RX for IT Vendors: Price Transparency for Hospitals

Updated: Jun 5, 2020

Two big things have already occurred in 2019 – my Mom had a much-needed knee surgery, and the Trump administration ordered hospitals to publish all list prices and comply by January 1st. 

Given my mother’s surgery, coupled with my love of deal negotiations, I decided to investigate her hospital’s “knee” pricing.  I walked away with my head spinning. I learned that a knee images with three views is $350 but with three bilateral views it’s $377; however, with one or two views it’s $297. Perhaps the one or two bilateral views is worth the $14 premium. Finally, four or more views of the knee costs $492. Then I compared this information with that of the other city hospital – but they used totally different options and pricing, so it was impossible to do a like-to-like comparison.

I told my Mom we should go all-in and ask for more than four views -- it’s the most value – and maybe get 10+ views and send them out as 2019 holiday cards.  

But seriously, the experience reminded me of IT pricing: you’ve got a highly inflated list pricing from the “vendor” (in this case, the hospital), significantly different levels of negotiation by insurance companies to make the list pricing meaningless, a very confusing bill for the client (patient) itemizing what they bought, and nobody (my Mom or the hospital or the IT customer) truly knows what they are ultimately paying for, and more importantly, what they should pay.

Hospitals themselves, as IT customers, are victims of the same challenge.  The question in the sourcing and procurement department is why do some hospitals pay $X for Salesforce Healthcloud and the hospital around the corner $2X or even $10X?  Why does one hospital data center pay $A for their Dell/EMC storage and the other pay $3A?  Of course, the vendors say it’s volume, or it’s the value they provide, or the price is different because one product is better than – wait - the other hospital’s same exact product?  Basically, they can’t provide an answer.

The big question is: should hospitals all be paying the same for technology, and can IT vendors help support the needed changes to our healthcare system?  IT vendors will still be in business – check out Oracle’s gross margins in the graphic below.  But will they do the right thing and help reduce healthcare costs?

RX for IT Vendors: Price Transparency for Hospitals - Purchase Price Variance

For her next knee replacement surgery, I may tell my Mom to pay a premium to go to the best knee doctor, and I would like to be an informed consumer.  I may advise a hospital to pay a premium for IT when it makes strategic sense to the hospital. But I wish that hospitals did not have to worry about being taken advantage of when they’re spending millions on IT, so they can focus on patient care.