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Why Does Healthcare Cost So Much?

10/1/2018

 The cost of healthcare is high because of inefficiency and excess.

Between doctors’ exorbitant salaries; pricey high-tech gadgets; and the energy and staff needed to run a sprawling medical complex, healthcare has to cost a lot. Right?

Or Does It?

Can we offer a different opinion? (It’s our blog, so you’ll have a hard time stopping us.) The actual cost of providing healthcare to people doesn’t have to be as high as it is. Hospitals' inefficiency and waste are costing patients more than most would spend on healthcare in a year. And, as it turns out, the best way to improve the business might just be modeling it more like a friendship.

Whether the inefficiency in your hospital is your fault or someone else’s, you have an obligation. To the people you’re caring for, to your institution, and to yourself. You have to educate yourself. So read on.

 

 

The Horror Stories

We’ve all heard the extremes of the billing nightmares. Like the couple who received a $15K bill for their baby taking a nap. It’s probably stories like the Texas couple considering divorce so they can afford their medical bills that makes millions of Texans avoid seeking out healthcare because they can’t afford it.

That’s the sort of story that makes people suspect healthcare isn’t about caring at all. And that’s the problem, in some ways. How healthcare deals with people. And how people interact with healthcare.  

 

The Business-Customer Relationship

Because healthcare straddles the line between private business and public service, people aren’t always sure how to approach their own care. Most people assume that doctors have their best interests – and not their wallets – in mind. No one wants to come out of an appointment with a list of prescriptions and recommendations asking, “OK. But what’re you getting out of this?”

The ideal doctor – be it an O.R. surgeon or family G.P. – often feels like a good friend. They’re someone who wants to help you because it’s the right thing to do. When your friend tells you about this new restaurant that you’ve just got to try, you don’t immediately research alternate restaurants with better reviews or a cheaper menu.

 

So when your friendly doctor recommends you get an MRI, what’s your first reaction? According to this study, most people go to the doctor-recommended MRI provider, passing six cheaper providers on the way. And they never knew.

Because going to the doctor isn’t a friendly interaction, is it? It’s a transaction. It’s business. And as soon as a relationship goes from friendship to business, people get upset.

You can think of that one person who owes you $20 right now, can’t you? But they don’t have to pay you back. Not unless you take them on a judge show. That’s not the case of the relationship of hospitals and their patients. If that goes in front of a judge, it’s much less fun.

 

"It’s The Customer’s Fault"

Of the ways we can fix this, let’s look at educating customers about pricing. (“Customer” and “price” aren’t terms we generally use in healthcare, for our own peace of mind, but as long as you put a new heart in someone, then bill them, that heart has a price tag.)

An uninformed public is business’s best friend, because they don’t know about the alternatives to your business. But if you are the alternative, you have to make sure – like this medium-sized hospital – the services you offer are the best in the market. Or you work harder to make sure that the public knows what your services are.

The more informed the public is about what healthcare options are available, the more able they are to select the best care. And the providers that lose business because of that education will be motivated to improve the care they provide. (Unless they’re one of the problem children of healthcare, fixing the system to prevent competition. We’re going to assume you’re not one of those, and if you are, please don’t tell us.)

Those millions of Texans we talked about earlier? How likely is it that they’re staying away from healthcare because they don’t understand their options? If the business of healthcare shifts its focus to explaining what it has to offer and how they can engage with it (y’know, like a friend would do), suddenly you have those millions of people putting millions of dollars back in your business.

Looks like friendship isn’t so bad for business after all.

 

Controlling Cost

The other solution (not a replacement, mind you, but a supplement) is lowering the price of the healthcare you provide. The most obvious way to do that is the one most people would try first. Lowering expenditures. “If I’m spending less, I can charge less,” right?

But there are all those costs dragging a hospital down. Expensive doctors. Expensive gadgets. Expensive facilities. And a very difficult balance has to be struck. How much of that can you trim while still providing not just the minimum of care but excellent care – care that transforms your best customers into your best friends?

There’s one easy way to reduce the amount hospitals spend, and that’s to reduce the amount that they throw away. Our feelings on the matter of waste in healthcare are, well… almost absurdly well-documented.

Let’s say you went to a store where they charged you $50 for a nice shirt, but as you were leaving, you saw the manager throwing a bunch of shirts just like yours in the garbage. Then, when you asked about it, they said they throw away shirts all the time. It was part of the cost of doing business. What would your reaction be? Ours would be to demand a discount, at least. And maybe steal some shirts out of the trash when they weren’t looking.

Well, that store is healthcare. Only they’re not throwing away a couple hundred dollars every day, they’re throwing away a couple billion. A grand total of over $700B every year. That means everyone in America's healthcare bill last year could have been lowered by almost $2500.

That sounds unacceptable, doesn’t it?

 

What Next

You’ve got inefficiencies. You’ve got waste. We’ve got the way to fix it.

As far as transforming your customers into your friends through the magic of actually talking to them like human beings? We have faith that you can figure it out. But adapt quickly, because you can be sure your competitors will.

 

 Headline photo via Depositphotos / Z5.

Topics: selling medical inventory, selling medical supplies, supply chain management, medical supply, digital supply management, healthcare inventory, buying medical inventory, lowering healthcare costs

Alex Diamond

Written by Alex Diamond

Raised in the armpit of East Texas before escaping to the civilization of Austin, Alex is an author and former radio/podcast personality. If you ever run into him, ask him about the day he split his pants in front of the Lone Ranger.