Business

Prepaid Medical Service: An Interesting Business Model

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Via Rachel comes a WSJ column about a physician who charges his patients flat, monthly rates rather than billing by appointment or procedure. This seems like it might be a good system. It resembles monthly plans for cellphone service, where service providers makes money in part because many subscribers use fewer than their allotted minutes, and subscribers who go over the limit pay a higher rate for the marginal minutes. (The fact that the prepaid medical plan doesn’t cover everything is its way of dealing with high-demand, high-cost customers who are analogous to cellphone users who exceed their allotted minutes.)

Naturally, the innovative physician’s business is under attack from regulators and insurance companies, but it appears that he is more than holding his own (one insurer is considering offering a plan to complement the prepaid service). It will be interesting to see if his business model is viable in the long term and in markets other than the one that he serves.

CNBC Has Competition

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It’s about time. CNBC is maddeningly journalistic rather than business-oriented in its style, and its news coverage and program selections are shot through with leftist, anti-business bias. You would think that a network devoted to markets and business would be run by people who actually know something about markets and business. Instead we get hot babes and snarky voiceover “analysis” from j-school hipsters who have all the elitist and group-thinking instincts of modern professional journalists. What a herd. Every once in a while they stumble onto something good and unique but not PC, like Kudlow or the WSJ editors’ show, but then they try to kill it by changing its scheduling and promoting the conventional-wisdom news show or screaming-asshole trading show of the moment in its place.

Finally, they are going to have real competition. This will benefit everyone other than CNBC’s owners and staff.

You Know About Condo-Flippers

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…well, here are people who flip ships.

(via MaxedOutMama)

What Is Not Seen

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A few months ago the Senate  Democrats here in the State of Wisconsin floated a plan to provide universal health care for all residents of the state.   The first question most will ask is “who is going to pay?”   The answer is that the plan ($15bb worth) will be funded through a payroll tax.

The plan is dead in the water as the Republicans who control our State Assembly are having nothing of it, but in the next election there is the distinct possibility that the Democrats will win back the Assembly, and will then control the Governor’s chair, the Senate and the Assembly.

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Health Care and Fixed Costs

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There are many health care plans being proposed to “fix” the growth in medical costs in the United States. Each of these plans has different elements but I haven’t really seen the particular linked issue addressed that I am going to speak of in this blog post.

I make a point of reviewing my medical bills. When you have surgery, for example, you receive an itemized bill. In that bill you can see services from each provider and also the cost for the room, medicine, etc… Frequently the costs seem far out of line from reality (outside the walls of medicine); a room could cost hundreds or thousands of dollars a night; an aspirin or readily available over-the-counter medicine could cost many dollars per pill.

The real issue is that the medical industry is primarily a “fixed cost” business, with very low “marginal costs”. For example, if you look at the Northwestern Hospital facility downtown, a vast series of interconnected buildings, and asked yourself this question:

“How would costs vary on a given day if the facility was full of patients vs. having NO patients?”

The answer is that the costs for that day would be virtually identical whether or not the hospital had patients. You still need to pay for the facility, the doctors, the electricity, and all the support workers and nurses. Virtually the only “variable” costs that would be avoided are the cost of medicines and food, but the medicines are inventoried and they need to hold stocks in advance and the food must be purchased based on planned demand and the spare food would just be thrown away (the costs would be pretty much the same).

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