Another Lesson in Pricing
May 31st, 2007 by 
Vishal Srivastava
Just when I thought I had seen enough of it, a hospital surprised me with its pricing policy. My brother was recently admitted to a hospital. He was moved from the general ward to a private room after a couple of days. The private room, was obviously, more expensive. The real surprise, though, came when I was looking through the final bill after we reached home.
The doctor’s consultation fee for the private room was 150% of fee for the general ward. He did exactly the same thing, spent same amount of time and yet charged much higher to those who indicated a willingness to pay more by staying in a private room. While I am not sure if its ethical, it was clearly a very clever way of price discrimination. What do you think?
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June 11th, 2007 at 8:04 am
I don’t think it is price discrimination, but price allocation. For each DRG, the hospital has to charge $x. However, patients with, for example, Insurance A are usually allocated a greater share of that price to compensate for the uninsured who likely will not pay their hospital bill. The hospital has to make money somehow to stay open and continue to serve the community. Is there a better and more fair way to recover the revenue that is lost from the uninsureds? Perhaps. We just don’t know what it is yet.
June 15th, 2007 at 12:46 am
So you think it’s fair to charge someone more for the same time just because they paid more for the room they’re staying in?