In the WSJ, Anne Wilde Mathews writes,
Dominant hospital systems use an array of secret contract terms to protect their turf and block efforts to curb health-care costs. As part of these deals, hospitals can demand insurers include them in every plan and discourage use of less-expensive rivals. Other terms allow hospitals to mask prices from consumers, limit audits of claims, add extra fees and block efforts to exclude health-care providers based on quality or cost.
Pointer from John Cochrane, who adds,
Medicine is missing the discipline of competition.
But I still wonder where the money goes in these hospitals. The bottom line? Waste? Paying for fixed costs? I suspect that it’s the latter. If so, then reducing hospital charges for some services is only going to cause them to raise prices for other services.
I am not against trying to increase competition in order to try to stimulate greater efficiency. But I am not sure that those of us on the outside really understand the cost drivers in medical care, especially in hospitals.
There are no alternatives. that is why, when people get sick, either got to a hospital or die, so they have a lot off leverage in the negotiation process . And also treatments are expensive, staff, etc. A hospital in India is cheap but the treatments are not as good. American hospitals have nicer accommodations and fewer patients per room than most hospitals in the world, which are overcrowded.
Isn’t the whole point of competition to provide alternatives? If one hospital is expensive, another could work to be cheaper. However, the current system gives them no incentive to do so.
They have different alternatives.
Sometimes they have the mild flu, the person concludes, correctly, to stay in bed and wait for it to pass with the usual remedies. Sometimes the person can tell they have a severe sprain in the ankle, so they put ice on it and schedule and appt with orthopedics in the AM.
They do self triage, home medicine in developed nations, and that is a great cost savings. Funneling every thing through the hospital door creates enormous jamming up, and therein lies the costs.
I agree with that if you compare China and Germany for example. In China everyone goes to the hospital if they are even slightly sick and as a westerner you don’t want to go there. People are treated right next to each other and everything is overcrowded. In Germany, traditionally you went to the hospital as a last resort when all else failed.
However the more immigrants we had the more overcrowded hospitals became because they did what they did back home: sick = hospital visit.
This combined with the shortage in doctors that want to open a business results in a convergence with the worse coverage in China. And yes this raises costs a lot. Hospital visits are more expensive especially via the emergency room.
Both Cochrane and the WSJ identify uncompensated care as a hidden cost driver. Hospitals are obligated to treat even with no prospect of getting paid, so these costs are shifted elsewhere. Since Medicare and Medicaid pay well below the private market, the private market absorbs most of these costs. Nothing wrong with the obligation to treat but it would be better if those costs were explicit and transparent. Let the government make it a budget line rather than bury it through internal transfer pricing.
I favor a law that would make price discrimination for these services illegal. Whatever price you charge Medicare or Medicaid, you must charge all payers. The ludicrous government price negotiators are happy to get 50% off of an inflated list price, indicating their incentives are wrong as well.
It’s hard to understand the cost drivers when “prices” throughout the system are secret and/or meaningless. That’s a hell of a way to run one fifth of the economy. I suspect many libertarians would be against regulations which impose cost / price transparency and consistency mandates on the health sector, but such things are public goods in terms of both our ability to understand and analyze what is actually going on and also in terms of being some bare minimum requirement for market-like mechanisms to work to produce other benefits such incentives for consumers to shop around and rational allocation of medical resources.
It might be enough to say that medical providers can have all the secret and inconsistent prices they want, but that it is against public policy for the government to adjudicate or enforce any such claims should any dispute arise, which will only be done in accordance to a posted menu of prices subject to “truth in advertising” liability.
I agree. This is one place where there is just too much abuse of the tax dollar to allow for the current system. As someone whose first instinct is libertarian, I would be willing to accept that providers must publish prices and must charge all payers the same price in order to foster competition. This is because the alternative is likely a government takeover of the system when socialists take control. It achieves the monopsony pricing power advocated for by the single payer crowd, without the bureaucratic expansion that would entail.
As a business owner, I can tell you that customers never know what cost breakdowns are for the businesses they buy products and services from, or any other meaningful financial information about them. It doesn’t matter.
The problem, actually one big one of many, is that hospitals have a veto over anyone who wants to compete with them. In a deregulated market, the existing hospitals would probably go out of business as new ones come in with lower costs. This is not a bad thing, it is business history in its entirety.
Until that deregulation happens, we will have multiple, frustrating reasons to regard the health care industry as a malfunctioning one.
Your customers may never know your cost breakdowns, but do they at least know what your prices are before they decide whether to purchase your output?
I live in an area with plenty of different hospitals and medical providers, but all that “competition” is totally pointless to me, since even if I paid the bills directly, there’s no way of knowing ahead of time what they are going to be at different places.
Lots of people have these Kafkaesque horror stories, but one of mine is that I had to decide whether or not to do an analytical procedure that the insurance company wouldn’t approve. When it came time to get the price to help me decide whether it was worth it, I was told that when I got the bill, I should call up the lab and tell them “self-pay” and they would give me a discount. “Ok, but what’s the original bill going to be? And what will the discount be? What’s the bottom line?” No solid quotes, I was just supposed to take a leap of faith that the final bill would be ‘fair’.
Fixing that is more important than fixing “competition”. Having plenty of local providers among which to choose is totally worthless in such a system, because there is no good basis for consumers to make any choices.
It doesn’t matter that they can block competitors, as there are no prices to compete on, no quality measures to view, and plans often lack incentives to seek lower prices. That must be fixed, or more new hospitals will just add fixed costs that will be accommodated by the insane payments…
I believe one of my points was that the customers don’t need to know the cost breakdown..as the two of you pointed out, they have price to use as a discriminator.
With the ability to prevent competition, hospitals are shielded from the effects of bad decisions, which is why fixed costs have become so high in so many of them.
I agree that third party payment is a large part of the problem. I suspect that one of the mechanisms that the ACA was supposed to have to fight that was very high deductibles. That eventually will begin to make consumers somewhat price conscious. (No one in the administration and congress that created the ACA would admit that, but it is obvious that that was a necessary feature.)
More competition will be very useful, however…unless there is the necessary deregulation, too much of the health industry will be insulated from cost pressure, despite the public paying more out of pocket.
What deregulation are you talking about? Be specific? What is described in this article is not happening because of deregulation. It is happening as result of competition. There are certain hospitals that no one wants to leave out of their network because they are of such high quality and/or offer unique services. Other hospitals may be cheaper, but they don’t offer what the expensive one does. The expensive hospital uses that leverage to demand higher payments and to make sure it is included in networks, even when to comes to areas where they do not provide unique services.
I work in the field and can provide names of such hospitals and examples if you want.
Steve
I’ll think more about this, but it is complicated. Both because it is (ethics vs. market, people respond differently to treatment) and because we make it so (regulation and culture)
(1)>But I still wonder where the money goes in these hospitals. The bottom line? Waste? Paying for fixed costs?
All of the above with the added complication that one man’s waste is another man’s treasure. Is a low-marginal-utility treatment waste? How to even tell? New tech, competition for patients moving hospitals to single occupancy, massive regulatory overhang…including regs that both reduce ethical issues and interfere with collaboration needed for cost reduction (like anti-kickback). 5% of patients are driving 50% of cost.
(2) Hospital market share is super local. Even for planned procedures. Most community hospitals have a primary service area (zips that generate 75% of admissions) that span a handful of zips. High-end care (brain surgery, transplant, etc) is at most regional. Which impacts the scale and overlap of competition
(3) Is healthcare a right or a service? (or both) The WSJ article is behind a paywall, but putting my MBA hat on the blurb sounds like an emotionally charged description of a 2-party negotiation.
(4) Setting a ‘price’ is tough when (a) individual treatments have a long tail of outcomes. One bad outcome (sometimes controllable sometimes not) can erase a lot of margin. So you need lots of lives. Which runs counter to my point #2 above. (b) you can’t price individual patients for that risk…’you pay 3x because your BMI is over 35′.
Among other reasons
(5) Pricing model is partly set by regulation. Government payers are >50% of the market and have lots of complicated regs around how pricing has to work and how they get paid. And they are paying below-cost
I work at a small insurance company and the money goes to admin and doctor salaries and expensive equipment. Like utilities hospitals raise rates when they have fewer customers in order to cover large fixed costs.
Is that capitalism?
It begs the question – are hospitals necessarily the most efficient way to deliver healthcare?
I think you don’t have a very good grasp of how a large acute care hospital actually works. The reality is that the hospitals themselves have a relatively poor understanding of their costs. I worked as an accounting auditor, consultant and banker to the healthcare industry for many years, and can tell you that the hospital management has a poor understanding of its cost structure. There are many reasons for this, including:
1. The cost structure of each hospital is unique and difficult to compare to other hospitals.
2. Much of the cost structure of hospitals is hopelessly muddled. A hospital is similar to an integrated manufacturing company, so it is difficult to track costs accurately. For example, a bandage may make its way from central supplies, then to ICU, and finally to the ER. What is the true cost of that bandage, especially after it is handled by so many people? Nobody knows the answer. Big picture, a hospital is really 2 businesses in one. It is a fancy hotel, and it is a health clinic. The fancy hotel is the “inpatient” part of the business that houses the patients overnight. The health clinic provides patient care. These 2 functions create a confusing overlap. As an analogy, imagine the cost structure of an aircraft carrier. The ship exists to transport and maintain the aircraft. The aircraft exist to deliver ordinance (i.e., “bombs) on targets, but also to protect the ship. What is the cost of each piece of ordinance dropped? This is not a simple question. What part of the ship cost do you consider fixed and which variable? How do you allocate the cost of the planes that protect the ship? What if the aircraft carrier deploys and its planes drop exactly one piece of ordinance? Does that mean that that one bomb costs $200 million, or whatever the cost of that deployment is? These questions of costs become complicated for an aircraft carrier which carries planes that deliver maybe at most about a dozen types of ordinance. Compare that to a hospital that is delivering thousands of different service items and you can see how the math becomes very complicated
3. Because many hospitals are non-profits, their emphasis is not on “costs”. Rather they seek to earn a certain “profit” (although that is not what it is called in a non-profit….it is usually called something such as “excess of revenues over costs”).
Another fact you might not know is that hospitals spend a disproportionate amount of their expenses on information systems, both procuring and maintaining them. I think this is money well spent because a hospital has a huge volume of heterogeneous revenue and expense items flowing through it, so keeping track of this information is crucial. Anyway, the point is that even with these complex systems, hospital management is often unable to answer the most basic “big picture” questions, such as “why did our costs go up so much and where did the money go?”
As I said in a previous comment to a similar post, I think the best way to answer this question is the change the competitive and regulatory framework of hospitals and see what happens. Of course, this is probably politically infeasible.
Another way to get at this question is to compare hospital cost structures to simpler and thus more transparent healthcare systems such as outpatient ambulatory centers. Because outpatient only clinics have fewer departments, the cost structure is much more transparent and much easier to analyze.
About the hotel part: this fairly straight forward, imo. I even know the rate for a standard European 2-bed room: 90 euro / person. I don’t find this to be overly expensive. I think the costs are in equipment (highly specialized, low volume high tech gadgets) and maybe overhead costs (lawyers, administration etc)
I spend too much time watching TV shows about doctors. I’ve seen countless episodes about Doctors bludgeoning Hospital administrators and or Insurance companies to pay for some poor patients expensive treatment. I can’t remember seeing any episodes in which the heroic doctor develops a less expensive way to treat some disease.
The real world seems to be much the same. I don’t follow the Nobel prizes in medicine, but a suspect that there are no awards for money saving ideas. My experience is that when asked about cost most doctors will respond by saying “I have to do what is best for the patient,” as if that settles it.
Recently https://www.medicinenet.com/appendicitis_treatment_with_antibiotics/views.htm a Swedish study concluded that mild cases of appendicitis can be treated with antibiotics rather than surgery. I would think this should reduce costs. This (if it really works out) would seem to be a worthy achievement. I wonder what reward the people involved will get.
Based on what other commenters have said about costs it may not be easy to figure out how much, if any, money this change actually saves money.
Seth Roberts used to complain that the Nobels in “Medicine or Physiology” weren’t even about medicine most of the time. They were about biological discoveries that “will lead to” advances in treatment or prevention–though the “will lead to” is often an unrealized hope.
Regarding competition, one wonders how much hospitals’ negotiating techniques matter in a landscape in which 35 states still have certificate of need laws. Props to the Mercatus Center for looking at this potential cost driver:
“George Mason University Professor and Mercatus-affiliated scholar Thomas Stratmann led the most recent comprehensive study of the effect of CON programs on the supply of medical equipment. Stratmann and his coauthor, Jacob Russ, report that there are on average 362 hospital beds per 100,000 people in the United States. Controlling for other factors, however, they find that states with CON programs have about 99 fewer hospital beds per 100,000 people than states without these regulations. Moreover, they find that CON programs that specifically regulate acute hospital beds are associated with an average of about 131 fewer hospital beds per 100,000 people relative to non-CON states. Furthermore, they find that CON regulations reduce the number of hospitals with MRI machines by one to two hospitals per 500,000 people and that states that regulate MRI machines have, on average, 2.5 fewer hospitals providing MRI services than non-CON states. Taking Michigan as an example, this means the state may have between 20 and 40 fewer hospitals offering MRI services than it would if it had no CON program.” – Matthew Mitchell, on the Mercatus site, April 17, 2017.
Another possibly relevant data point, looking at the BLS web site, it appears that since 2008 hospital employment has grown by 14% while, looking at the HCUP site 10 year trends in various inpatient stay statistics, everything has been constant with very little trend changes except for a small decline in the rate of inpatient stays per 100,000 population.
The increase in employment might be an indicator of the hospitals’ move into outpatient care which some AHA slides online show to now be about 40% of hospital revenues. On the other hand, it might also be reflective of the increasing regulatory burden faced by hospitals. Under the Tyranny of Metrics header, one wonders how much all those ACA mandated customer satisfaction surveys cost to administer and how much hospitals are spending to make the patient experience a happy one.
Meanwhile, the CDC issued its Health, United States annual report last week and disclosed that for the third consecutive year life expectancy at birth has declined. The US spends grotesque amounts on non-medical health research. One wonders where all that money is going and what, if anything, useful it is producing. One wonders whether the elites reaping the benefits of various crises have an interest in maintaining crises for the sake of their own enrichment. As a general rule it would appear that elites first loyalty is to each other. The South China Morning Post has an article today on how the Chinese government is cracking down on the movement of its scientists to higher paying jobs as well as on shoddy workmanship. The US might need to take a page from their book.
Licensing, credentialing, and accreditation are state processes that create monopoly power for healthcare organizations. These organizations have created a system where the customer buys a service without seeing the price before purchase. There can not be market discipline if there is no way for the buyer to know the price. We have all gotten bills after the service with line items like $25 for a bandage or $50 for a $0.50 blood test. If you add in that the buyer is often under duress because of realistic health fear, you get the polar opposite of what markets do to achieve efficient price discovery and supply/demand balance.
>But I still wonder where the money goes in these hospitals.
Ok Arnold, you asked…
At one level, hospital costs are simple. People, supplies, and buildings. There aren’t big Scrooge McDuck vaults sitting around filled with healthcare lucre. So the spend flows into salaries and devices and drugs and buildings. Why are they high? Here are some comments on some buckets of spend and drivers. I’m not going to get into the pricing side because that’s a whole ‘nother post.
1) Very high fixed cost. A large percentage of hospital cost is fixed (facilities, clinical staff, admin, etc). That makes profitability very sensitive to utilization. That has a huge number of second-order effects on cost noted below.
1a) There are a fair number of unions in the hospital sector. That drives a certain degree of inflexibility around staffing. (Even if you’re not unionized you don’t want to be.)
1b) Hospitals tend to be ‘old school’ in that they are still institutions where people can spend an entire career. They are much less ruthlessly efficient in workforce management than other industries. Even consolidation seems to drive much fewer layoffs than you’d see in other industries.
1c) Capital. So much capital.
2) Frequently underutilized resources. A hospital, especially a large hospital, needs to have certain services available whether they are being used or not. Trauma teams are an example, but there are lots of small hidden resources that are also there ‘just in case’. Worse, these resources tend to be scaled to peak usage, not average or median usage. That means that at any given time there are unused resources sitting around. But woe betide if they aren’t available one of the 2 times per month they are needed. Medflight helicopters spend a lot more time on the ground than in the air.
3) Administrative overhead. Healthcare has a high administrative burden. It is heavily regulated, services must be provided on-demand 24/7/365, errors are often punished with large fines, large malpractice payments, headlines in the local paper, or all three. Reimbursement is complex and contentious. That leads to heavy investment in managers, quality teams, finance, etc. Since services are provided 24 hours, there is no real ‘downtime’ for front line clinical staff or the management structure to oversee them.
4) Spending to support non-price competition. Given the lack of price transparency, hospitals compete for patients on non-price factors. (1) Hospital profitability is heavily dependent on utilization. (2) Hospitals tend to generate profit on narrow subset of services. (3) Utilization *within* those subservices also matters (if your cardiac surgeons are averaging 100 cases/year you’re probably losing money on them). Given these drivers, there is a great deal of competition for planned healthcare procedures in certain areas. So…
4a) Marketing. You’ve probably seen the ads. It’s not up there with beer ads, but it isn’t cheap.
4b) Amenities. Private rooms (see 1c above). Fancy robots for surgery (capital and operating cost). Nurse navigators. Note that patient experience is tracked and reported, so it becomes a driver even outside the utilization rationale.
5) Spending to respond to physician preference. If physicians are independent (vs employed) they have some choice on which hospital to refer patients to / perform surgeries at. This gives them leverage to request amenities, tools, services, etc. You’re a hospital administrator. The physician practice that drives 80% of your general surgery wants a $1.5M robot that requires a $1500 expendable for each surgery. Say no and they threaten to take their cases to the hospital 3 miles away. You then, at best, must lay off staff to get your operating costs down. Say yes and your profitability drops. Same thing with the latest device from Stryker or BSC that their the rep is pushing to the physician. Etc Etc every day. Dynamic with employed academics is a bit different but has a similar outcome.
6) Supply cost inflation. Supply cost inflation is a constant battle in every category. Drugs, devices, OR supplies, etc. Administrators can push back but will often run into one of the issues above (patient preference or physician preference). There are also continually increasing demands from societies, regulators, etc. If society XYZ says now clinical staff doing chemo administration require face shielding and full body coverage instead of just gloves and aprons then your costs just went up a few thousands.
7) Clinical delivery regulatory overhead. Regulatory requirements always increase and costs track with them–people or supplies or both.
8) Non-clinical regulatory overhead. CMS requirements. Society/accreditation requirements. State health requirements. At a minimum, they consume administration time. More often, each common sense requirement adds people, supply cost, or both. Implementation of a new IS system to comply with regulatory requirements like Epic EHR can cost 100s of millions for a single system.
9) Subsidizing bad patient behavior and difficult patients. Follow-up care to get patients to follow post-discharge instructions so they don’t readmit. 1:1 management of patients with psychiatric issues. Housing patients that are well enough to be discharged but there are no post-acute services that will take them.
10) Subsidizing under-paying patients. Read Medicare and Medicaid. Unreimbursed care is small compared to subsidization of government payers.
11) Subsidizing education and research. Generally, neither fully covers cost directly for structural reasons. So they wind up getting subsidized by the clinical mission.
These aren’t buckets of cost but they impact cost management.
12) General lack of cost management sophistication. As noted, hospitals and health systems often don’t have a really solid handle on their cost structure. That’s partly because it is a very complicated environment, partly because cost management isn’t a primary objective, and partly because at least some hospitals do not invest in cost management sophistication on their management teams.
13) Cost management isn’t a primary driver. First, hospitals have a strong non-financial mission. Financial viability is a requirement (you need margin to support the mission). But so long as the bills are paid, cost reduction isn’t a primary objective. For a community hospital, care delivery is paramount. For an academic, it’s a tripartite mission (clinical, education, research). Given the opacity of prices, a topic in and of itself, there’s not a countervailing pressure. So costs ratchet up.
13a) Physicians are not trained to consider cost of care in their clinical decision making. In my experience, there’s a range. Some will work with administration if provided the relevant information. Some consider any discussion of cost unethical. Some only care if it impacts their income. Most fall somewhere in the middle.
13b) Hospital administration doesn’t tend to attract money grubbing bastards. If anything, it attracts the opposite…people who want to help others and contribute positively. Cost reduction at a hospital means either laying off people or denying powerful constituencies something they want. Given that, the industry could probably do with a few more money grubbing bastards.
14) Low-value care. Note that in the categories above I’ve only discussed the cost of delivering care, not the value of that care. There are many ways care can be low-value…
14a) To the patient. No clinical impact or clinical impact less than direct cost to the patient.
14b) To society…
14b-1) Clinical impact less than direct patient cost plus indirect cost via third party payers
14b-2) Net clinical impact less than the amount the patient contributes to society (e.g., treatment to extend 80 year old live to 85, $500k treatment for patient with lifetime income less than $500k)
…Where to draw the line on ‘value’ and how is one of the things that makes healthcare cost management so challenging.
Very helpful, thank you.
Ditto! Very helpful indeed.
I work in the field. I would agree with some of what you say, and disagree with some, but on this “Given that, the industry could probably do with a few more money grubbing bastards.” you clearly work in a different world than I do. We have way too many money grubbers. They provide some of the worst care, sometimes at the highest prices (mostly they cut corners and provide care that really isn’t needed).
Steve
(1) Open to discussing where we disagree. Different systems are different, so this is an n of 1. There’s definitely a non-profit/for-profit split.
(2) Like I said, there’s a range. There are definitely some money grubbers running around. Of course, the fact that their treatment rates are 5x other docs is just because of the population they get. And they probably believe it since humans are rationalizing animals.
(3) When I first got into the industry the decisions and approach drove me crazy. But I’ve found that if I dig there’s usually a reason for the madness. Some of the reasons are good and some not. Its given me a certain…sympathy. May just be Stockholm Syndrome though. A lot of it gets back to certain structural limitations of the industry that there’s just no getting around…regardless of the economics, payer model, etc.
Thanks for a terrific post. Which inspires me to ask the following:
Single payer advocates say that hospitals waste billions of dollars because they must deal with multiple insurers and fee schedules and delays in getting paid.
I am sure that this causes some expense, but I wonder if it is the huge expense that single payer advocates claim. What do you think?
Here is a related question. Some single payer advocates state that the big savings would be to put hospitals on a global budget, as in Canada. Each hospital would get one huge check a year from the government, and patient billing would disappear. No claims, no collection agencies, no need for insurance companies………
Is this achievable? The government funds would have to be distributed by some formula, such as per population, and I do not see an easy way to do that.
Some cities have too many hospitals, some hospitals have invested in more expensive equipment, some hospitals have high debt levels….etc. etc.
Your comments will be appreciated!
Bob:
This is probably going to get buried but I’ll reply anyway.
Fundamentally, there is more demand for health services than we can supply economically. That’s both direct services (drugs, procedures) and softer services (open schedule slots, free parking, navigation services).
The problem that I have with both the ‘billions in wasted admin’ argument and the ‘just give the money directly to the hospitals’ argument is that both seem to assume there’s this frictionless allocation that would happen. To which I reply, ‘have you seen the last 100 years of economic history?’
Yes, if you eliminated all insurance companies and consolidated payments into a CMS-like entity there would probably be overall health spending savings. But you have now moved all health spending allocation into the political sphere. In the real world, that means allocation based on lobbying, graft, and outrage. If someone is happy with the idea of having Donald Trump or Barack Obama (whichever they like least) deciding what care they get and the DMV managing it, fine. They can move to Canada or the UK. I’m less sanguine.
For those that think I overstate, I will offer one example. The original MIPS payment model for docs, when printed, runs to 2368 pages. I’ve seen it. There’s a whole industry of people running around helping docs report and comply and optimize. That’s for one program that’s a couple years old, is pretty poorly documented in places, and changes annually. That’s one program among dozens. There are whole admin staffs allocated to government payers on both the provider and payer (insurance company) side. And Medicare has co-pays so you still need AR groups. And there are audits so you still need admin staff to make sure charges are accurate and accurately reported. Etc Etc.
Giving it to the hospitals means a 2-level political allocation. First a larger political entity (state or federal) distributes money, then a local political entity decides who gets how much.
If you want any sort of market dynamic, now you’re back to having admin costs.
Based on the aforementioned last 100 years of economic history, it is fair to say that the burden of proof is firmly on the side arguing for centralized, non-market allocation approaches and that the burden is very high.
One thing that would help would be to create/force/encourage a common transaction model so that encounters are coded and reimbursed using standard systems. That would allow for different market solutions (Aetna plan A pays for something and Medicare does not, but the ‘something’ is defined the same way). This is a bit beyond my bailiwick…I haven’t worked with claims reporting. So there may be a reason for the infinite variation. In any event, it’s unlikely to get done in the real world. Medicaid is usually a few years behind Medicare, and that’s just in the government payer space. That said, here’s one analysis that suggests that may be the direction that the Amazon / Berkshire / JP Morgan model is going…
Hope that helps.
Forgot the link.
https://stratechery.com/2018/amazon-health/
Thanks.
Part of what drives the single payer crowd is a sense of horror at what happens to a minority of patients with hospital billing and collections.
The present “system” of huge and terrifying charges, followed usually by forgiving most of the bill, is a little nuts; and by comparison, treating hospitals like fire departments with a global budget and no user fees seems rather sane and more humane.
The tough part is that this may create more problems than it solves. I cannot imagine a CMS bureaucrat telling the Mayo Clinic hospital what its budget will be next year.
>The present “system” of huge and terrifying charges, followed usually by forgiving most of the bill, is a little nuts
I agree. The ironic thing is that the Medicare rule that all patients must be billed the same amount is keeping it from being fixed.
So in this case the fix for a Medicare-caused problem is more Medicare…
And all of the above have led to a bizarre nonsense ritual, where the hospital bills hundreds of dollars for 40 minutes work it did slowly, including an insane price for an arm sling (mine) – which the person who gave it to me said “this will be priced at some insane price”
Weeks go by and insurance company actually pays rather less (indeed, perhaps a rational amount) and my part of the bill is quite small. Then insurance company touts how much money they “saved” me, happily failling to note that my premiums exceed the actual cost of care every year, except perhaps for one year.
In other words, it’s all fraud all the way down.
With bizarre political pressures – medicaid and medicare pay less than cost, yet are the sole payer for a huge part of the market, so most providers have to take at least some medicare or medicaid patients. But wait – they’re also the world’s largest and most expensive healthcare payer, and so their cost will ALWAYS be a political issue.
Which means endless society wide power of government pressure to reduce payments by systems that have a near monopoly on a large part of the market and pay under rate.
(Because it’s all fraud all the way down.)