A post by ILS team member, Eric Kidwell:
One of the things that makes healthcare so different from anything other business is that very few people are competing on price. This makes some sense in that nobody wants to skimp on their health. There are not too many people who would choose a second rate heart surgeon because they offered a “buy one heart surgery, get a second one free” special.
We also don’t compete on price because, quite frankly, even we don’t know how much things cost. When I was working for a large health system, I was filling in as the Public Information Officer one week. A reporter called me and asked me for a breakdown of costs in a knee replacement as she was trying to compare prices and services among several health systems. I naively told her I would get right back to her and called our financial services department for the answers. The answer to every single question about costs was, “It depends.” Even we don’t know how much things cost. So how can we compete on price?
The standard argument is that if we can’t compete on price, then we compete on quality. After all, nobody really asks the price of a top of the line Mercedes Benz either. If the quality is world class, then we can get a premium price without concern for competition, right? Well, that’s not really true in healthcare.
Take the Mercedes example above. It works for cars because there are only a few high quality brands. To make the example fit for healthcare, you have to imagine a car market where every single brand was high quality, nobody put prices on the cars, and everybody had to have a car. In that case, you might just choose the car dealership closest to you. (Isn’t that how many people make their choice?) You might choose a car dealership where your auto insurance company provided you with a discount. (Sound familiar?) If those two factors were equal, then you would likely choose based on which dealership provided you with the best service.
I can hear you saying, “But in healthcare, all quality is not the same!” I disagree. From a consumer point of view, it is very difficult to tell the difference between a great hospital and a really great hospital. Almost every health system touts awards for one thing or another. The noise that is created leaves consumers with the idea that everyone is great. There are no Toyotas, Fords, and Hondas… only Lexus, Cadillac, and Acura.
So if healthcare doesn’t give us a choice in price and we can’t really tell what the difference is in quality, what is left? Service. How do you make me feel? This doesn’t mean that price and quality aren’t important. It just means that your customers can’t tell the difference between you and your competition in those areas, so you have to compete on what they can distinguish.
I’d love to know what you think. Send me a note to firstname.lastname@example.org