Lack of Transparent Pricing in Healthcare is Killing US

Guest Blog By: Aaron Fausz and Terry Howell


In response to a request for an assessment of the roof on your home, imagine a roofer saying, “Yes, there is some damage, and this roof needs to be replaced.” For most people, their next question would be, “How much will it cost and when will you be available to do the work?”

What if the roofer said, “I’ll do the work next Wednesday and send you a bill after I am finished. Don’t worry, it probably won’t cost you much because you have insurance. But I can’t tell you our cost now because it will vary based on the type of insurance you have, as well anything out of the ordinary we uncover while performing the work.”

How many of you would hire this roofer?

Imagine you do hire this roofer, they perform the work, and four weeks later you receive a bill for significantly more than you expected that contains itemized costs for the following:

  1. General planning time
  2. Time to measure the roof
  3. Tape measure usage
  4. Time to determine the number of shingles needed
  5. Transportation of plywood, shingles, nails, and roofing felt to your home
  6. Unloading the plywood, shingles, nails and felt fee
  7. Plywood cost
  8. Shingles cost
  9. Felt cost
  10. Nails cost
  11. Hammer usage time
  12. Ladder usage time
  13. Truck usage time
  14. Gas for the work trucks
  15. Workers travel time to and from your home
  16. Extra cost to take the felt and shingles up to the roof (this is difficult work, hence an extra charge)
  17. Roofers’ fees
  18. Roofer assistants’ fees
  19. Worker suntan lotion fee (spring, summer, and fall only)
  20. Cost to take off the old roof
  21. Overtime cost for work after 5:00 pm
  22. Cost to clean up your yard after the roofing is completed
  23. Cost to haul old shingles to the landfill
  24. Bill preparation time
  25. …and so forth

The bill’s level of detail is absurd, the cost is a shocker, and when you ask why it was so expensive, you find out (after the third call) it is because some of the workers hired were outside of the insurance coverage plan. This alone would be bad enough, but then you find out a neighbor down the street had a similar job completed by the same roofer for 40% less cost than yours. The former is irritating, but the latter is just infuriating.

How would you feel? How long do you think this roofer would be able to stay in business? Could any company or any industry survive with such unknown pricing?

The answer is no — except for healthcare. In healthcare, this happens thousands of times a day.

And the healthcare industry gets away with it because consumers allow it. And we’ve allowed it for years because we’ve heard, “Oh don’t worry about it, insurance (or Medicare for those over 65) will pay for it. It won’t cost you anything.”

This lack of price transparency, along with healthcare being insulated from normal market forces, has allowed healthcare costs to skyrocket 250 percent over the last 20 years, while inflation has only risen 50 percent (which is bad enough).

This needs to stop. The nation cannot afford healthcare costs to go up another 250 percent over the next 20 years.

In our book, Healthcare is Killing US: The Power of Disruptive Innovation to Create a System that Cares More and Costs Less, we show how a lack of price transparency is hurting all of US and how the healthcare industry can improve.


Aaron holds a PhD in industrial and organizational psychology from the University of Tennessee in Knoxville, with a minor in industrial engineering. In addition to his latest book, he is also co-author of Leading Healthcare Improvement: A Personal and Organizational Journey. He has helped numerous organizations align and improve their personnel and business systems to accomplish strategic objectives and he has consulted with leading healthcare organizations all across the country. His areas of expertise and professional skills include guiding organizations through strategically driven changes and enhancing business performance, with significant experience in rapid cycle improvement, performance measurement, and behavioral change management. Aaron also has extensive experience in the implementation of technological solutions, as well as in executive coaching. Never interested in the status quo, for over a decade Aaron has pursued research and writing about disruptive innovation and how it can transform healthcare.

 

For over thirty years Terry has been learning and teaching ways to transform our sick care system into a compassionate healthcare system that is humble, respectful to all, patient-focused, constantly learning, affordable, accessible to everyone, and safe. His experience includes serving on the executive teams of two large hospitals where he helped install state of the art management systems. In addition to serving on these leadership teams, he worked at two nationally known healthcare consulting firms as president of one and senior principal of the other. He just recently started Skye Solutions, LLC focused primarily on disruptive innovation in healthcare. Terry is proud of the fact that he was able to provide content and teaching support at the founding of the Institute of Healthcare Improvement, lead the redesign and development of a nationally respected Lean Academy at Denver Healthcare, teach at the Tulane International Masters of Medical Management program and elsewhere, and serve on advisory boards of forward-thinking organizations. Terry’s tendency to constantly push the envelope of improvement explains his current research and writing about how disruptive innovation can transform healthcare institutions.

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