An Online Market for Medical Care

Can you buy health care the way you buy goods and services on eBay? Almost. A small, emerging online service called MediBid is letting providers bid to provide the care that patients need.

Patients must be able to pay cash. They fill out medical questionnaires; they can upload their medical records; and they can request the procedure they need. The patient’s identity is kept confidential until a transaction is consummated. MediBid-affiliated physicians and other medical providers respond by submitting competitive bids for the requested care.

Business at the site is growing. For example, last year the company facilitated:

  • More than 50 knee replacements, with an average of five bids per request and some getting as many as 22. The average price was about $12,000, almost one-third of what the insurance companies typically pay and about half of what Medicare pays.
  • Sixty-six colonoscopies with an average of 3 bids per request and some getting as many as six. The average price was between $500 and $800, half of what you would ordinarily expect to pay.
  • Forty-five knee and shoulder arthroscopic surgeries, with average prices between $4,000 and $5,000.
  • Thirty-three hernia repairs with an average price of $3,500.

MediBid facilitates the transaction, but the agreement is between doctor and patient, both of who must come to an agreement on the price and service.

One key component of all this is the willingness to travel. If you ask a hospital in your neighborhood to give you a package price on a standard surgical procedure, you will probably be turned down. After the government suppression of normal market forces for the better part of a century, hospitals are rarely interested in competing on price for patients they are likely to get as customers anyway.

A traveling patient is a different matter. This is a customer the hospital is not going to get if it doesn’t compete. That’s why a growing number of U.S. hospitals are willing to give transparent, package prices to out-of-towners; and these prices often are close to the marginal cost of the care they deliver. Interestingly, a lot of the out-of-towners getting the cut-rate prices are foreigners.

North American Surgery has negotiated deep discounts with about two dozen surgery centers, hospitals and clinics across the United States, mainly for Canadians who are unable to get timely care in their own country. The company’s cash price for a knee replacement in the United States is $16,000 to $19,000, depending on the facility a patient chooses.

But the service is not restricted to foreigners. The same economic principles that apply to the foreign patient who is willing to travel to the United States for surgery also apply to any patient who is willing to travel. That includes U.S. citizens. In other words, you don’t have to be a Canadian to take advantage of North American Surgery’s ability to obtain low-cost package prices. Everyone can do it.

The implications of all this are staggering. The United States is supposed to have the most expensive medical care found anywhere. Yet many U.S. hospitals are able to offer traveling patients package prices that are competitive with the prices charged by top-rated medical tourist facilities in such places as India, Thailand and Singapore.

All of this illustrates something many of my readers already know. Markets in medical care can work and work well — provided government gets out of the way.

 

Comments (29)

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  1. Devon Herrick says:

    It’s sort of funny. Last week in the Dallas market, Groupon had a deal-of-the-day for Lasik corrective eye surgery offered by a very well know eye surgery center. Under the old set of assumptions, eye surgery (as with virtually all other medical procedures) would be considered too diverse to quote a package price in advance. But under competitive bidding, this surgery center was confident in the mix of patients sufficient to offer the service at $2,500 for both eyes.

  2. Mike Braun says:

    Lasik Eye Surgery is the only procedure to come down in price.

  3. ralph weber, www.MediBid.com says:

    @Mike…that’s because it is market based, not third party payer funded

  4. ralph weber, www.MediBid.com says:

    @Devon, I have posted 2 articles on Groupon here http://www.medibid.com/blog/?s=groupon I’m not sure the case has been tested yet, but many feel that this violates the anti-kickback rules, and is considered fee splitting. Because Groupon gets a portion of the medical fee the doctor could lose his or her license. A few years ago a company was shut down in California for just this involving dental care.

  5. Devon Herrick says:

    @Ralph, I will have to read your post on Groupon. I hadn’t not really thought about the fee-splitting aspect of the Groupon deal (I wonder if Groupon and Key-Whitman Eye Center thought it it?).

    Groupon’s Key-Whitman deal isn’t the only medical deal I’ve seen. I’ve purchased dental teeth cleaning/teeth whiting on a deal-of-the-day website. The other day I even bought a voucher for Fraxel laser face resurfacing from a cosmetic surgery center.

  6. ralph weber, www.MediBid.com says:

    @Devon,
    I saw the dental deal here too, and was about to get it, but got a better bid on MediBid. I’ve posted a lot on fee spitting. It’s most prominent overseas with international medical tourism, where a kickback is paid to the facilitator. Medical boards are cracking down on it more and more. Here are a few posts on it: http://www.medibid.com/blog/?s=fee+splitting
    http://www.scribd.com/doc/12952367/SUPREME-COURT-BROADENS-FEE-SPLITTING-PROHIBITION

  7. Janice Michaud says:

    MediBid would be a great fit with a high deductible HSA compatible policy. The individual deductible should be 10-15k. Currently the individual deductible is capped at $6050. An excellent policy line would have progressive out of pocket amounts (2k- 20k, usual and customary to fulfill the deductible and out of pocket max, and a premium that would reflect less carrier risk. I would love to sell a health policy like this and own one myself. MediBid would be an integral part.

  8. Elizabeth says:

    Is Medibid all US-based? How far does the average patient travel to get, say, a $12,000 knee replacement?

  9. ralph weber, www.MediBid.com says:

    @Janice,
    They work well together, and in many states you can get an ERISA plan with stop loss that kicks in at 10-20k, and have it HSA compatible. Alternately an employee of a C-Corporation can participate in an HRA with an HSA under it, as I speak about in chapter 8 of my book; MediCrats

  10. NormD says:

    These docs offer fixed price surgeries

    http://www.surgerycenterok.com/

  11. Richard Matthews says:

    This really is great stuff – ties right into outfits like Bid Rx, Direct Labs, etc. And of course Medical Tourism and outfits like the surgical specialty centers run out of Vancouver.

    I wonder how it is that none of the candidates for Republican nomination fails to mention this? Why no billboards?

    RAM

  12. ralph weber, www.MediBid.com says:

    @Richard I dont think the republican nominees really have anything beyond “repeal obamacare” on their menu. I participated on a healthcare panel with Newt on Monday and he at least acknowledged that it needs to be the market that resolves healthcare, not the government

  13. Dr. Bob Kramer says:

    JOHN;

    LET ME REPEAT; It cannot be successful because the delivery of health care should be a contract between doctor and patient. Bidding for lower prices only destroys the notion that health care can be wholesaled like an item at auction.

  14. Ralph @ MediBid says:

    Bob,
    You are mistaken. First, when you go to hotels.com do you ALWAYS book at motel 6? Most people who go to http://www.MediBid.com are looking for a specific doctor’s profile. Under the traditional third party payer system, the only differentiation is in-network or out of network. At MediBid patients can actually see the education, training and boarding of the doc. Second, the number one reason that MediBid works as well as it does is it restores the patient/physician relationship.
    Please tell me who it was that told you that MediBid was all about bidding for lower prices, so that I can correct this misinformation

  15. Peter Denker says:

    Hi John,
    Quite interesting. Doesn’t it suggest that some sort of exchange for a full policy might produce similar results.

    Also, can you tell anything about the quality of the providers?

    Best,
    Peter

  16. Tom Anderson says:

    When Peter talks about “exchanges”, he is probably refering to a government funded insurance exchange. Problem: GOVERNMENT FUNDED, ie: taxpayer funded! The government needs to get out of the business of health care financing. There already is a place where individuals can go to buy insurance on line and compare policies from state to state, and it was created by the private sector. Government involvement in the design and implementation of “health insurance” is what got us here. What we now call “health insurance”, is not insurance at all. It’s prepaid health care. So, why not put the premium into your own bank account, and pay as you go instead of puting it into a system that has nothing to do with health, and everything to do with buying and selling MONEY!

  17. Voltaire in '012 says:

    Kudos to John for bringing this to our attention—and to MediBid for its spirit of initiative. I hope, however, that they are getting ready to “scale up,” because I have a hunch this will be a growth industry in the coming years.

    One question, though: Ralph@MediBid reports that “patients can actually see the education, training and boarding of the doc.” Can patients get some sense of the doc’s success rate or reputation? That would be critical for an important operation.

  18. ralph weber, www.MediBid.com says:

    @voltaire, that’s a sensitive complicated issue. Upon acceptance if the bid, you get the medical license number of the physician, so you can do your own 2nd level of due dilligence. If you decide after that, that you do not like that doc, we will allow you to select another, and there is no “re-stocking fee” :)

  19. Lee Kurisko says:

    I must respectfully disagree with Dr. Kramer. Yes, health care is supposed to be a contract between doctor and patient but how can it be with third party intrusion? Third parties pay for most health care hence the ever growing control that third parties have over how health care is delivered. The regulatory environment, the complexity of health care administration and payment is a direct effect of third party payment. Veterinarians don’t deal with these nightmares because they are paid for directly by their clientele in most cases. The truth is that the only way a sancrosanct doctor-patient contract and relationship can be maintained is by the patient directly contracting with the doctor, that means that in most cases they must pay themselves. http://www.medibid.com facilitates the doctor-patient relationship. Besides, as Dr. Jane Orient says, “payment is part of the therapy.”
    Remember, third parties (government and private insurance) do not create the money to pay for health care. People do. Third party payment is a money laundering scheme that puts money into the hands of third parties that has been taken from patients. Patients should pay directly. Insurance should maintain its proper role of compensating for large unexpected financial losses.

  20. Ralph @ MediBid says:

    Lee, I agree with you. When the product changed from medical care to payments, doctors became suppliers of commodities to be financed and dictated by the medicrats who design these products.
    Doctors need to reclaim medicine, and remind us that they created the product medical care, and not insurance bureaucrats.

  21. Lee Kurisko says:

    Ralph, you are correct. With the “medicrats” in charge, their needs are complied with and not the patients. As an example, the 6 minute doctor visit is driven by this third-party intrusion with price-fixing. This outside influence destroys the doctor-patient contract.

  22. Ralph @ MediBid says:

    Lee, it’s a classic example of a top down approach. Making medical care a commodity, making people think this commodity can be outsourced, or delivered by providers with lower skill levels. Ultimately, this diminished quality, and medicine is one of the best examples where high quality actually carries a lower cost in the long run than low quality does.

  23. Lee Kurisko says:

    Ralph, I agree. If you think about it, if you let doctors fees “float” with the marketplace, patients could have longer visits and get all of their issues dealt with.
    A proper history and physical exam could be performed reducing the need for expensive ancillary testing. Time for education may reduce the need for medical intervention. For example, proper nutrition and exercise generally work better than medications for Type 2 diabetes in controlled trials. Despite this, the knee jerk response of physicians is to prescribe meds because it gets the patients out of the door faster.

  24. Ralph @ MediBid says:

    Lee, Corporate medicine will increase with ACO’s and obamacare

  25. Lee Kurisko says:

    Ralph, you are correct. Corporate medicine is increasing already under PPACA. Independent hospitals and clinics are going the way of the Dodo bird. It has already caused major disruption for us in Minnesota. Large hospital chains are dumping radiology groups to streamline the number of groups that they have to deal with in the new world order of Obamacare. We have lost contracts even though there where no complaints about the quality of work. One of our long time customer hospitals “fired” us and let themself be gobbled up by Mayo because they knew they could not navigate the complexities of PPACA themselves.

  26. Ralph @ MediBid says:

    As the large insurers buy up the ACO’s i will get worse

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