10 ms·

What are a hospital's costs?

56 points by zabramow 11y ago

merrywhether 11y ago
After working in healthcare myself for a while, I've always wanted to see it be a service that was paid for by the customer directly (at least hypothetically). This concept of not knowing costs would be completely unacceptable in any other industry, but it seems that people are reluctant to price things partly out of a fear of being able to do cost-benefit analysis on care and thus on human life. Direct billing would force hospitals and other care givers to be able to give cost estimates up front, and then market forces would help bring costs down as providers would compete and patients could shop around. I'm aware that this might not be optimal in all situations (eg emergency care), but runaway costs and opaque cost-benefit relationships are not helping things. I remember hearing that 20% of total healthcare costs are spent in the last 2 weeks of people's lives, and perhaps having more transparent costs would help avoid these costly, frequently unpleasant, and ineffective interventions. Of course, transitioning to this would be impossible overnight, but it's an interesting thought experiment. There would still be the option for catastrophic insurance, but otherwise it would be interesting to see market forces play a role.
- organsnyder 11y ago
  The problem with asking patients to shop based on price is that the penalty for making the wrong choice is much more devastating than with just about any other good or service. I did a ton of research when I bought my car, but even then the price of making a sub-optimal decision was limited to a substandard experience or waste of money. When choosing a surgeon, however, the cost of a wrong decision will be perceived to be much higher—shoddy work there could be life-altering/ending. Of course, shoddy workmanship on my car could also have devastating results (and safety was a big part of my decision process, especially since my father might not have died in his car accident if he had side curtain airbags), but it's not considered with the same level of urgency. Also, I'm extremely wary of pricing schemes that disincentivize preventative care and early interventions. Many illnesses are much more treatable—at much lower cost—if they're caught early. While we also need to be careful to avoid unnecessary expense, we don't want to discourage people from seeking care at the early signs of trouble. That being said, I do agree that transparency in healthcare costs is very much needed. However, we need to be careful in considering how market forces impact personal healthcare decisions.
  - msandford 11y ago
    You make some good points regarding quality, but there are a great many things where that doesn't matter. Yes if it's a major medical issue where a life hangs in the balance quality matters tremendously. But a huge range of medical care is about quality of life or other more minor things. I also think that if prices were available to people they might choose the preventative care themselves versus waiting until things are so bad that a major and costly intervention is needed. People talk about externalities as if they're the devil when it comes to climate change, but when it comes to medicine nobody bats an eye. Right now the consequences of people smoking, eating poorly, drinking too much, etc are generally externalities for individuals because either their insurance eats the cost or the public does. I'm not suggesting that people should be forced to bear that cost entirely on their own without insurance, but with no pricing available GPs have one less tool to "scare straight" their patients. I think what's especially galling is that the hospitals do have all the pricing information available in a database that they use to turn patients charts into bills. It's just not published publicly so patients can't make a slightly more informed decision on the front-end, they only see it AFTER care has been provided.
    - VLM 11y ago
      > I also think that if prices were available to people they might choose the preventative care themselves versus waiting until things are so bad that a major and costly intervention is needed. Insert analogy with car maintenance here. I'm just not seeing it in practice given the car maint example, although it sounds nice. Clearly, based on the car example, you can't motivate people merely with $$$ or inconvenience or some responsibility guilt trip. I'm thinking pain might work. "The total pain experience of a root canal is Y% vs flossing at a total pain experience of Z% make your choice..." Then again people seem impervious to pain, or impervious to learning from pain. "lets have another kid" "lets go on a fifteen mile hike in brand new boots" "hold my beer and watch this" If $, inconvenience, and guilt trips don't work, and pain also fails, I'm not sure whats left as a possible motivator.
      - msandford 11y ago
- emodendroket 11y ago
  Consumers have a lot of "skin in the game" right now between being uninsured, or having significant co-insurance, or high-deductible/catastrophic plans, etc., but they do not generally have the information to make informed decisions about their own care. Some research suggests patients with these kind of plans do spend less, but largely by foregoing preventative care: http://commonhealth.wbur.org/2012/05/consumers-health-costs http://commonhealth.wbur.org/2012/05/consumers-health-costs As for the cost-benefit thing, do you think insurers are not doing it?
- VLM 11y ago
  Two interesting problems. One is that a free market might result in "better" purchaser decisions, but a free market requires a meeting of the minds and some patients won't have minds, temporarily or permanently, and those that do have a staggering power imbalance of one uneducated untrained individual vs a thousand person highly trained organization. We're not talking about two commodity traders exchanging with each other. This is before we get into "state of mind" and panic, someone having a heart attack can't focus on contractual negotiations quite like the guy across the table not currently having a heart attack. And then there's the timeliness issue, and geography... The second, is medical care cannot be treated as a commodity. I was horrified at the "taylorism gone wild" in the article where one surgeon used twice the bandages as the other, and therefore is bad. In the real world that will be implemented as "well, yes I know your tumor was a completely different size and shape than his tumor, and bandages cost almost nothing compared to a human life, but we have beans to count and quotas to stay under so you'll just have to bleed to death because it would take too many bandages to save your life" or "well yes half his patients are permanently crippled and none of hers do, but she uses twice as many band aids, so we'll have to downsize her and keep him, to stay under our bandage budget". Without a commodity of interchangeable identical product, you can't have a free market or at least not the gains of a free market. Its interesting that the medical system admits as such... there are specializations of patient disease clusters, but despite the best efforts of centuries of work we still can't specialize beyond a very shallow level, we have cardiologist specialists not specialists in 25% arterial blockages of the left ventricle, even though its "obvious" that if it were implementable, specialization to that level would be very helpful. This is before we get to the issue that you get what you count, so if you count meaningless metrics you'll get excellent meaningless metrics, not health care. A better model for the economics of health care would be fine art. Or maybe education. Notice how the money spent correlates strongly with how much money is available, and has little correlation with results, at any level beyond bare requirements. Or how attempts at taylorism style management provide laughable comedy results. Health care does seem to "fit" better with fine art or education, than with accounting or a manual factory assembly line.
  - zeveb 11y ago
    > I was horrified at the "taylorism gone wild" in the article where one surgeon used twice the bandages as the other, and therefore is bad. It didn't say that it was bad; it just noted it as a fact. Perhaps Dr. Jones's patients need more bandages because of the types of patient he sees (which might indicate that he's really good at what he does); perhaps his incisions are larger (which would be bad); perhaps he just wastes bandages (which is also bad). All measurements can do is demonstrate a difference: good management is required to discern the reason for the disparity, and determine if it's a positive or negative indicator.
- mikepurvis 11y ago
  It seems so right from an Adam Smith invisible hand point of view: offer choice, allow people to shop around, and costs will go down, right? The US has already been running this experiment—the results are in, and it's a huge loser. Everything you need to know is in this chart: https://en.wikipedia.org/wiki/File:Total_health_expenditure_per_capita,_US_Dollars_PPP.png https://en.wikipedia.org/wiki/File:Total_health_expenditure_... It turns out that everyone pays a lot less when you treat healthcare infrastructure like roads, dams, the power grid, or any other infrastructure— it has certain high fixed costs which build and sustain it (financed from the general tax base), and apart from that, it should be available for use by everyone.
  - zeveb 11y ago
    > It seems so right from an Adam Smith invisible hand point of view: offer choice, allow people to shop around, and costs will go down, right? > The US has already been running this experiment—the results are in, and it's a huge loser. No, we've really not been running that experiment: we don't offer much choice, we don't really allow people to shop around, and most importantly, the vast majority of people aren't paying directly for their own care. The U.S. most definitely does not have a free market in health care, and hasn't for decades.
  - merpnderp 11y ago
    What we have isn't really insurance, but health care supplements. Insurance is for unforeseen events. But US health insurance pays for regular checkups and procedures. And I'll take our more expensive health care over any other system any day of the week. Because when the day comes when 1 of the 2 primary killers in the US comes for me (cancer and heart disease), no country in the world has better outcomes. And the US does it for a much more diverse, much larger, and unhealthy population. Cancer and heart disease outcomes are the best proxy for how well a health care system operates.
    - danharaj 11y ago
      > Cancer and heart disease outcomes are the best proxy for how well a health care system operates. Maybe for you. There are plenty of other fundamental measures of health care quality, like infant mortality rate.
refurb 11y ago
I work in the healthcare industry and have a good friend who works at a major hospital. You know what I've learned? Hospitals have no clue what it costs them to serve an individual patient. The lowest level where they understand costs is at the service level (e.g. ER, cardiac lab, stroke center). It's one of the reasons why you see all the wonky prices from hospitals: they just "create" prices for individual procedures until it covers their aggregate costs. It doesn't really matter to the hospital if procedure A is $1K and procedure B is $5K. As long as Arate + Brate > costs, they are fine with it.
- emodendroket 11y ago
  Well, yes, that's what the article says, but highlights one hospital working to change that.
  - protomyth 11y ago
    There is a clinic in Houston that was profiled earlier that did price per procedure and knew their costs. They were not a Medicaid / Medicare provider which might have made a difference.
- rayiner 11y ago
  The idea of pricing out hospital procedures as if they're widgets or oil changes is ridiculous to begin with.
  - emodendroket 11y ago
    I don't know that anyone is suggesting that. I'd also argue a routine diagnostic procedure, like a blood test, is pretty comparable to a mechanic doing an oil change.
  - mistermann 11y ago
    Is calculating statistical aggregates over a long period of time ridiculous? Many service based procedures have uncertain length, flipping a coin to arrive at a price doesn't seem like a great solution either.
patio11 11y ago
The group began with head and neck cancer, treatment of which turned out to involve 160 processes requiring measurement. To assess outcomes, it asked patients which they thought were most important. Head and neck cancer patients wanted to be able to talk and to swallow. (Survival, which many doctors had thought was a top priority, was not something patients raised; many assumed they would survive.) That parenthetical note is perhaps the clearest illustration I've ever seen in my life on the communication and expectation gap between experts and non-experts.
- deleted 11y ago
  [deleted]
- existencebox 11y ago
  I was looking in the article for a followup to that statement, but there was none. The reason I raise an eyebrow is simply that even in the absence of a communication gap, talking+swallowing as top concerns seems like a reasonable response. What matters more to you, being alive, or having a tolerable quality of life? Are we sure that there's a misunderstanding that death is a likely outcome (I could believe it; but I would also be slightly surprised, since "cancer==death sooner or later" exists even as a trope in mainstream media) as opposed to just a prioritization over things that matter so long as you're alive? Anyway, this was quite a tangent from the original article content, just something I was mulling over given your comment.
  - masklinn 11y ago
    > Are we sure that there's a misunderstanding that death is a likely outcome There isn't a misunderstanding that death is a likely outcome, there commonly is a misunderstanding of survival time. Gawande's book covers the subject of differing expectation between doctors and patients when discussing harsh treatment, patients think it'll give them months or years, doctors think weeks. If that isn't explicitly put on the table — and it usually isn't — you can get drawn-out "medical fights" where the patient's quality of life is more or less negative. See also: http://www.pbs.org/wgbh/pages/frontline/health-science-technology/being-mortal/dr-atul-gawande-hope-is-not-a-plan-when-doctors-patients-talk-death/ http://www.pbs.org/wgbh/pages/frontline/health-science-techn...
rgoddard 11y ago
One of the difficulties of improving the overall healthcare system is there are very few ways of making systematic improvements. This article talks about a single hospital. They demonstrated a method which works, but this only improves one hospital. For a real change to occur this would need to be repeated at a large number of hospitals on a hospital by hospital basis. The US healthcare system is incredibly fractured with large regional variances. The question is how to improve the system as a whole not on a piece by piece basis.
- raarts 11y ago
  The journey of a thousand miles begins with one step. -- Lao Tzu

56 points by zabramow 11y ago

After working in healthcare myself for a while, I've always wanted to see it be a service that was paid for by the customer directly (at least hypothetically). This concept of not knowing costs would be completely unacceptable in any other industry, but it seems that people are reluctant to price things partly out of a fear of being able to do cost-benefit analysis on care and thus on human life. Direct billing would force hospitals and other care givers to be able to give cost estimates up front, and then market forces would help bring costs down as providers would compete and patients could shop around. I'm aware that this might not be optimal in all situations (eg emergency care), but runaway costs and opaque cost-benefit relationships are not helping things. I remember hearing that 20% of total healthcare costs are spent in the last 2 weeks of people's lives, and perhaps having more transparent costs would help avoid these costly, frequently unpleasant, and ineffective interventions. Of course, transitioning to this would be impossible overnight, but it's an interesting thought experiment. There would still be the option for catastrophic insurance, but otherwise it would be interesting to see market forces play a role.

organsnyder 11y ago
The problem with asking patients to shop based on price is that the penalty for making the wrong choice is much more devastating than with just about any other good or service. I did a ton of research when I bought my car, but even then the price of making a sub-optimal decision was limited to a substandard experience or waste of money. When choosing a surgeon, however, the cost of a wrong decision will be perceived to be much higher—shoddy work there could be life-altering/ending. Of course, shoddy workmanship on my car could also have devastating results (and safety was a big part of my decision process, especially since my father might not have died in his car accident if he had side curtain airbags), but it's not considered with the same level of urgency. Also, I'm extremely wary of pricing schemes that disincentivize preventative care and early interventions. Many illnesses are much more treatable—at much lower cost—if they're caught early. While we also need to be careful to avoid unnecessary expense, we don't want to discourage people from seeking care at the early signs of trouble. That being said, I do agree that transparency in healthcare costs is very much needed. However, we need to be careful in considering how market forces impact personal healthcare decisions.
- msandford 11y ago
  You make some good points regarding quality, but there are a great many things where that doesn't matter. Yes if it's a major medical issue where a life hangs in the balance quality matters tremendously. But a huge range of medical care is about quality of life or other more minor things. I also think that if prices were available to people they might choose the preventative care themselves versus waiting until things are so bad that a major and costly intervention is needed. People talk about externalities as if they're the devil when it comes to climate change, but when it comes to medicine nobody bats an eye. Right now the consequences of people smoking, eating poorly, drinking too much, etc are generally externalities for individuals because either their insurance eats the cost or the public does. I'm not suggesting that people should be forced to bear that cost entirely on their own without insurance, but with no pricing available GPs have one less tool to "scare straight" their patients. I think what's especially galling is that the hospitals do have all the pricing information available in a database that they use to turn patients charts into bills. It's just not published publicly so patients can't make a slightly more informed decision on the front-end, they only see it AFTER care has been provided.
  - VLM 11y ago
    > I also think that if prices were available to people they might choose the preventative care themselves versus waiting until things are so bad that a major and costly intervention is needed. Insert analogy with car maintenance here. I'm just not seeing it in practice given the car maint example, although it sounds nice. Clearly, based on the car example, you can't motivate people merely with $$$ or inconvenience or some responsibility guilt trip. I'm thinking pain might work. "The total pain experience of a root canal is Y% vs flossing at a total pain experience of Z% make your choice..." Then again people seem impervious to pain, or impervious to learning from pain. "lets have another kid" "lets go on a fifteen mile hike in brand new boots" "hold my beer and watch this" If $, inconvenience, and guilt trips don't work, and pain also fails, I'm not sure whats left as a possible motivator.
    - msandford 11y ago
emodendroket 11y ago
Consumers have a lot of "skin in the game" right now between being uninsured, or having significant co-insurance, or high-deductible/catastrophic plans, etc., but they do not generally have the information to make informed decisions about their own care. Some research suggests patients with these kind of plans do spend less, but largely by foregoing preventative care: http://commonhealth.wbur.org/2012/05/consumers-health-costs http://commonhealth.wbur.org/2012/05/consumers-health-costs As for the cost-benefit thing, do you think insurers are not doing it?
VLM 11y ago
Two interesting problems. One is that a free market might result in "better" purchaser decisions, but a free market requires a meeting of the minds and some patients won't have minds, temporarily or permanently, and those that do have a staggering power imbalance of one uneducated untrained individual vs a thousand person highly trained organization. We're not talking about two commodity traders exchanging with each other. This is before we get into "state of mind" and panic, someone having a heart attack can't focus on contractual negotiations quite like the guy across the table not currently having a heart attack. And then there's the timeliness issue, and geography... The second, is medical care cannot be treated as a commodity. I was horrified at the "taylorism gone wild" in the article where one surgeon used twice the bandages as the other, and therefore is bad. In the real world that will be implemented as "well, yes I know your tumor was a completely different size and shape than his tumor, and bandages cost almost nothing compared to a human life, but we have beans to count and quotas to stay under so you'll just have to bleed to death because it would take too many bandages to save your life" or "well yes half his patients are permanently crippled and none of hers do, but she uses twice as many band aids, so we'll have to downsize her and keep him, to stay under our bandage budget". Without a commodity of interchangeable identical product, you can't have a free market or at least not the gains of a free market. Its interesting that the medical system admits as such... there are specializations of patient disease clusters, but despite the best efforts of centuries of work we still can't specialize beyond a very shallow level, we have cardiologist specialists not specialists in 25% arterial blockages of the left ventricle, even though its "obvious" that if it were implementable, specialization to that level would be very helpful. This is before we get to the issue that you get what you count, so if you count meaningless metrics you'll get excellent meaningless metrics, not health care. A better model for the economics of health care would be fine art. Or maybe education. Notice how the money spent correlates strongly with how much money is available, and has little correlation with results, at any level beyond bare requirements. Or how attempts at taylorism style management provide laughable comedy results. Health care does seem to "fit" better with fine art or education, than with accounting or a manual factory assembly line.
- zeveb 11y ago
  > I was horrified at the "taylorism gone wild" in the article where one surgeon used twice the bandages as the other, and therefore is bad. It didn't say that it was bad; it just noted it as a fact. Perhaps Dr. Jones's patients need more bandages because of the types of patient he sees (which might indicate that he's really good at what he does); perhaps his incisions are larger (which would be bad); perhaps he just wastes bandages (which is also bad). All measurements can do is demonstrate a difference: good management is required to discern the reason for the disparity, and determine if it's a positive or negative indicator.
mikepurvis 11y ago
It seems so right from an Adam Smith invisible hand point of view: offer choice, allow people to shop around, and costs will go down, right? The US has already been running this experiment—the results are in, and it's a huge loser. Everything you need to know is in this chart: https://en.wikipedia.org/wiki/File:Total_health_expenditure_per_capita,_US_Dollars_PPP.png https://en.wikipedia.org/wiki/File:Total_health_expenditure_... It turns out that everyone pays a lot less when you treat healthcare infrastructure like roads, dams, the power grid, or any other infrastructure— it has certain high fixed costs which build and sustain it (financed from the general tax base), and apart from that, it should be available for use by everyone.
- zeveb 11y ago
  > It seems so right from an Adam Smith invisible hand point of view: offer choice, allow people to shop around, and costs will go down, right? > The US has already been running this experiment—the results are in, and it's a huge loser. No, we've really not been running that experiment: we don't offer much choice, we don't really allow people to shop around, and most importantly, the vast majority of people aren't paying directly for their own care. The U.S. most definitely does not have a free market in health care, and hasn't for decades.
- merpnderp 11y ago
  What we have isn't really insurance, but health care supplements. Insurance is for unforeseen events. But US health insurance pays for regular checkups and procedures. And I'll take our more expensive health care over any other system any day of the week. Because when the day comes when 1 of the 2 primary killers in the US comes for me (cancer and heart disease), no country in the world has better outcomes. And the US does it for a much more diverse, much larger, and unhealthy population. Cancer and heart disease outcomes are the best proxy for how well a health care system operates.
  - danharaj 11y ago
    > Cancer and heart disease outcomes are the best proxy for how well a health care system operates. Maybe for you. There are plenty of other fundamental measures of health care quality, like infant mortality rate.

refurb 11y ago

I work in the healthcare industry and have a good friend who works at a major hospital. You know what I've learned? Hospitals have no clue what it costs them to serve an individual patient. The lowest level where they understand costs is at the service level (e.g. ER, cardiac lab, stroke center). It's one of the reasons why you see all the wonky prices from hospitals: they just "create" prices for individual procedures until it covers their aggregate costs. It doesn't really matter to the hospital if procedure A is $1K and procedure B is $5K. As long as Arate + Brate > costs, they are fine with it.

emodendroket 11y ago
Well, yes, that's what the article says, but highlights one hospital working to change that.
- protomyth 11y ago
  There is a clinic in Houston that was profiled earlier that did price per procedure and knew their costs. They were not a Medicaid / Medicare provider which might have made a difference.
rayiner 11y ago
The idea of pricing out hospital procedures as if they're widgets or oil changes is ridiculous to begin with.
- emodendroket 11y ago
  I don't know that anyone is suggesting that. I'd also argue a routine diagnostic procedure, like a blood test, is pretty comparable to a mechanic doing an oil change.
- mistermann 11y ago
  Is calculating statistical aggregates over a long period of time ridiculous? Many service based procedures have uncertain length, flipping a coin to arrive at a price doesn't seem like a great solution either.

patio11 11y ago

The group began with head and neck cancer, treatment of which turned out to involve 160 processes requiring measurement. To assess outcomes, it asked patients which they thought were most important. Head and neck cancer patients wanted to be able to talk and to swallow. (Survival, which many doctors had thought was a top priority, was not something patients raised; many assumed they would survive.) That parenthetical note is perhaps the clearest illustration I've ever seen in my life on the communication and expectation gap between experts and non-experts.

deleted 11y ago
[deleted]
existencebox 11y ago
I was looking in the article for a followup to that statement, but there was none. The reason I raise an eyebrow is simply that even in the absence of a communication gap, talking+swallowing as top concerns seems like a reasonable response. What matters more to you, being alive, or having a tolerable quality of life? Are we sure that there's a misunderstanding that death is a likely outcome (I could believe it; but I would also be slightly surprised, since "cancer==death sooner or later" exists even as a trope in mainstream media) as opposed to just a prioritization over things that matter so long as you're alive? Anyway, this was quite a tangent from the original article content, just something I was mulling over given your comment.
- masklinn 11y ago
  > Are we sure that there's a misunderstanding that death is a likely outcome There isn't a misunderstanding that death is a likely outcome, there commonly is a misunderstanding of survival time. Gawande's book covers the subject of differing expectation between doctors and patients when discussing harsh treatment, patients think it'll give them months or years, doctors think weeks. If that isn't explicitly put on the table — and it usually isn't — you can get drawn-out "medical fights" where the patient's quality of life is more or less negative. See also: http://www.pbs.org/wgbh/pages/frontline/health-science-technology/being-mortal/dr-atul-gawande-hope-is-not-a-plan-when-doctors-patients-talk-death/ http://www.pbs.org/wgbh/pages/frontline/health-science-techn...

rgoddard 11y ago

One of the difficulties of improving the overall healthcare system is there are very few ways of making systematic improvements. This article talks about a single hospital. They demonstrated a method which works, but this only improves one hospital. For a real change to occur this would need to be repeated at a large number of hospitals on a hospital by hospital basis. The US healthcare system is incredibly fractured with large regional variances. The question is how to improve the system as a whole not on a piece by piece basis.

raarts 11y ago
The journey of a thousand miles begins with one step. -- Lao Tzu