Why NOT Source our Medical Procedures?

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I heard this story last week on NPR (more about that later) and it made me think of an exercise we put our decision making classes through.  It goes like this:

Group A gets this question:

You are in a store about to buy a sweater which will cost $70. Suddenly you see and ad in the paper offering the same sweater in a store two blocks away for $40. Would you travel the two blocks to buy the sweater?

Group B gets this question:

You are in a store about to buy a computer which will cost $2,000. Suddenly you see and ad in the paper offering the same exact computer in a store two blocks away for $1,970. Would you travel the two blocks to buy the computer?

Here is the normal response rate.

                                                Yes                         No

Group A                               90%                        10%

Group B                               50%                        50%

 

What our participants always find interesting is that when you look at the two questions they are exactly the same – it is $30 savings to walk two blocks.  I wonder if we offered to hand you $30 in cash to walk the two blocks (for either the sweater or the computer) if the answer would be different?

Well, a company called Vitals is doing just that according to a report on NPR “Why Most People Don’t Shop Around for Medical Procedures”.   It is a fascinating model and one that makes so much sense from a sourcing perspective I wish I had thought of it.  The article points out that we “shop” for just about everything today in our personal lives, both goods and services, particularly when it is a brand name item that is easily comparable.  But we generally don’t shop for medical procedures?  We have a tendency to go where we are told (by health care professionals – who direct us to use the hospital) and sit back and hope that our insurance company will cover the cost.

This model is fascinating and one that, if it catches on, could help to challenge and even normalize the high cost of health care today.  The model is very simple – when a health care professional recommends a medical procedure you call Vitals.  They will find you a provider within 20 miles of your home at the best possible price.  If you take their recommendation, you will be rewarded monetarily – yes, they will send you a check.   What? Why? How? Well, if you as a consumer choose the more cost effective option, you may be saving either your insurance company or employer thousands of dollars.  The reward (a check) is simply a reward for the right behavior and an incentive for you to continue doing so.  The article notes one recurring procedure that resulted in a patient receiving as much as $500 per month.  When a doctor was asked how he felt about his patients “shopping around”, he thought it was a good idea.  He recognized that prices in health care didn’t make much sense.  He noted that a hospital charges more for many procedures because “medical procedures build in overhead costs such as the ER and the helipad on the roof.”  He felt his business was taking care of people.

Let’s take this example and use it as a lesson for the professional services we buy on behalf of our companies.  Are we really getting the VALUE some firms charge us for?  They may be selling us on their resources (make sure you get the “A” team if you are paying for it?), their extensive research (are you getting access to and taking advantage of that research?), their ability to innovate (are they applying innovation to your engagement?), etc.   There are times, like patients, our leaders ask us to simply “use the hospital” – we go to the same large, global firms without challenging if we are really getting the VALUE we are paying for?  So, why NOT source our Medical procedures (professional services)?

Let us know what you think and join in the conversation . . . . .

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Anne Kohler
Anne has been leading consulting and financial management organizations for over 25 years. She has extensive expertise in Strategic Sourcing, change management, contracting & contract management (both the buy side and sell side) organizational design and supply chain management. Anne has a passion for collaborating and educating her clients while helping them to uncover hidden value in their organizations. In addition, Anne has been named by Supply & Demand Chain Executive as a “Top 100 Provider Pro to Know” every year since 2007 and a 2013 Top Female Supply Chain executive.
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1 Comment

  1. An awesome concept. Costs for medical procedures could use some competition. There shouldn’t be vast discrepancies in the price of an apendectomy or any other highly utilized surgery. I’m on board, what’s the website for “Vitals”?

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