Price Competition Comes to Hospitals!
by Scott MacStravic
A recently published story in Wichita, Kansas describes how its local Galichia Heart Hospital will begin charging a flat fee of $10,000 for coronary artery bypass graft (CABG) surgery for patients where there is little chance of complications. Patients with risky co-morbidities, such as diabetes, or who have had this surgery before, are not eligible for this price.
Since the usual and customary fees for CABG surgery run in the $35,000 range, this is a major example of price cutting by a hospital. With growing numbers of consumers covered by high-deductible insurance and using their own health savings accounts, this should be a welcome option. It might even help stem the flow of patients overseas for this surgery, given the added costs of flying to India, Thailand, or Brazil.
It is also the first of what may be many shots across general hospitals’ bows from free-standing specialty hospitals in the battle to win the lion’s share of this usually very profitable service line. And with roughly five tenths of one percent of the population looking for this surgery each year, this is a big market to gain a share of. The hospital has admitted its intention to capture the attention of insurers, as well as consumers, with this low price.
Surgeons at Galichia perform about 200 CABG procedures a year, and hope to increase that to 300, according to its CEO. The two major general hospital systems in Wichita – Via Christi Regional Medical Center and Wesley Medical Center enjoy most exclusive contracts with insurers, including Via Christ-owned Preferred Health Systems and Blue Cross/Blue Shield of Kansas.
The $10,000 rate is better than any of the local general hospitals’ rates, according to Galichia’s CEO, so this dramatically lower rate may win some converts, at least when current exclusive contracts reach their renewal dates. It is unclear how much such a lower fee might change physician referral patterns, particularly to other physician-owned facilities, but it might attract business at quite a distance.
Galichia is running ads in Canada and the UK, for example, where long waits for such surgery tend to be common, in competition with other “foreign” countries already advertising similar savings and immediate service. Timely Medical Alternatives and North American Surgery founder Rick Baker in Canada is quoted as saying that “The price…is absolutely stunning.” His firms connect patients with specialty hospitals that perform surgeries at low, contracted rates.
With such a low price in the US, it seems at least possible that other hospitals may have to rethink their charges, or lose considerable business to those who have done or will do so in response to their rivals. It might at least prompt some efforts by insurers and patients to seek to negotiate new rates with hospitals they already do business with. [A. Atwater “Galichia Heart Hospital’s $10k Bypass Jolts Industry” Wichita Eagle Feb 24, 2008]
