The U.S. health care system is dysfunctional. It does not compete on price. Rather, it competes to maximize revenue against reimbursement formulas. That is why hospital bills are unreadable, page after page of line items and billing codes. The business model is sky-high list prices and a huge discount for third party payers, while billing for every conceivable service. The cause is the over-reliance on health insurance, which severs the feedback loop between consumer and vendor.
I have a theory that health care system dysfunction bleeds over and corrupts other areas of medicine even where insurance is far less common. This dysfunction is tainting veterinary care. Several years ago, we took our dog Clementine to a new veterinary clinic because her previous vet moved away. The new vet was inattentive; did not really look at Clementine’s file and came in at the last minute to say our dog needed her teeth cleaned. We asked the price, and it was $699. When asked they gave us an 8.5” by 11” piece of paper listing every single disaggregated service as a line item with a separate price. We declined and decided to go elsewhere. Two other vets said Clementine’s teeth were fine.
What goes into canine teeth cleaning? There is sedative or anesthesia. There is cleaning. Often there is bloodwork to identify health risk. But did you also know there is an operating room fee? A waste disposal fee along with another half a dozen line items? Why did this vet go to the trouble of creating a detailed estimate listing items separately that were not optional services? Probably because consumers come to expect these ridiculous disaggregated bills. Pet owners are willing to pay more when there is a list of items that normally should fall under a bundled price. The biggest reason is probably that many pet owners now have pet insurance policies. About 5.36 million pets are covered by pet insurance, 80% of which are dogs. There are also private equity investors quietly buying veterinary clinics but keeping the old name on sign, so customers do not notice there has been a change in ownership even if they notice prices seem higher. Then there are consultants whose job is to boost revenue. As an aside, I cringe whenever I hear people on LinkedIn brag about being a management consultant who enhances revenue. That is rarely a consumer-friendly adaptation. When was the last time you heard a management consultant advise business owners to lower prices, cut advertising, and let word of mouth from satisfied customers sell their products? It was probably practice consultants who taught vet clinics to bill more like medical clinics.
Our current veterinary practice is also bad about disaggregated bills. We took our dog in for a suspected urinary tract infection (UTI). Treatment included nine-line items for $373. A month later we had to go back. By the time we escaped from the office our bill was $223, including $65 for another office visit. A week later the symptoms had not subsided, and we returned. The bill was $503 and included a urinalysis & culture UTI cystitis profile ($186) and an X-ray ($160). Clementine needed surgery for a bladder full of struvite stones. My vet charges separately for an injection and the drug. The injection was $22 (just the act of injecting Maropitant Citrate), while the drug was an additional $35. One week and $1,200 later we left after surgery with an itemized bill listing many more line items. The grand total for all of Clementine’s treatment included 33-line items for a total cost of $2,295. The surgery was not that expensive (~ $695), but getting to that point with all the nickel and diming cost us a fortune.
Cosmetic surgery is more competitive than therapeutic medicine because health insurance does not cover it. Yet, cosmetic surgery is not immune to the negative externalities of therapeutic medicine. Some years ago, I was working on a cosmetic surgery project. I have tracked cosmetic surgery prices for years. I called some plastic surgery offices to ask the price of a facelift. Prices varied but were between $6,500 and $8,500. When I asked if there were any other fees some clinics replied, “oh there’s anesthesia fee and a facility fee and an operating room fee.” When I asked who owns the facility, one clinic replied several surgeons owned the operating room, and it was in the same building. I told this story to a surgeon who specialized in high volume cosmetic surgeries, and he laughed and said “no, I only have one fee.”
Third-party payment corrupted our health care system. Although the medical market works much better when insurance is not common, there are those who would copy some of the tricks & traps if they can.
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