At the Helm

Now the general public is mad at me about health care costs


Last week, I woke up to an email inbox filled with hate mail from strangers. For this, I can thank Dan Diamond, longtime editor of the Advisory Board’s Daily Briefing.

Dan recently wrote a column for Forbes that gently debunked a recent 60 Minutes segment about health care reform—which itself sprang from journalist Steven Brill's book on the genesis of Obamacare. Dan’s piece included a link to a 2013 blog post of mine where I tried to clearly define the different types of health care costs—hospitalization costs, hospital charges, insurance costs, and so forth. That’s where the trouble began.

My post on “the difference between ‘cost’ and ‘cost’” had sparked angry commentary before, but it generally came from accountants who didn’t take kindly to what they saw as oversimplifications. (And to some extent, I agreed with them. That's why I wrote a follow-up piece affirming why the ability to properly calculate direct and indirect costs is strategically important for health care organizations.)

But this feedback was different.

Almost universally, the angry emails I got this time were from people who believe that the whole idea of understanding health care cost structures better is misguided. To paraphrase their prevailing sentiment: “Who cares about the different kinds of health care costs? Consumers don’t understand Wal-Mart’s costs—what matters is the price at the checkout. Likewise, what matters is the bottom-line cost to consumers.”

At first blush, there are a lot of ways to counter that argument. For one thing, consumers are still not the primary payers for health care services in America today; the government is the biggest source of dollars in the health care economy, followed by private employers.

But the intensity of the responses I got, at least to me, supports what my Advisory Board research colleagues have been saying for the past many months: health care is in the midst of a retail revolution.

Thanks to high-deductible health plans and the health insurance exchanges, consumers are more directly exposed to health care costs than they have been in generations. By the same token, though, the way payments work for most people in today’s health system is poorly suited to a consumer-payment environment. (Just think of how our system encourages multiple practitioners and institutions to all bill separately for services.) At least some of the animosity in the emails I received was about how complex it is to pay for health care when you’re a patient.

To me, it’s not much of a stretch to think that the health care organizations that can simplify their pricing and payments—and be price-competitive—are going to have a competitive advantage in this increasingly retail market. The evidence from my inbox, at least, suggests that that’s what consumers want.

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