No one ever pays list price

When I was much younger, I remember watching "The Price is Right" with my grandmother. Many of the games involved trying to guess the "actual retail price" for various consumer items. Sometimes, it would be expensive items like cars. Often, it involved various random packaged goods from the grocery store like floor cleaner or dishwasher detergent. 

Today, we've entered a new age. It seems everyone is looking for a deal. Major retailers like Macy's actually tried a strategy to wean their customers off of discount coupons only to hit fierce resistance from their most loyal customers. It seems that nobody likes to pay the same price as everyone else (even if it is a lower price than the "sale"!).

This article from the NY Times notices the trend. With the transparency of web shopping, they found the same sale price at numerous web sites with various percentages off the "list price". Which, of course, makes you wonder what the real "list price" was all along. It seems that no one pays list price. If that is the case, why would you even need it?

Here is one recent example of how retailers use list prices to motivate online buyers: Le Creuset’s iron-handle skillet, 11 ¾ inches wide and cherry in color.

Amazon said late last week that it would knock $60 off the $260 list price to sell the skillet for $200. Sounds like a bargain, the sort of deal that has helped propel Amazon to over $100 billion in annual revenue.

Check around, though. The suggested price for the skillet at Williams-Sonoma.com is $285, but customers can buy it for $200. At AllModern.com, the list price is $250 but its sale price is $200. At CutleryandMore.com, the list price is $285 and the sale price is $200.

An additional 15 or so online retailers — some hosted by Amazon, others on Google Shopping — charge $200. On Le Creuset’s own site, it sells the pan for $200.

This tactic is coming under increasing scrutiny:

“Offline retailers need blowout sales to draw traffic due to the costs of visiting a store — driving, then parking, walking and searching,” said Rafi Mohammed, a consultant and author of “The 1% Windfall: How Successful Companies Use Price to Profit and Grow.” “Online retailers don’t use blowout sales since it’s so easy to shop there. But to provide confidence to consumers that they are consistently getting good deals, it’s even more important for them to provide price comparisons.”

After the Overstock suit, online pricing policies are coming under greater scrutiny.

Two customers sued Amazon in late 2014, saying its list prices violated false advertising laws by bearing no relation to the prevailing market prices. The case was dismissed after Amazon pointed out that its customers gave up their right to sue in favor of binding arbitration.

Here is the link to the full article:  http://www.nytimes.com/2016/03/06/technology/its-discounted-but-is-it-a-deal-how-list-prices-lost-their-meaning.html?ref… 

OK, but how much is it?

Original post:  Nov 19, 2014

One remedy that is often proposed in healthcare is to make it more responsive to market forces. In theory, the customer (i.e., the patient) should make informed choices and select the most cost-effective care. Setting aside the situations where you have a complete inability to choose (e.g., an emergency like a heart attack or broken leg), you should select the lowest cost provider for your procedure. That's the theory. The practice is much more uneven.

KQED in San Francisco recently collaborated with a startup called ClearHealthCosts.com. The idea was to crowdsource the prices that people paid for specific medical procedures. Hundreds of people have shared their experiences. Here is a sample from the article:

We thought we would find variation, and indeed we did. In California, commercial insurers paid from $128 to $694 for a screening mammogram. In Los Angeles,one woman's insurer paid $600 more than the lowest-cost screening mammogram reported in the area. "I'm sure every woman who's had a mammogram had the exact same experience I did," this woman said. "It was a friendly technician, but I don't think that's worth maybe 600 extra dollars."

In lower-back MRIs, we found that for CPT code 72148, insurers paid from $467 to $1,567. But when we looked beyond commercial insurers, we found even greater variation — from a low of $255 to a self-pay price of $6,221 at an academic medical center. That $255 MRI was paid by Medicare, and was just a fraction of the facility's charge of $2,450.

But the variation doesn't stop there. Yet another person went to the same facility and was charged $603 for the same procedure, same CPT code. This patient had commercial insurance but paid the entire amount out of pocket, the patient wrote, since "I had not yet met my deductible."

While price is certainly a major factor in the equation, quality is also a key component. You won't save any money if the procedure that you have is ineffective and you have to have a return visit to fix the original work! Unfortunately, it's really difficult to compare and little data exists.

Here is the link to the full article:  In California, That MRI Will Cost You $255 — Or Maybe $6,221 : Shots - Health News : NPR

For more on this topic, here is a link to the Masachusetts law that went into effect January 1, 2014 which mandates that hospitals must reveal their costs up front:

Price shopping....for healthcare?

Here is a link to a WSJ article comparing prices in Southern California:  How much will that be?

Price shopping....for healthcare?

Original post:  Jan 22, 2014

A new law went into effect January 1 in Massachusetts. Doctors and hospitals are required to tell patients who ask how much a procedure will cost.

Unlike most other goods or services, it is extremely difficult to compare the prices of healthcare procedures. Most facilities are unable to calculate exactly how much a patient will pay for any given procedure.

This article from WBUR.org focuses on Caroline Collins. She and her husband have a health plan with a $3,000 deductible for a vaginal birth. She called various hospitals in order to determine the cost of the procedure. After many frustrating transfers and dead ends, she was finally able to determine an average price for vaginal birth at between $10,000 and $16,000.

Collins is used to the challenge of searching for health care prices because she was uninsured for a while in her 20s. So does she feel like anything has changed now that hospitals and doctors are required to quote patients a price within two working days?

“The experience was pretty frustrating from beginning to end,” she says. “It was definitely surprising how many machines I spoke to within the last few days.”

This is the world in which Collins is supposed to become a savvy health care consumer, making informed decisions about where to get the best care at the best price.

Here is why it's difficult for the hospitals:

No one said this would be easy. Each hospital negotiates prices with each insurer. Sometimes the hospital and physician charges are separate, sometimes they are not. And then, what the patient pays on top of their premium varies if they have a deductible or coinsurance.

“It’s very different from, you go into Best Buy, you want to buy a refrigerator,” says Karen Granoff, the senior director for managed care at the Massachusetts Hospital Association. Granoff says her members are working with insurers to nail down prices that hospitals can quote patients.

“They know they need to do this,” Granoff says. “They are not opposed to the transparency. I think they are worried about the challenge of getting the information to the patient.”

In the end, this is something that they will have to do:

There are no plans to revise the pricing requirement. The state’s undersecretary for the Office of Consumer Affairs, Barbara Anthony, says the time has come to put price tags on health care.

Here is the link to the full article:  Mass. Launches A Grand Experiment: Pricing Health Care | CommonHealth