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I think it's an important reminder that markets need some level of transparency to function. And perhaps that relatively simple regulation (like a requirement t

by dukoid 9y ago

I think it's an important reminder that markets need some level of transparency to function. And perhaps that relatively simple regulation (like a requirement to publish the prices -- or in other areas the first sale doctrine) might be the best regulation where feasible....

conanbatt 9y ago
This is a very interesting case, but I'd be cautious about it. Its not that the surgery that costs 60k, will cost 16k if you don't have administrative staff. Its true administration is a huge expense, but I doubt it can make medical care cost 1/4. Also healthcare services can never be "all round service" because any complication could mean a million things from scans to medication. Even on primary care you cant really promise to give 100% service for a fixed fee without ending up working like an insurance.
- crpatino 9y ago
  It is not as if the extra $44K goes all to the admin's payroll. Rather, if you have more personnel, it means you are running a bigger, more complex operation. That demands larger facilities, more equipment, a wider range of skills in your workforce, etc, and that all costs money. Furthermore, given that all those things require heavier capital investments, it makes less likely that the surgeon performing the surgery is a (partial) owner of the hospital itself, but rather a highly compensated employee. There is a double-bite effect there: 1. The doctor's interest is less alligned with that of the hospital, so he will demand higher compensation for the same amount of work, at least of there's enough scarcity of doctors to justify it. 2. The capitalist owner will naturally expect a return of investment. It is subtle, but in this case the expected profit is proportional to the total capital investment, not the number of hours/services provided.
prostoalex 9y ago
Hospital chargemasters are required to be public in California https://www.oshpd.ca.gov/Chargemaster/ https://www.oshpd.ca.gov/Chargemaster/ Unfortunately, 1) The price agreements between hospitals and insurance companies are confidential, as both sides compete in their own industry and don't want to reveal their hands. 2) Consequently, chargemasters post some ridiculous price per procedure (with discounts available, naturally, to insurance carriers, who are the bulk buyers in the business). Which makes chargemasters similar to list prices you see at most retail establishments - only schmucks are expected to pay those.
- Clubber 9y ago
  There is an Adam Ruins Everything episode about that. Basically hospitals were reasonable, then insurance companies came along and brought extra business to hospitals. For that, they felt they deserved a cut. Since the hospitals were mostly non-profits, or low profit, they didn't have anywhere to cut, so in response they raised their rates to provide a cut. There is more to it, but that's the origin of the charge master. Of course regulation requires administrative staff which costs more money as well. Malpractice is ungodly expensive too. Other costs are the requirement that hospitals treat the uninsured. I was listening to NPR when the ACA debate was going on, and the CEO of a local large hospital said about 25% of his costs are due to treating people who couldn't pay. That's a huge number.
  - maxerickson 9y ago
    The American Hospital Association tracks uncompensated care (bad debt and forgiven bills): https://www.aha.org/system/files/2018-01/2017-uncompensated-care-factsheet.pdf https://www.aha.org/system/files/2018-01/2017-uncompensated-... It's around $40 billion per year in recent years (for all US hospitals). With hospital spending around $1 trillion, it's 4 or 5% across the industry. There are of course individual hospitals that face higher costs.
    - ed312 9y ago
      That's an incredibly revealing document! I've been looking for something like this to explain to my more conservative friends why the ACA is actually a better way to reduce medical costs.
    - Clubber 9y ago
      Thanks. I must have remembered it wrong. Even with a variance, 25% seems way to high.
      - maxerickson 9y ago
        Could be related to costs vs charges. Would still be lots of net income though (for the uncompensated care to represent a larger fraction of total costs). Could also be including Medicare and Medicaid (which the numbers in that pdf explicitly exclude). They pay, but not always enough to cover the cost of care delivered.

by dukoid 9y ago

conanbatt 9y ago

This is a very interesting case, but I'd be cautious about it. Its not that the surgery that costs 60k, will cost 16k if you don't have administrative staff. Its true administration is a huge expense, but I doubt it can make medical care cost 1/4. Also healthcare services can never be "all round service" because any complication could mean a million things from scans to medication. Even on primary care you cant really promise to give 100% service for a fixed fee without ending up working like an insurance.

crpatino 9y ago
It is not as if the extra $44K goes all to the admin's payroll. Rather, if you have more personnel, it means you are running a bigger, more complex operation. That demands larger facilities, more equipment, a wider range of skills in your workforce, etc, and that all costs money. Furthermore, given that all those things require heavier capital investments, it makes less likely that the surgeon performing the surgery is a (partial) owner of the hospital itself, but rather a highly compensated employee. There is a double-bite effect there: 1. The doctor's interest is less alligned with that of the hospital, so he will demand higher compensation for the same amount of work, at least of there's enough scarcity of doctors to justify it. 2. The capitalist owner will naturally expect a return of investment. It is subtle, but in this case the expected profit is proportional to the total capital investment, not the number of hours/services provided.

prostoalex 9y ago

Hospital chargemasters are required to be public in California https://www.oshpd.ca.gov/Chargemaster/ https://www.oshpd.ca.gov/Chargemaster/ Unfortunately, 1) The price agreements between hospitals and insurance companies are confidential, as both sides compete in their own industry and don't want to reveal their hands. 2) Consequently, chargemasters post some ridiculous price per procedure (with discounts available, naturally, to insurance carriers, who are the bulk buyers in the business). Which makes chargemasters similar to list prices you see at most retail establishments - only schmucks are expected to pay those.

Clubber 9y ago
There is an Adam Ruins Everything episode about that. Basically hospitals were reasonable, then insurance companies came along and brought extra business to hospitals. For that, they felt they deserved a cut. Since the hospitals were mostly non-profits, or low profit, they didn't have anywhere to cut, so in response they raised their rates to provide a cut. There is more to it, but that's the origin of the charge master. Of course regulation requires administrative staff which costs more money as well. Malpractice is ungodly expensive too. Other costs are the requirement that hospitals treat the uninsured. I was listening to NPR when the ACA debate was going on, and the CEO of a local large hospital said about 25% of his costs are due to treating people who couldn't pay. That's a huge number.
- maxerickson 9y ago
  The American Hospital Association tracks uncompensated care (bad debt and forgiven bills): https://www.aha.org/system/files/2018-01/2017-uncompensated-care-factsheet.pdf https://www.aha.org/system/files/2018-01/2017-uncompensated-... It's around $40 billion per year in recent years (for all US hospitals). With hospital spending around $1 trillion, it's 4 or 5% across the industry. There are of course individual hospitals that face higher costs.
  - ed312 9y ago
    That's an incredibly revealing document! I've been looking for something like this to explain to my more conservative friends why the ACA is actually a better way to reduce medical costs.
  - Clubber 9y ago
    Thanks. I must have remembered it wrong. Even with a variance, 25% seems way to high.
    - maxerickson 9y ago
      Could be related to costs vs charges. Would still be lots of net income though (for the uncompensated care to represent a larger fraction of total costs). Could also be including Medicare and Medicaid (which the numbers in that pdf explicitly exclude). They pay, but not always enough to cover the cost of care delivered.