The Company Store, Built by Monopolistic Pricing and Conflict of Interests

After 30 years of high and rising costs, the lay press is (finally) learning the causes of America’s ridiculous healthcare spend. Dr. Atul Gawande was the first to explain the physician’s role (“culture of money”) in his sentinel New Yorker article June 2009 (“The Cost Conundrum: what a Texas town can teach us about the cost of healthcare”). Mr. Steven Brill then gave us the role of irrational pricing from hospitals and device companies (“Bitter Bill: why medical bills are killing us”; Time March 2013). In today’s New York Times, Elisabeth Rosenthal has chosen one common procedure (colonoscopy) to link together the physician and hospital roles (“The $2.7 Trillion Medical Bill“, June 2, 2013).

Her findings:

1. Regarding Physicians: “(Americans) are typically prescribed more expensive procedures and tests than people in other countries, no matter if those nations operate a private or national health system”; “(Physicians) have defaulted to … the most expensive option, without much, if any, data to support it”; “(Tests) are often prescribed and performed more frequently than medical guidelines recommend”; “Once (gastroenterologists) bought into a (surgical center), the number of procedures they performed rose (27%)”.

company store, coal mining2. Regarding Prices: “Americans on average pay 3-4 times as much (for a given procedure) as (patients in Europe).The high price paid … mostly results … from (a) (provider) business plans seeking to maximize revenue, (b) (prices negotiated) between hospitals and insurers that have no relation to the actual cost of performing the procedure, and (c) lobbying, marketing and turf battles among (providers) that increase patient fees.”

Potential Remedies:

1. Physician’s decisions on behalf of their patients must be disconnected from personal financial gain, otherwise an insurmountable conflict of interest is created.So that means, much less fee-for-service (FFS) care, and rules to limit or prohibit physicians from owning the surgical center in which they operate (Stark Laws for ASCs).

2. Physician leadership must organize patient care end-to-end to account for total cost and total benefit, otherwise each independent provider will maximize profit for self, rather than benefit for patients.

conflict of interest3. Healthcare services that exist for the community good (e.g., the cost of a day in the neighborhood non-profit hospital) should be regulated like public utilities, otherwise prices will remain irrational, given that a free market cannot exist in local healthcare.


One thought on “The Company Store, Built by Monopolistic Pricing and Conflict of Interests

  1. A very wise hospital administrator said to me many years ago: “I am what they pay me to be.” That has not changed, and will not, until the way we pay is changed. But there is a lot of money at stake among a wide variety of interests that make the change supremely difficult.

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