I recently saw some interesting data about unit pricing in healthcare. 

In spite of the fact that government payers set non-negotiable rates and that a handful of mega-payers have similar pricing monopolies in certain markets, there is still tremendous variation in unit pricing for similar services. 

This is true for physician services, hospitals, pharmaceuticals and most everything else.  Not everyone gets paid the same rate for the same service.

This is a logical outcome.  Many factors influence pricing.  Sometimes it is about scarcity, sometimes it is about quality, sometimes it is about asymmetrical power between buyers and sellers.   So we should expect a variance.  An MRI is not likely to cost the same for everyone in the same market, much less from market to market.  Pricing is elastic.

But what made this data interesting was the assertion by the presenter, a pretty credible source, that if we simply paid all providers at the low end of the existing pricing range we could drop the cost of healthcare to around 12% of GDP, a financial savings that would far exceed even the most optimistic visions that could be imagined.  We’re still debating if our goal is to actually reduce the cost or simply slow the rate of growth to something close to inflation.

Granted, the person making this claim is with a clear low cost provider, so he was fine being paid at the low end of the range because his organization is already paid there.

Do I think we’re going to see the entire pricing range collapse to the low end of the range?  No.  Some healthcare providers have a defensible advantage that lets them price higher.  Think about being the only neurosurgeon within a 500 mile radius in certain rural communities.  You have pricing power.  However, I do think the wide range of pricing elasticity is going to get compressed, particularly in more competitive markets.

If your cost structure, either in your business or in your personal lifestyle, is so high that you could not survive if you lost your pricing premium, you better do one of two things:  Shore up and defend whatever it is that gives you a real premium (and don’t lie to yourself about whether or not it is really defensible), or get to work cutting your cost.