the best lawyers waste rent on Class A office space, put expensive paintings on the walls, furnish the office with antiques, and maybe even hire an expensive caterer for an important meeting with a key client in the boardroom?
A low-rent office in a strip mall on the edge of town would not lead to a reduction in their legal skills. The answer is that these “wasteful” expenses signal quality.
Golly, who knew that the new Puritanism requires that newly built hospitals should imitate the grim places constructed 100 years ago? What were those hospital architects thinking when they conspired with management to reduce electricity bills by channeling “bountiful natural light” to unfortunate people who happen to be hospitalized in sunny Denver?
Never mind that private rooms reduce hospital infections and promote healing by making it possible for patients to sleep.
For the record, all of the hospitals mentioned in the article are located in the Denver metro area. It has been blessed with a fairly competitive hospital market and strong population growth over the last 2 decades.
Gas fireplaces are not uncommon in malls, restaurants, and offices around Denver. They are hardly a stellar example of hospital spending decadence.
Neither are 100 drink machines in hospital cafeterias. The Coca-Cola Freestyle is a machine that can make over 100 specialty drinks. It is a vending machine. If that is what St. Anthony’s has installed in its cafeteria, it might be contributing to the hospital’s bottom line. That is what vending machines commonly do.