This seems so sensible to me that I’m curious why the hell it wouldn’t work.
Although I imagine this gets really messy when dealing with Medicare and with the mandate to treat everyone regardless of their ability to pay. I'd expect those arrangements would need to change to make this work.
I feel a bit silly pontificating about this. Hopefully someone who really understands the topic will weigh in.
Healthcare pricing should be based on cost+plus models for the hospitals rather than on value driven approach you see every else in any sales.
We are not questioning their costs whatever they maybe, if the costs logically remain roughly same no matter how a particular patient came to them, then there is no reason for price to be different depending on type/ nature of insurance or lack thereof.
Cost plus models provide a perverse incentive to increase costs, as 5% of $2 is more than 5% of $1.
If you are locked into "choosing" the one in-network service provider in your area who can price very differently for your insurance than for others yes there is room for perverse incentives as is today.
If you and I can choose freely from any service provider in the area and everyone has to price the same way( i.e. not change basis who the customer is) then they will have to be competitive, people are very price sensitive and will tend to move towards the ones which are cheaper.
See how the airlines all slowly have moved towards the low-cost models: more economy/less first class even if they were full service. Sure you will have some Frontier/Spirit type organizations eventually but if they get the job done(Moving you from A to B) at lowest price then that is all that matters[3], similarly if a hospital is no-frills and gets your cataract operation[2] or do regular checkup faster and cheaper they will do so and plenty of people benefit from that.
Force hospitals to compete, not lock into monopolistic preferential contracts with some buyers and force users to now be exhorted crazy premiums to avoid the possibility being charged even more. Price regulation does not mean government fixes the prices, it should just mean that service provider have to charge the same for anyone without knowing their source (which insurance plan/company or self-funded and income level).
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[1] While there are some cases where two hospitals / doctors are not equivalent and cannot be compared, vast majority of care is fungible, i.e. you can replace one hospital / doctor with another without material impact to outcome of care.
[2] I have seen this myself work https://www.gatesfoundation.org/Ideas/Speeches/2008/05/willi... it is like assembly line, brutal efficiency.
[3] This assumes robust regulation, which we already have in healthcare, probably more so than required, there is no systemic regulatory oversight problems in the industry today.
If your claim is hospital management and administration does not have a clue like a early stage start-up founder on VC money what their per-unit costs are, I am not sure you have negotiated a bill between insurance, hospital and you in the U.S, it is laughably false.
Even doctors are acutely aware of how tagging their services under which SKU is covered how by which insurance and by how much, and also how much they make from the hospital for that as well.