Dr Priceline’s downstream cost reduction plan cannot simply be scaled up.

Dr. Lee Gross of Epiphany, a direct primary care leader, brags about the great discounts he gets for his patients on downstream procedures like advanced radiology. And, specifically, he proudly lets us know that a big part of this involves accessing advanced equipment during slack hours. This is, of course, the same strategy by which discounters like Priceline are able to book last minute hotel rooms at big discounts.

As long as marginal costs of production are met, vendors are happy with discounts for inventory that would otherwise become unsalable. But, Dr. Gross, the total of all sales prices has to exceeed the total of all costs of production; else there is no profit. Discount after-hours bookings for MRIs will be available at, and only at, the margins.

The broader world of downstream care pricing will not likely be remade by direct primary care practices applying Dr. Gross’s Pricelining technique. If there is any real value to be extracted by, for example, off-peak MRI scheduling, health insurers and large provider systems will be better equipped to exploit that opportunity than direct primary care clinicians who choose to sacrifice face time with their patients to spend telephone time as downstream care brokers.

Come to think of it, is there any legitimate reason for direct primary care physicians — who pride themselves on long, probing patient visits — to spend their precious time acting as downstream care brokers? How exactly has the DPC MD who delivers meds to your office, or opens her surgery for a Sunday meds pickup become a symbol of cost-effective care?

Doctor Gross plainly understands that a seller of MRI services is willing to provide lower cost services at below average prices so long as marginal costs are met. But many of his compatriots describe accepting Medicare and Medicaid patients at payments lower than average fees as “losing money”, even when that amount of price discrimination can add to a practice’s bottom line. And I don’t hear them grousing about how Gross’s patients are not paying their fair share of MRI costs, even as I hear them make the equivalent complaint about Medicare and Medicaid patients.

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