Contrarian CEO: Consolidation Will Hike Spending
The fact is that some hospitals and health systems can reap reimbursement as much as 50% higher than a competitor with similar quality and outcomes results, simply because it has a network insurers feel they can't do without.
So what's wrong with that? Make sure your customers can't do without you, and charge them accordingly. That's capitalism.
Of course that's a dramatic oversimplification of the highly complex beast that is healthcare. Healthcare is different from other markets in that it's near-impossible for those who are making treatment decisions, (customers) especially if they're patients, to make any kind of value comparison, and thus, choose the lower cost option—even if quality and outcomes are similar.
If Panasonic wants to sell me a TV at 50% less than Samsung, and it has similar quality, that's easy for me to discover and to make a decision on whether that extra 50% for the Samsung is well spent. Consumers, and with certain exceptions, employers, can't make that call, and insurers aren't helping them much.
This CEO's argument, which holds a lot of weight with me, is that the lack of transparency in healthcare means that all the demonstration projects, all the cost-cutting exercises, indeed, all the vertical and horizontal consolidation going on in healthcare won't lead to lower prices.
Obviously, whether or not the CEO I interviewed is right remains to be seen, but he makes compelling arguments that the trend bears further examination before we conclude that consolidation in healthcare is “good” for patients or “good” for our country.
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