Today’s Washington Post has an interesting article about the cost of medical services. It compares the cost of certain procedures in the US, and some OECD and non-OECD countries and it conclusively shows that the cost of medical service is far higher in the US. It also says that the number of doctor and hospital visits in the US is not greater – in fact, US patients stay a shorter time in treatment compared to patents in other countries. In addition, the US population is not sicker than elsewhere.

Thus, the author concludes the only remaining variable is simply the price of service. This may be true, or it may not. It may be a reflection of the market forces, where service providers charge fees as high as they can. Or perhaps it’s that the inefficiency of the bureaucracy of medical institutes and insurance companies that leads to high costs, and these high costs require high prices.

But it got me thinking about the ethics of pricing. In this blog I often talk about how companies can (and should) optimize their pricing to capture the maximum of their clients willingness to pay.  In doing so, they justify their higher price with better service or better products. This keeps customer satisfaction high.

But optimizing prices means that you say “no” to some prospects. You say “no” to prospects who cannot or will not pay your price. But is it right for medical service providers, in their quest to boost profits, to increase their prices? What if they thereby deny some patients their service?

A few years ago we declined doing work with a company selling a medical device that helps survivability during heart attacks. We found it unethical to help the company optimize their prices, thus, denying some (dying) patents the benefit and value of this device. Another time, we denied optimizing prices for a casket manufacturer – we felt it would prey on survivors’ vulnerability at the time of great sadness.

But we helped another medical device company triple their prices. The rationale was simple. With about $80m invested in the company, who had yet to show a profit, investors were about to pull the plug unless they became profitable in a flash. The device helps improve the outcome of certain transplants almost 100%.  While tripling of prices would deny some patients the benefit of their product, the alternative was worse.  If they closed shop, 100% of their patients would be denied the benefit of their product.

These issues are tricky. Of course you want to stay in business and want to make a profit – but are there occasions where profits need to take the back seat to “doing the right thing”? I think so.

With healthy regards,

Per Sjofors

 

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AuthorPer Sjofors