Nothing New Under the Sun

Several blogs (cough* Dr. Wes*cough) are all atwitter about Carol.com, supposedly a new way of accessing and comparing information about medical care costs:

(CNN) A new Twin Cities company called Carol is trying ... a Web site that gives consumers a "care marketplace" to search for medical services, compare quality and price and make appointments.

Carol joins an effort to transform the U.S. health care system by putting consumers in charge and letting the market do its work.

"We want to let consumers define value," said Tony Miller, Carol's founder and chief executive officer. "We don't have care competition in the marketplace today."

The free site, which went live in January, generates revenue from health care providers who become "tenants" on the site. When a consumer sets up an appointment with a clinic or doctor on Carol.com, the provider pays the site a fee. (emphasis mine)

Never mind about the hoopla of price transparency, consumer choice and all that other impressive verbiage. This is nothing but an internet version of physician referral services that have been around for over a generation. (I remember my mother's skeptical take about a service that would even "make the appointment for you.") The kicker (or should I say "kickback") is that providers pay by the appointment.

Think about advertising for a moment. The correct way to compare pricing is not the absolute cost of one ad versus another, but how many potential patients it will attract. Say a Yellow Pages ad yields 50 patients a year. Suppose there's a neighborhood newspaper ad that costs one tenth as much yet produces 25 patients. It's not rocket science (or even advanced calculus) to figure out which is the better deal.

The best ad is the one that costs you the least amount of money per patient it generates. Once you start talking about an arrangement where you pay directly for the patients who respond instead of for the ad itself, that is no longer advertising: it's a kickback scheme.

What's the difference between Carol.com and my friend Carol, who comes to me and says, "If I tell all my friends about you, will you pay me $10 for each one who comes to you as a new patient?" Nothing at all.

The utility of networks like Carol.com is completely dependent on the number and quality of the medical providers it can sucker into its scheme sign up as "tenants." Any provider with even a modicum of business savvy should run, not walk, as far away as they can from Carol.com (as currently structured) and all of her friends. Move along; there's nothing new here.