You name the price

Next week, rock band Radiohead is doing something that, to my knowledge, no other major rock act has done. The group will soon be selling digital versions of its new album, "In Rainbows," for whatever its fans wish to pay [1]. (If fans want the "real" album they'll need to spend about $80 bucks.) They can do this, band members say, because they're not working with a major record label that's taking a cut.

Maybe this sounds crazy, but couldn't hospitals do something similar when it comes to pricing common procedures or procedure/physician professional services bundles? 

I'm not suggesting that hospitals would benefit from a direct Internet price war driven by still-unsophisticated consumers--but what if employers did direct bidding for services? In public, on a Web site, rather than in private, with competing negotiations?

In theory, like Radiohead's rock fans, such employers have no incentive to "bid up" a price to a level that hospitals would like. But hospitals could give them an incentive to do so by looking at their capacity and making it clear just how many service units they were selling.

At least in markets where competition is high, hospitals in a region could set up what would essentially be a private exchange, with employers bidding on their services publicly (though perhaps anonymously), and prices for service bundles rising and falling as listings do on any exchange. 

Alternatively, such an exchange could borrow from the Priceline model, where employer-buyers name a price, flat out, for what they want. This being healthcare, specing things out would be more complicated for employers than under the Priceline model--definitely tougher than simply bidding on two hotel nights in Vegas--but I believe it could be done at some point in the future.

Don't misunderstand me, I know I'm hugely oversimplifying what it would take to make such a model work. But with value-based pricing models emerging (under considerable pressure from the federal government), healthcare services sold on more directly than ever price (think retail clinics [2]), and public price disclosures by providers becoming more common, trends are headed in this direction.

Once the industry develops measures that square quality measures with pricing--and it's realistically possible to buy a "unit" of healthcare with some assurance of what you're getting--I think schemes like these that make bidding more transparent are just around the corner. The question is only who will get there first. - Anne [3]