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Comment by myrmidon | Hacker News Reader

How would higher hospital density help quell healthcare costs, though?

Isn't that just more infrastructure, administration overhead and staffing that victims have to pay for, in the end?

No, actually it would be lower for the same reason competition always leads to lower prices. Uncompetitive hospitals that can’t meet need would naturally go out of business.

A “need” certificate is similar to the cap that med schools have - it’s effectively a pricing cartel to keep salaries/revenue high

There are extremely high fixed costs + we require hospitals to do unprofitable work (they aren't allowed to turn anyone away from the ED, for example). In many small regional chains, their profitable hospitals in one area fund unprofitable hospitals in other regions.

Overall we have a crisis of hospitals shutting down, not a crisis of oversupply.

> competition always leads to lower prices

I don't see how this could be true for emergency visits. Would an ambulance drive you to the cheapest hospital within some fixed radius?

Hospitals typically lose money on emergency visits and make it back on scheduled inpatient care and outpatient services. This would accelerate a poor performing hospital's demise, because ambulances will go to the closest one but patients who have options will look elsewhere.

If you now have two ERs within driving range, you have the choice to go to the cheaper one if you are conscious and in a stable enough condition to reflect. This is the sort of thing people already think about in the US.

Here is a summary of a number of studies of the effects of Certificates of Need:

https://ij.org/report/striving-for-better-care/overwhelming-...

But the victims don't have to pay for it -- excess infrastructure is a bad investment that those who built it pay for. The builders are not guaranteed a return on their investment.

I don't really get it.

If you are arguing that the customer is not paying for inefficient providers, then I strongly disagree.

Customers always end up paying for inefficient supply chains. If you end up with an inefficient allocation of hospitals/doctors (local overprovisioning), it's always gonna be the patients that are gonna pick up the bill for this in the end through higher average prices.

Inefficiencies are doubly bad because you potentially don't just pay the pure cost for the inefficiency (middlemen, waste etc.) you even pay for margins on top.

I think the assumption that such inefficiencies could lead to actual savings for customers (by magically making the providers decrease their profit margins) is highly overoptimistic.

> Customers always end up paying for inefficient supply chains.

Obviously not. There is nothing that compels a customer to do business with an inferior competitor, if there is an alternative. The end result of having a sufficiently inefficient supply chain can be that the company involved goes out of business, as it cannot operate at a profit.

Where would you expect bananas to be cheaper: a town with five grocery stores, or a town with one?

I mean, that depends. A town with ten people and five grocery stores will be inefficient, and probably have very expensive produce as a result.

A town with ten people won't have five grocery stores in the first place. Nobody's going to spend a bunch of money to open a store in a place where there isn't a customer base to support it.

> Nobody's going to spend a bunch of money to open a store in a place where there isn't a customer base to support it.

Tell that to the waves of cupcake shops, craft breweries, and now cannabis dispensaries in my area.

Right, luxury items are definitely an apt analogy here. Man, people really do love to argue, huh.

The point is that business decisions aren't magically correct. People can, and do, open stores in oversaturated markets. When your cupcake shop flops, that's sad; when hospitals close, that can be devastating to a community. It makes at least theoretical sense for states to try and prevent that impact.

Avoid the impact from hospital closures by preventing them from opening in the first place? Hospital closures are devastating if they're the only one in the area, or remaining facilities don't have enough slack. They aren't devastating in an oversaturated market.

> Avoid the impact from hospital closures by preventing them from opening in the first place?

Yes? That's the idea. I won't say it always works, but it's the idea; preventing the existing facilities from closing.

> They aren't devastating in an oversaturated market.

It certainly can be, if the oversaturation puts all of them on shaky financial grounds.

There is such thing as market failure due to oversaturation.

> Where would you expect bananas to be cheaper: a town with five grocery stores, or a town with one?

I'm not defending the "Certificate of Need" regulations, but your thinking is sloppy: healthcare is not a product like bananas. That analogy will mislead more than it will inform.

If every person has to buy 10 bananas a day or they will die, the town with 5 stores may have more expensive bananas, because they can just raise prices to cover the excess capacity and people will pay.

If we look at "food" more generically, rather than bananas specifically, we are literally in that situation where every person has to have X amount per day or they will die. And competition still works great.

There are two things that set healthcare apart here. One is that sometimes people need unusual treatments to stay alive that are extremely expensive, and our desire not to let people die is at odds with the normal market mechanism where products that cost too much just don't get purchased. The other is that sometimes people have emergencies so urgent they can't really choose their provider.

But the vast majority of healthcare doesn't fall into those categories, and normal market mechanisms work fine for those. Competition would lower prices for most healthcare just like it does for food and everything else.

They can't just raise the prices because people will bring their business to the competition. I've personally done this for CT scans. In my local market we literally got a scan for 2k where the hospital we'd usually go to wanted 10k.

The same works for non-emergency surgery as well. Take a look at https://surgerycenterok.com/ it's such a breath of fresh air to see the full price for each procedure right there. People travel there from all over the country to get needed procedures. So competition clearly works but the system doesn't really enable it. For example insurers don't want to work with the linked center because they won't give them rebates but charge everyone the same price. More details: https://www.econtalk.org/keith-smith-on-free-market-health-c...

> In my local market we literally got a scan for 2k where the hospital we'd usually go to wanted 10k.

That’s still 4-6x what it would cost at a private clinic in Canada.

> They can't just raise the prices because people will bring their business to the competition.

Not necessarily. They're all under the same pressure. If they all provide similar services with little differentiation, the price will probably settle at a higher level to cover the fixed costs of 5 stores instead of 1.

> In my local market we literally got a scan for 2k where the hospital we'd usually go to wanted 10k.

You kind of get at it below, but I wonder if that's an effect of insurance negotiations (e.g. the hospital you usually "usually go" gave in to insurance discount demands in one area, but pushed back on scans pricing to get the revenue they need to operate).

I do think the totally fictitious nature of posted healthcare prices is a serious problem.

You are over simplifying the problem. First off, the place you quote at 2K is probably an imaging business or part of a larger business that can keep the machines more fully utilized. The hospital has it's equipment to support it's main business. Nobody is going to the hospital for routine imaging. Next, nobody pays $10K at the hospital. Insurance will either have an already agreed to rate or will negotiate it down. As a private pay patient, you can negotiate it down. For planned imaging, a lot of people still won't shop around. Even with a deductible, it should still be the negotiated price. After deductible they all cost the same for most people on insurance. Modern Healthcare isn't a free market. These days insurance has most of the power.

The town where you can see the banana prices on the shelves, if not online, and where there's a collective refusal to pay (perhaps through an organizer payer) if the price is too high.

In the town closest to central america.

The labor to produce, ship, and shelve the banana determine it's cost along with whatever margin the store that sells the banana is willing to take. Walmart, for example, could be perfectly willing to sell a banana at a loss if they think that will get you in to buy a TV.

This is why dollar stores exist and often kill off local grocers. They can sell a lot of non-perishable goods at a loss and win back by understaffing the location and overcharging on non-perishable goods.

I live in a city with probably around 50 different clinics, but they are all associated with 3 major medical groups. It isn't a lack of buildings that's preventing competition.

Exactly. The more suppliers are in a market, the more competition there is. Thus lower prices and a better selection. People don't like a monopoly is other areas of life. Healthcare is no different.

I don't think that is a good comparison at all.

Unlike grocery stores, hospital ERs don't get frequent repeat customer interaction, so that makes the competition aspect basically completely inapplicable.

As typical ER visitor,

- You wont know what "quality" of care you are going to get beforehand

- You will have very limited capability of selecting the hospital

- You will be unable to compare prices beforehand

So why would any of those 5 hypothetical hospitals decrease prices?

More competitors won't do shit if the market is uncompetitive by design.

That's what reviews and word of mouth are for. Don't you do research before picking a hospital and doctor?

We do need price transparency though.

> Don't you do research before picking a hospital and doctor?

No. Preventing rapid unplanned end of life is the main purpose of hospitals in my view.

Enough time to make a choice of hospitals (or even to collect information on specific hospitals) is a luxury that I would not expect patients to have.

For every emergency I plan a visit to the hospital at least 10-20 times. Emergencies are the exception, by definition. I think everyone with health insurance, which the Census Bureau says is 92% of Americans, since they will not go directly to the ER.

An ER is only a small part of what a typical hospital provides. And life-threatening, must-get-treatment-immediately-or-die emergencies are only a small part of what a typical ER provides.

Yes, there are some kinds of care that aren't very amenable to competitive market forces, but the vast majority is.

How could you even compare prices?

If you go in because of a killer stomach ache you could end up needing a CT and emergency surgery. Or you could end up getting some pepto-bismol.

And if you are taken there by an ambulance (which you also have no ability to compare any price to). You'll be sent to the hospital the paramedics decides to drop you off at.

There is an inherent complete lack of information when going in for a medical situation that can't be fixed by the free market. You need (or believe you need) treatment now. There's no way for you to know what that treatment will be.

Even going in for an annual physical can be the exact same. Some dicey numbers on your blood work and you might be looking at some huge unplanned bills that are completely unavoidable.

That's exactly my point.

Number of competitors is only one of the inputs for how competitive a market is, and price intransparency + lack of information on treatment quality make it moot for the healthcare sector in my view.

I don't think higher hospital density would hurt, but we would have to pay for this and I don't see it help drive down prices.

>Unlike grocery stores, hospital ERs don't get frequent repeat customer interaction...

Oh yes they do. I can think of any number of patients I'm familiar with who end up in the ER multiple times a week. Practically daily for some people. And a few who are known for getting discharged from one hospital and immediately heading to another nearby one.

What is a reason to end up multiple times a week in ER?

I have a bunch of people with serious conditions in my "bubble" (spontaneus penumothorax, diabetes, ...) and none of those needed the ER more than ~1/lifeyear.

If weekly hospital visits were typical, competitive free market hospitals would be more feasible IMO but I don't think we're close to that (and I don't want to be, either).

What is a reason to end up multiple times a week in ER?

This happened with a friend's mother during her last year of life. She had dementia, cardiac problems, infections, breathing problems, a whole litany of symptoms of slow death. But she didn't have any one clearly terminal condition (like late stage cancer) that would justify a switch to hospice, so she lived in an assisted nursing facility and also had to go to the ER more than 70 times in that last year. It was horrifying for everyone and the costs were astronomical. The state is now trying to seize her daughter's house to partially offset the accumulated expenses.

Addicts (usually but not always homeless) with all sorts of drug/alcohol caused health problems that they don't manage. Not to mention overdoses/too drunk to move.

Medically fragile elderly people trying to live on their own when they shouldn't be. Frequent falls with injuries, etc.

A friend of my mothers was in and out of the ER and med/surg floors for months with mysterious cardiac symptoms that ended up being a new reaction to a medication she'd been taking for years.

People who are just psychologically, hmm, needy and looking for attention. When I worked on an ambulance there was a lady who'd call weekly because she said her blood pressure was high (it never was) and we couldn't refuse to transport her.

And more...

1. One accepts only Visa, one only MC, one only Amex, one only cash, and one only accept bitcoin.

2. One offers bananas to walk in visitors, but the others have a minimum wait time of 1 month to a year.

3. One is a mile away. One is an hour away. Still in the same county.

4. None of them offer an easy to understand menu. You can't just order a banana. You ahve to order Banana Services and meet with Banana specialists. You can't take the banana home.

5. You wake up in a banana shop and you didn't get a chance to shop around before being presented with a bill. They don't take your payment of choice, so it's 10 times as expensive.

6. Some won't let you buy a banana. Instead, you have to buy a banana service. Per banana pricing is the lowest here, but the total cost is higher if you just want a banana.

Which banana store do you buy from? A, B, C, D, or E?

I'll take the first choice you make and let you know if you picked correctly. Anything other than the correct choice is a failure.

My expectation on cost of banana will be more on how much it costs to ship to said town? Similarly, which town has higher tax burden to cover? Assuming any sort of health inspection on places that store food, the town with more stores has a higher burden.

Which is all to say, my gut is it is far more complicated than that allows for. Not a useless model, but also not a very actionable one.

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