I went to the grocery store the other day. They make it easy to shop. Each item has a shelf tag that shows the price of the item. I like that!
Grocery stores have low gross margins, so they need to lure customers with good prices, good selections, and good service. Most stores put a flyer in newspapers on Wednesday listing their specials. You can compare one store’s prices to the other’s, and decide if it’s worth the gas to drive four more blocks to save a few cents.
Car dealers place price stickers on the window of their cars, fueling stations post the price for each grade of gas on big signs. Department stores have price tags on most items. Restaurants have menus that tell you the ingredients of each dish and its cost.
Most hospitals, doctors, and other medical providers don’t list prices. I don’t like that!
What does your local hospital charge for a knee replacement? How much is an X-ray? How about a night in the hospital? How much does your doctor charge for a physical? What does the Lab charge for a blood test? Why aren’t prices posted in the lobby of clinics and hospitals? Then you could decide if it’s worth driving a few extra blocks to save hundreds of dollars.
A well-respected regional hospital in the Northeast, with which I’m familiar, has this on its website:
Healthcare billing and insurance issues can be complicated.
Professional fees are not included on your hospital bill. You will be billed separately by your attending physician, anesthesiologists, radiologist, pathologist, and other specialties.
A hospital serving The Villages of Florida, a huge retirement enclave, posted this on its website:
… we understand how overwhelming it can be to deal with health issues and billing issues on top of that. We know that your medical bill and insurance details can get confusing. It is our goal to make the process as easy as possible for you.
A hospital chain in Sacramento has this on its website:
Please note that you may receive more than one bill for services received at the Medical Center. Physician charges, may include bills for Radiologists, Anesthesiologists, Cardiologist and Pathologists, and will be billed separately. Physicians are independent of the hospital and bill for their services separately.
If grocery stores took the same approach as your local hospital, they might post this on their website:
We understand that grocery billing is complicated and can be overwhelming. Most fees are not included when you check out. The farmers, fertilizer companies, meat packers, box companies, food-testing agencies and other specialties, will bill you separately.
The U.S. has some of the best-trained doctors in the world. It has great research facilities, it has the latest technologically advanced equipment and highly skilled nursing and other patient care professionals.
Best of everything, however, doesn’t deliver the best results across a broad range of measures. The U.S. spends double the percent of Gross Domestic Product (GDP) on health care as other developed countries but ranks last in nearly every category of efficiency and effectiveness.
We don’t get much bang for our buck because healthcare isn’t an integrated, holistic system. Our science is first-class but our systems and processes are from medieval times. Doctors are in “private practice.” Medical specialties have their silos. Hospitals allocate their operating rooms to the surgeons with the most business. Big Pharma works in its silo. A hospital’s billing practices sometimes infer that they are hotels. with medically related room service.
When we compare the U.S. to eleven other developed nations,[i] we come up short: our access to medical care ranks last, in large part, because we don’t have universal healthcare. We rank last in information flow between primary care and specialist because of the dearth of integrated systems; we have the highest rate of mortality amenable to health care, and our life expectancy dropped each of the last three years.
We have one of the highest infant mortality rates in the world.
The administrative costs account for as much as 31% of total hospital expenses.[ii] One study found that administration cost is about 0.67% per doctor in large medical groups.[iii] The lack of a national approach to healthcare delivery results in unsustainable expenses with poor results; management systems and processes are antiquated, payment systems are outdated and pricing processes are decades behind the business world. Our great doctors and nurses in a dark-ages medical world that reduces quality outcomes. Healthcare is ripe for major disruption.
We see disruptions today unimaginable ten years ago: Airbnb is the largest hotel chain in the world, Uber and Lyft compete to be the largest taxi company in the world, Ma Bell isn’t in the telephone business anymore, and Bitcoin is chasing real money. We are only a few years away from driverless cars, making car ownership obsolete.
We face two gigantic challenges: how to lower healthcare costs dramatically and how to bring medical outcomes up to world standards, and then surpass them. Systemic change usually takes twenty years; however, modern disruption strategies take five to ten years or less. Amazon’s purchase of Pill Pak is a good example. Most drug stores could go out of business in ten years. Amazon will deliver pills to your home in individual doses with date and time to take them, at very low prices. They won’t have the cost of middleman distributors and prescription management companies who eat up rebates and pay pharmacies. The entire drug distribution system is ready for a major disruption.
The current model of doctors in private practice is unsustainable because of its inefficient delivery model. It too is ready for disruption. In addition, Artificial Intelligence (AI) is set to take over most of the diagnostic challenges doctors face every day and the methods to remedy ailments. We see that already in many kinds of personalized cancer treatment protocols. Universal healthcare will provide primary care to everyone, reduce illness, improve delivery systems, and reduce costs. A single-payer system would reduce costs even more.
What does a highly efficient and effective healthcare delivery system look like? The healthcare system to which I belong has over 4.3 million members in Northern California; it operates 21 hospitals, 242 medical offices, and outpatient facilities. It has 8,900 doctors and 23,000 nurses on its payroll.[iv] It has great management systems. Admittedly, scale helps this kind of system. An easy, but not necessarily accurate, way to describe the system is that the insurance company and the medical practices are one system. Because of the organization and management systems, it is able to control costs and provide outstanding customer service.
Doctor clinics, labs, radiology, outpatient surgery, pharmacies, physical therapy and more are integrated into one efficient operation. On-line services are outstanding; making doctor appointments, ordering meds, email, and doctor consultations are all available on a smartphone or computer. It’s obvious that they understand Lean Management and Six Sigma quality measurement. I like that!
Medical systems across the country are slowly moving to the single provider model, with the hospital as a focal point. It will take a massive disruption to effect significant reductions in health care costs and improvements in healthcare outcomes. Not only is the pharmacy industry about to see a major makeover, but the day of the private practice-doctor has less than twenty years before it disappears. Integrated medical practices, processes, systems, and administration have the potential to lower medical costs by 20% out of the bag. We know this because we can compare our costs with those of other countries.[v]
Ask your doctor what he charges for a regular visit, for a physical, or how much per day your hospital charges per day. Don’t let the blank stares scare you.
[i] Mirror, Mirror 2017 – International Comparison Reflects Flaws and Opportunities for Better U.S. Health Care – The Commonwealth Fund
[ii] Becker Hospital Review – CFO - 2009
[iii] Health Affairs - 2011
[iv] https://share.kaiserpermanente.org/article/northern-california-fast-facts/
[v] Mirror, Mirror 2017 ibid
