Hospitals are learning to love patients

US hospitals take in more than $500B annually, which is more than twice the amount Americans spend on clothing. What if clothing stores and their websites offered a consumer experience similar to that of hospitals? Think pricing opacity, limited information on quality, perplexing store navigation, and a sense that customer experience is a low priority. I suspect that the apparel industry would be much smaller if this were the case. We would simply make do with fewer clothes.

Why, then, do hospitals continue to capture such a large slice of the US economy? Why haven't more patient-friendly institutions grown up to compete with conventional hospitals on the basis of patient experience? [1] The answer is that, on average, patients pay for just 5% of hospital services. Medicare and commercial insurers are hospitals' real customers. And these customers are demanding a stronger focus on patient experience. In particular, starting this year, Medicare's Value Based Purchasing program will use patient survey results to determine incentive payments to hospitals.

Combine this trend with the rise of high deductible plans -- which have tripled in the last five years -- and you have a more consumer-driven market for hospital services. And since higher patient satisfaction is correlated with higher care quality, this could be a good trend for hospitals, payers, and patients alike.

[1] To some extent this has happened in the form of surgical hospitals, which dominate the list of hospitals with the highest patient satisfaction scores.

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