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There is an Adam Ruins Everything episode about that. Basically hospitals were reasonable, then insurance companies came along and brought extra business to hos
by 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 agoThe 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 agoThat'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 agoThanks. I must have remembered it wrong. Even with a variance, 25% seems way to high.
- maxerickson 9y agoCould 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.