Pricing Everything and Value of ???

An undergraduate student, Jaime Rosenthal, spent her summer working for some University of Iowa professors and published her summer research in JAMA.  She called 102 hospitals, usually multiple times, to request pricing information about hip surgery for her uninsured grandmother (ficticious).  Only about half could come up with any price at all and the prices varied hugely. 

“Among both top-ranked and non-top-ranked hospitals, total price estimates ranged from $10,000 to well over $100,000; for reference, available data suggest that Medicare and other large payers frequently pay between $10,000 and $25,000 for primary joint replacement surgery.”

Sara Kliff notes that medical prices are usually nontransparent and vary widely:

Rosenthal’s findings are not exactly an anomaly in medical research: A study published in the Archives of Internal Medicine in the spring found even greater variation in prices for an appendectomy. Depending on where it was performed, the very simple procedure could cost anywhere from as little as $1,529 to as much as $182,955.

Moneybox notes that the health care industry is similar to other industries with price discrimination like hotels (which a hospital resembles) and airlines:

[The health care industry lacks price transparency and has wide variance in prices.] I often hear this discussed by health care wonks as driven by unique attributes of the health care industry... But nontransparent pricing is a fairly common feature of economic life outside the realm of standardized commodities traded in highly competitive markets. Look at the range of different prices residents of any given city are paying for identical cable television packages at any given time. Or look at airline pricing, where all kinds of crazy stuff happens. Connecting flights are sometimes cheaper than direct ones despite higher costs, how many days you stay is often a factor, one-way and round-trip price differentials are wacky, nobody understands the alchemy behind when you can redeem frequent flier miles, etc.

Or perhaps the most directly relevant comparison would be hotels, since hospitals and hotels feature the same basic dynamic that an empty room is pure waste. Hotel revenue management is a very complicated issue that you can study at Cornell or hire consultants for and is undertaken with the assistance of complicated computer models. A small, charming B&B may have a pricing scheme that's as simple as a two-by-two grid assessing whether it's a weekend or a weekday and whether it's peak or off-peak season. But a sophisticated hospitality firm is going to have a pricing formula that's extremely hard to summarize, and there's no reason to expect hospitals to be any different from hotels in this regard.