Pricing & Healthcare Products

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Pricing has been elusive for a wide range of healthcare products and services because of the third-party payment system. As a data point, it is interesting to note how many links one has to click through just to get basic information about drug coverage through Medicare.

On a consumer level, one can find more and more websites that review and discuss healthcare pricing. While medical product review websites such as this one have existed for some time to helping people like doctors navigate the wide range of medical products out there, one can find more and more websites devoted to helping people find prices for services like doctor’s visits and lab testing.

Why is healthcare pricing becoming more relevant? As insurance premiums go up, we are seeing growth in high-deductible healthcare plans that offer some relief from the high premiums of plans that offer a wider range of benefits. While the value of not having to pay more on a monthly basis is obvious, a person who uses this sort of plan runs the risk of not having healthcare coverage if and when a healthcare issue arises.

While shopping for medical products is easier, shopping for medical services has historically been much more challenging. With insurance and the government setting the prices of healthcare, it is hard to know the exact price of a service ahead of time.

One must consider how buying a medical service differs from buying medical products like medical books or clothing. Medical goods like books are well-known, highly-differentiated products that can be accurately described using attributes such as weight, number of pages, publisher and the like. Medical clothing can be priced using attribute such as size, color, materials and thread count. Using these easily described attributes, e-commerce stores, for example, can readily get a sense for supply and demand and appropriately price products to match the demand.

Healthcare services, on the other hand, are not so easily priced. People with medical conditions can be broadly classified along lines such as ethnicity and age but, ultimately, every application of a medical service ends up being a custom application due to the myriad of differences once one gets into the subtleties of the clinical case. As such, saying that we can price every person who has stomach pain at $150 simply does not work as your routine gastritis will mix in with more complex conditions even when larger attributes such as age and gender match up.

Rise of Retail Healthcare

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The retail healthcare revolution is happening. Health insurance premiums and deductibles are going up, driven by an aging population that is exponentially utilizing more healthcare services. As a result, payment for first dollar care is being increasingly pushed onto consumers who are being turned into healthcare shoppers.

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