Businesses try to implement various strategies such as differentiation, low price, and rapid response to stay ahead in competition and to attract more customers. But, when it comes to hospital industry, there is nothing much to do to increase profit other than improving internally such as adding new services, outsourcing some work, improve quality, increase profit margin etc. Most of the hospitals have successfully increase their revenue by charging higher amount to insurance holders and get away with it as not many people pay attention to it.
But, it may change soon. Steven Sonenreich, CEO of Mount Sinai Medical Center in Miami Beach, announced that he would bring transparency to industry by posting prices comparing to Blue Cross and Aetna. In early May, the center for Medicare and Medicaid Service released data from 3,000 hospitals that accept government insurance. According to this data, price of most of the treatments vary as much as by three times. And these hospitals get away with it because insurance companies have to pay that amount and patients pay fixed co-pay.
However, with increasing cost of Health care, insurance companies have changed co-payment plans from fixed co-pay to percentage of total billed amount. Therefore, patients will be more aware about how much they will be charged. Thus, availability of price information can benefit both hospitals and patients. After the announcement, Brian Keeley, CEO of Baptist Health in South Florida stated that the hospital industry is headed in that direction. Thus, in short time, all hospitals nationwide will follow the steps of Mount Sinai Medical center.
Now the question comes to mind is why Sonenreich wants to be first to be in industry where secrecy of price has been working out perfectly. If it were some other industry, being first to market would be smart move. Therefore, the reason for being first to market in my opinion is to build reputation and favorable word of mouth when every hospital at least in Florida has adopted this. Thus, their plan seems to attract more patients in long run.
Furthermore, as we have discussed in chapter one that measuring quality of services is much more difficult than physical products. And hospitals rely on attracting more customers by providing better quality services. Most consumers make purchases based on assumption that higher the prices better the quality, as we talked about in chapter 6. For example, more than 80% students chose Rolex as better quality where I think other watches were better quality for their price. Similarly, with availability of price information in hospitals, I think people with go to the hospitals that charges more. But, as Sonenreich stated that they are the lowest cost hospital in area, they might lose patients to competitors because of the price transparency. Thus, their decision of transparency might hurt them in long run.
Do you think the transparency in hospital cost will make us more conscious about where we go? And how will if affect the Mount Sinai Medical Center?
6 thoughts on “Price Menu in Hospitals?!”
You bring up some good points here. I agree with your reasoning that Mt. Sinai is probably making the insurance aspect of the business more transparent to make a good name for themselves in the field of quality service. You are right, services make it harder to measure quality; therefore, Mt. Sinai Hospital wants to be a leader, which is a smart move. I think that it is a crime to be charging drastically fluctuating prices between hospitals for the same services, especially because most people just pay the bill when it comes in the mail and the insurance company takes care of the rest. As patients and consumers of the service, we need to be more aware of what is going on in the industry. I applaud Steven Sonenreich
If I am correct,all hospitals are “non -profit” organizations. However, they are all highly profitable institutions to the contradictory belief. I think the general public have a right to know how hospitals obtain their revenues. This article made think that being transparent would make the management of hospitals more accountable to the general public. I think being transparent would help to reform the entire hospital industry. In recent years, medical costs have been rising and many patients struggle to afford to pay for insurance or their medical bills. I think patients would be making better informed decisions in regards of choosing their health providers if they knew how hospitals earn their money.
Great Post! It is really refreshing to see the healthcare industry heading in this direction and Sonenreich should definitely be applauded. For some families and individuals, going to the hospital can be a financial blow, big time. Knowing before hand how much the service will cost will help families plan or at least brace themselves. Receiving that bill in the mail and not knowing how much you’ll have to pay is scary and it’ll be great to have a heads up. For some, getting sick can be a death sentence in itself because they know the financial obligation is so unknown. Its about time, the patient is considered.
I found this interesting since I currently work as an analyst for a urgent care center called Concentra. Since the center opened, one of its big “draws” (if you could call it that) is that it has “menu board” pricing. That is essentially a list of services and how much that they cost so that there are no surprises for patients. The service has been very well received, especially for lower income families that cannot afford to be buried by debt. It is encouraging to see a hospital taking similar measures.
I find this really refreshing as taylordeaderick mentioned. My dad has been in/out of the hospital and when the bills come we wonder if we should go to another hospital instead. I hope hospitals nationwide start to accept this method because it would help out many people.
One time, I went to the Emergency Room with a friend who complained about pain in his arm area. My friend was quietly waiting for 7 seven hours to be attended by a doctor. Then, they started to do test, and they realized that he was going through a heart attack. Everything was moving fast for him. When people get sick over weekends, they have to go emergency rooms because they do not have other alternatives to see doctors. Emergency visits are ridiculously expensive and should be reserved for people who have immediate life threats rather than for people who have bronchitis, the flu or cold. No doubt, the health care system has many faults and deficiencies and needs to be reformed.