Health Care Politics Management

Prices and Perfect Substitution

More wisdom from Seth Godin:

One of the driving factors in setting prices is understanding the issue of substitutes. If there are four kinds of bottled water and one is half the price of the others, guess which will generate all the sales? They are quite close to perfect substitutes, so take the cheap one.

via Seth’s Blog.

Third party payers, bureaucrats and healthcare reform wonks all want us (that is dentists and physicians) to be perfect substitution commodities. That is that every dentist is just the same as every other dentist. If that is true then it is logical to shop for price. If every dentist is just as good as every other dentist if the only difference is price then the cheapest makes perfect sense.

But of course that is nonsense.  Dentists vary significantly based on skill training and experience. Where the office is located, how it is decorated, how pleasant and efficient the staff is and just how likable the dentist is makes a significant difference to patients.

Everybody knows this but policy wonks and insurers are on a never ending quest to find the cheapest care. The only way they can justify this is to pretend that all dentist are the same. Otherwise they are by design forcing their customers to go to the worst dentists.

Technology is one of the best ways to make your practice stand out to patients. It is obvious when it is used, and it is easy to demonstrate to patients. On the other hand the marginal integrity of the restoration is clinically more relevant but you will never be able to demonstrate that to a patient.

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