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Fed Up with Drug Companies, Hospitals Decide to Start Their Own

• maxxxxx 9y ago
  I am not sure if patients will see any of the savings though. I view hospitals as fundamentally dishonest organizations after a few experiences. Their medical treatment is fine but their financial practices are borderline fraudulent.
  • programmingpol 9y ago
    Some, if not most, of this is a result of the insurance system. The insurance companies only pay x% of any given item, therefore the hospitals have to jack prices through the roof to collect enough to survive. The problem with our healthcare system is that too much money goes to drug companies, medical device makers, and insurance companies and not enough makes it to the people actually providing the care. Its a bit more complicated than that, I'd admit, but that's the TLDR version.
    • chimeracoder 9y ago
      > Some, if not most, of this is a result of the insurance system. The insurance companies only pay x% of any given item, therefore the hospitals have to jack prices through the roof to collect enough to survive. To clarify: Medicare reimburses rates that are below COGS, so hospitals have to increase the amount they charge private insurers in order to make up the loss.
      • dangerlibrary 9y ago
        If Medicare rates are actually below cogs, why do hospitals accept Medicare patients? I know some don't, but the vast majority do. Something about that explanation feels off.
        • Thriptic 9y ago
          Some private facilities don't, but in general it's cheaper and easier to provide preventive care than it is to try to collect from these patients after they admit to the ER with a complication (where you are mandated by law to treat them). One of the reasons hospitals accept discounted rates for insured patients in general is ease of reimbursement vs trying to chase the patient for money.
        • woolvalley 9y ago
          If you serve a certain rate of medicare patients, you get additional funding. It's set up this way for 'political' reasons. Like most of us politics, it's a mess.
          • chimeracoder 9y ago
            > If you serve a certain rate of medicare patients, you get additional funding. It's set up this way for 'political' reasons. Like most of us politics, it's a mess. That's not an incentive for hospitals to serve Medicare patients; it's compensation for the fact that the hospital sees so many Medicare patients (and therefore so few privately-insured patients, by portion) that it can't make up the difference solely from overcharging private insurers.
      • ejstronge 9y ago
        The grandparent is describing a separate issue - note that not all hospitals will serve Medicare-receiving patients beyond their federal requirements. Insurers negotiate reimbursement rates with hospitals, with both parties being able to leverage their size/social cachet to extract favorable terms. This contributes to the availability of certain hospital chains in the preferred networks vs. the non-preferred networks of particular insurers.
        • chimeracoder 9y ago
          It's actually the same issue - the way the contracts are structured, insurers agree to pay X% of what Medicare charges, where X is typically something like 200% or 300%.
    • reaperducer 9y ago
      > The insurance companies only pay x% of any given item, The hospitals negotiate those rates. If they're not happy with them, they need better negotiators.
      • Thriptic 9y ago
        Depends on what the market conditions are. If there is a lot of competition from hospitals then the payer may just refuse to include the hospital in network if they aren't willing to play ball, meaning they lose all the prospective business.
    • mywittyname 9y ago
      Health insurance companies have taken to denying almost every claim that hospitals file. This overtaxes the hospitals claims denial departments and costs hospitals millions in lost revenue because they don't have the staff to properly review and resubmit every claim (which has to be done by a clinical specialist). It's like taking your car to a mechanic, and once it's fixed, refusing to pay, claiming car didn't need THAT repair in the first place. Then getting away with it because you have an arbitration agreement in place with the shop. So the shop needs to employ an entire separate department of ASE certified mechanics that are dedicated to documenting that the repairs performed on customer cars were necessary. But the kicker is, YOU GET TO DECIDE IF YOU'RE CONVINCED THE REPAIR WAS NECESSARY. Hospitals used to have small (1 person per 10k beds) claims denial departments and use outsourcing firms if case loads increased. Now they are acquiring all the outsourcing firms and increasing their staff to like 100 people per 10k beds. It's insane. I like to retell a particularly awful denial my partner had to deal with, which was a patient had their open heart surgery claim denied by the insurance company because they determined that the patient's condition only warranted observational care (that's right, the insurance company determines what care you need/get). The hospital eventually won that claim, but they routinely lose $100k+ claims and have to eat the cost.
      • garmaine 9y ago
        On the other hand, when I bring my car to an auto shop they give an estimate of cost before actually doing any work.
        • influx 9y ago
          Not only that but car insurance is for catastrophic events, not for tune ups, and oil changes.
        • vkou 9y ago
          Your car is unlikely to experience life-threatening complications with a nearly unbounded upper cost while it's being fixed. Your body is. A routine surgery can absolutely turn into a hundred-thousand-dollar nightmare. Never mind that a mechanic has a much better understanding of a car, then a doctor does of a human body.
    • maxxxxx 9y ago
      "The problem with our healthcare system is that too much money goes to drug companies, medical device makers, and insurance companies and not enough makes it to the people actually providing the care. " The surgeons I see through work have very nice houses and 100k+ cars so they are part of this.
      • wlesieutre 9y ago
        You can thank the American Medical Association for their work on artificially limiting the number of doctors. I've read some accounts that they're now trying to fix this, but it's not something you can just fix in a year or two.
      • cjalmeida 9y ago
        To add some data to your anecdote. Median surgeon salary in CA is $400K. In UK, a surgeon gets about $100K.
    • Thriptic 9y ago
      The real root problems with the system are that a tiny minority of very sick patients account for an overwhelming majority of treatment costs; that it's difficult to prevent this from happening; and that the current care structures make it hard to take early action to incentivize these patients to improve. It also is almost impossible to have a real discussion about this fact because it makes people uncomfortable.
      • majormajor 9y ago
        There's a lot of moralizing in this, without numbers justifying it. Show me the evidence that an overwhelming majority of costs come from few recalcitrant bad actors vs things like cancers, expensive surgical or drug remedies of rare diseases, or just plain expensive end-of-life care (a somewhat separate discussion from the others, but a conversation that'll have to be had sometime). Without that... the costs will always be unevenly distributed due to the nature of illness, that's why the only sane first-step health policy is mandated universal insurance coverage, public or private, since the main question is who is going to get the bad news that they've got the unlucky genes/mutated cells/whatever. Everyone pays in, everyone gets covered if/when they need it. And if you pay in your whole life and never get seriously ill? That's not a reason to complain, that's a reason to thank your lucky stars you didn't have to deal with being seriously ill or injured! It's not fucking fun, like sick people are trying to get a free ride here.
        • adventured 9y ago
          The parent comment was correct when they said this: "The real root problems with the system are that a tiny minority of very sick patients account for an overwhelming majority of treatment costs" It's impossible to tell exactly what the parent comment meant any more precisely without clarification, whether they were talking about unnecessary over-consumption of resources (Americans have been over-healthcare'd for decades), or that eg cancer patients or elderly consume vast resources (as one would expect). However, it is of course the case that a tiny percentage of the population produces a very large share of the cost. The bottom 50% of healthcare consumers, are a mere 3% of the cost in the system. I don't know what the point of any of that is however, there are only ultimately two choices: go back to the old system that was far less expensive for the majority, but didn't properly cover about 1/3 of the population; or continue to shift toward universal healthcare with a fully distributed cost (which means significantly raising taxes on the middle class, as in every universal healthcare system). "When it comes to America's spiraling health care costs, the country's problems begin with the 5%. In 2008 and 2009, 5% of Americans were responsible for nearly half of the country's medical spending. ... In 2009, the top 1% of patients accounted for 21.8% of expenditures." https://www.theatlantic.com/business/archive/2012/01/5-of-americans-made-up-50-of-us-health-care-spending/251402/ https://www.theatlantic.com/business/archive/2012/01/5-of-am...
    • jjoonathan 9y ago
      Hospitals are every bit as cynically abusive as the other players. They ratchet up prices as high as they can get away with while blaming insurance companies, the only party in the system with enough leverage to negotiate prices down, they demand huge kickbacks before giving drug companies access to patients (the #1 cost in drug development) and put gigantic markups on drugs they give to patients while pretending drug companies are the sole responsible party for high drug prices, they act like non-profits when asked to pay taxes but for-profits when they decide on executive compensation or location strategy (i.e. close hospitals in poor neighborhoods, open in rich neighborhoods), and they house a guild that has had such diabolical success in "managing" its training pipeline that it publicly condemns the policies it itself put in place to do so. In general: If you ask the insurance companies who the problem is, they point at hospitals and drug companies. If you ask hospitals who the problem is, they point at insurance companies and drug companies. If you ask drug companies who the problem is, they point at insurance companies and hospitals. If you look at patient costs in the three sectors compared to other countries, you see a remarkably even division of the spoils between the three heads of the beast.
    • ekianjo 9y ago
      > The problem with our healthcare system is that too much money goes to drug companies, Erm no, actually you pay a lot more for pure hospital services all things considered than whatever is paid for the price of drugs. I totally agree that drugs should be cheaper for patients, but pretending drug manufacturers are the only/main problem is just far from the reality of the market. Every intermediate is inflating their prices as well.
    • cjalmeida 9y ago
      Oh please. Doctors in the US get huge amounts of money, to the point they're the actual 1%. You don't see anything like this in OCDE countries. Doctor associations all across the country create enormous barriers to the opening of new medical schools to avoid competition. Don't get me wrong, medical doctors are generally good hard working people. But we need to acknowledge they're part of the problem.
      • cjalmeida 9y ago
        To downvoted, some data. A surgeon in CA earns on average about $400k while its peer in UK makes $100. 4x the cost of labor should partially explain why a surgery can easily cost 6 figures.
        • jinglebells 9y ago
          Although, remember that surgeon won't need to pay for health insurance, so that saves some cash :D
      • jrnichols 9y ago
        > Doctor associations all across the country create enormous barriers to the opening of new medical schools to avoid competition. similar to how nursing unions band together and squash efforts for community paramedicine (many of the same services at a way lower cost) to expand. "they'll be taking our jobs!" is what it boils down to.
  • derefr 9y ago
    Savings, no. But benefit, surely: patients might actually be able to be prescribed melatonin (http://slatestarcodex.com/2013/09/28/sleep-now-by-prescription/ http://slatestarcodex.com/2013/09/28/sleep-now-by-prescripti...) if there was a hospital-demand-driven drug-lab producing and bottling it to clinical standards. The entire market for drugs like Ramelteon—drugs that only exist because doctors can't prescribe the generic, because hospital and pharmacy suppliers don't carry the generic, because no drug lab finds it profitable to sell the generic, despite FDA approval—would collapse overnight.
  • mirimir 9y ago
    Well, some hospitals are honest, and dedicated to patient care. And some are dishonest, and only in it for the money. But whatever, none of them are as evil as most drug companies.
    • yorby 9y ago
      > none of them are as evil as most drug companies not yet...
    • darkerside 9y ago
      Good Lord, people truly just don't get it. Hospitals are not evil; they are tasked with saving people's lives. People who nobody else can save. All the worst medical problems in the world--sometimes sudden trauma, sometimes a festering problem left to burst--they all end up on the doorstep of the hospitals, full of doctors, nurses, and technicians who are humans just like you and me. And they work ridiculous hours saving as many of us as they can, dragging bodies back from the footsteps of Death itself. Some of them making great money doing it, but others just because it's not in their nature to do anything but help. And yes, like any organization, hospitals scramble for cash to keep the lights on and keep operations going for a mission they hold sacred. But you show up at an ER, and you will get a minimum standard of care, no questions asked. And that's pretty amazing. Disclaimer: None. I don't work in the medical industry.
      • maxxxxx 9y ago
        All you are saying is correct but you can't excuse their billing practices.
        • notatoad 9y ago
          Blaming one specific part of a profit-centric health care system for being profit-centric seems a little silly
          • maxxxxx 9y ago
            This is not about profit but about being opaque and dishonest in their business practices.
  • chrisgd 9y ago
    HCA, community health and the rest have gotten insanely wealthy off of sick people
  • ThrustVectoring 9y ago
    You'd be hard-pressed to make a system that keeps hospitals from being abusive. Your BATNA to accepting their terms is literally dying, and especially the older folks who need more care have giant piles of cash. The cynical profit-maximizer in that position will raise uninsured prices high until the losses due to "eff this, I'm declaring bankruptcy and my various creditors can squabble over my assets" outweighs the increased collection from payment plans. 62% of bankruptcies in the US are caused by medical debt. The only saving grace in this all is that you can save enough for retirement in creditor-protected retirement accounts, and can otherwise secure yourself financially while telling your creditors to pound sand if they're being ridiculous.
    • jacquesm 9y ago
      Other countries hospitals are doing just fine.
    • Consultant32452 9y ago
      I could design such a system overnight. Starting tomorrow instead of paying for medical care the US Medicare and Medicaid programs will simply cut a check to the people who they were previously funding care for. Then those people may choose to spend the money on anything they wish, healthcare or otherwise. The days of not being able to price shop are over, competition will drop prices through the floor. The hospital can try to be as evil as they want, but their ability to do so in a market that has actual price and service competition will make it very difficult to do so.
      • selectodude 9y ago
        “Let me price compare my heart attack operation before I decide on which hospital I want this ambulance I found on Expedia to take me to before I die.” I mean this nicely but sincerely, are you high?
        • fvdessen 9y ago
          Most medical interventions are not about immediately life threatening situations.
• pstuart 9y ago
  Here's a great analysis of the overall problem: http://truecostofhealthcare.org/ http://truecostofhealthcare.org/
  • TrainedMonkey 9y ago
    This site is sluggish on a pretty beefy laptop. edit: Using Google Chrome Version 63.0.3239.132 (Official Build) (64-bit)
    • pstuart 9y ago
      Definitely a pause in loading, however, it's worth the wait. It's my doctor's site, I'll let him know.
    • cheeze 9y ago
      Highjacks my scrolling to make it "smooth" as well...
• reaperducer 9y ago
  Coincidentally, some insurance companies that are fed up with hospitals are starting their own.
  • eatbitseveryday 9y ago
    Any source, example, etc.? Your comment reads like one of those click-bait advertisements.
    • Thriptic 9y ago
      HMOs. Direct employment of physicians by payers used to be a popular thing until people realized that the incentive structures were conflicting. More money for providers means less for the parent payer etc.
    • nradov 9y ago
      It's really not click bait. Kaiser Permanente already operates under that model with a single organization acting as an insurer and owning hospitals. Other payers are moving in the same direction by acquiring or creating provider organizations. In some markets all of the major providers have merged together in order to gain more negotiating power so the only way payers can get some leverage back is by having providers as employees instead of vendors.
      • mywittyname 9y ago
        Also, a lot of hospitals self-insure anymore.
      • tssva 9y ago
        Kaiser only operates in this manner in certain of the 8 regions they service. Mostly on the west coast. In the regions on the east coast Kaiser contracts with existing hospitals.
    • ars 9y ago
      UPMC. It's both an insurance company, and a chain of hospitals. And Dr.'s offices, and well, pretty much everything. Not sure which came first though, hospital or insurance company.
• fludlight 9y ago
  Let's say they succeed in launching a new generics company. Ten years down the line they will divest in order to build each hospital a shiny new geriatrics wing. Within six months the spun-off drug company will jack up prices and the cycle will continue.
  • TillE 9y ago
    From that perspective, does any country have their own publicly owned pharmaceutical manufacturer? It's the kind of thing the NHS should do, since they control most other aspects of health care, but I don't think they do. There's so little benefit to competition with generics, you may as well have that vertical integration to at least provide what hospitals need.
    • ekianjo 9y ago
      Country-owned means of production have usually not fared well vs competitive forces in the past. And it could be considered as unfair competition: a state-owned manufacturer could basically have a blank check from the government for any kind of investment and would not have to worry at all about profitability. It sounds very nice as a thought exercise, but economical incentives are very tightly linked with productivity.
      • chrisbennet 9y ago
        Thinking of it as “unfair competition” implies that companies have some sort of entitlement to a market. They don’t. If my town wants to have its own fire department, it’s not “unfair” to privately owned fire departments anymore than working on my own car is “unfair” to professional mechanics.
        • mindcrime 9y ago
          Nationalized producers are generally considered "unfair" because they're usually (always??) tax subsidized in some way. As such, they're not competing on a level playing field with the other players. In fact, the other players are being taxed... to pay for subsidizing their direct competitor! Now if you wanted to setup a nationalized producer, put a "chinese wall" between it and the State and force it to compete without subsidies or special (favourable) regulations, sure, go for it. But then what's the advantage of it being nationalized to begin with? Anybody could start a non-profit corporation and do the same thing.
• Feniks 9y ago
  This is happening in my country and the government has said they'll back any pharmacy deciding to mix the drugs themselves. Healthcare costs are spiralling out of control. It'll lead to a metric ton of courtcases all the way to Strasbourg and beyond though. The Americans may threaten to invade.
  • fencepost 9y ago
    Just offer to let Trump put his name on a hotel there, or a condo building attractive to Russians wanting to launder some money. Tada, no risk of a US invasion and you may even get better trade deals.
• indescions_2018 9y ago
  I always assumed it would be CVS that got into the game. There are are probably a dozen or so drugs that account for the majority of consumption. Flu vaccines, blood pressure, cholesterol, thyroid, insulin, asthma, progesterone, beta-blockers, gerd, etc. Providing these at minimum cost, as well as community public health services. Could be enormously cost effective. And extend general wellness and productivity many times over. >>> "the trick will be in selecting the right third-party manufacturer to ensure good quality" Obvious subtext here is outsourcing mass market generics to be produced in India, China and other emerging markets. "Pharma-security" might be a popular way to phrase it today. Quality is undoubtedly reflected in price. And there is enormous opportunity in exponentially reducing R&D costs and finding efficiencies.
  • Clubber 9y ago
    I they seem to be explicitly targeting generics, so R&D doesn't come into play. It's really just find someone who can build a known compound and press it into a pill. This has the potential to be massively disruptive.
    • mirimir 9y ago
      Even generics need FDA approval. Manufacturers must demonstrate therapeutic equivalence.
      • akozak 9y ago
        That's interesting - even if they can prove chemically they're producing something that's already been approved?
        • toomuchtodo 9y ago
          That is part of the approval process. https://www.fda.gov/Drugs/ResourcesForYou/Consumers/BuyingUsingMedicineSafely/GenericDrugs/ucm506040.htm https://www.fda.gov/Drugs/ResourcesForYou/Consumers/BuyingUs...
        • 9y ago
• WalterBright 9y ago
  When there's lack of competition, one needs to look for artificial barriers. Ah, found it: "Intermountain executives said that they would seek approval to manufacture the products from the Food and Drug Administration, which has vowed to give priority to companies that want to make generics in markets for which there is little competition."
  • nradov 9y ago
    I certainly hope you're not suggesting that we dispense with FDA approval for drug manufacturers just for the sake of increasing competition.
    • WalterBright 9y ago
      I don't need government approval to start manufacturing cars. Why for generic drugs? Note that you're paying plenty for having the FDA as gatekeeper.
      • rdruxn 9y ago
        There are numerous federal regulations concerning the manufacturing of cars.
        • WalterBright 9y ago
          Conforming to regulations are not the same thing as getting approvals/certification.
          • selectodude 9y ago
            Your car needs to be certified to not spew shit everywhere in the same way your drug needs to be certified to not harm people who take it. For obvious reasons, one is far more expensive to test and certify.
            • 9y ago
• shykes 9y ago
  This article makes it seem like drug companies alone are responsible for predatory pricing in US healthcare, with hospitals being somehow on the consumer's side of the issue. In reality US hospitals are just as guilty of predatory behavior. If they do achieve lower costs through a new generics company, I do not trust them one bit to pass on the savings to patients. Why would they?
  • icantdrive55 9y ago
    Never forget being charged 14.99 for one Acetaminophen while in a hospital, and this was years ago. My father had good insurance. He went in for a spider bite. He needed to stay the night. I arrived and he thanked me for Teddy Bear, and flowers. I told him I didn't send you anything. He said, "Well someone did?" Weeks later he called me up, and said the gift shop on the hospital send the gift, and charged the Insurance company $230. Billed under something like "psychological affirmations". Any who--they are thieving entities. It kills me when I meet people, with no assets, who pay their inflated hospital bills out of American pride? They are so strong in their convictions, I don't even bring up a chapter 7. I understand they save live, but don't financially ruin patients. One other memory. I went in for something. I had great insurance, so I didn't worry about the bill. They gave me a blood test. A week went by, and I got a bill for $900. I called my union, and they the hospital didn't know I had insurance. My union said my bill would be $10. She said the hospital sent them the bill of $100, and I would pay my 10 percent. I asked, "Why do they only charge you $100?" She said, "It's about Collective Bargaining. Yea--I find it shocking too."
    • Gustomaximus 9y ago
      One of the best rules for US hospitals (other than universal care) would be for all hospitals to publish prices annually and charge one set price, be it a walk in patient or large union. This should be a reasonable rule if people want to keep capitalist system healthcare. Its not stopping them competing, only applying a transparent and level playing field to the market.
      • carlmr 9y ago
• narrator 9y ago
  Kaiser getting into the drug business would be awesome. Insurance, Hospitals and Drugs all under one roof.
  • jopsen 9y ago
    Really, bigger conglomerates?
• tacon 9y ago
  For a fantastic discussion about the Byzantine process for generic drug approval, I recommend a recent episode of EconTalk[0]. The guest wrote a book called "Drug Wars: How Big Pharma Raises Prices and Keeps Generics off the Market"[1]. When up to half a billion dollars of revenue is at stake, the drug companies have incredible incentives to delay or prevent generics coming to market. Believe or not, they often simply refuse to give a sample of the old drug to the generic company. No sample to compare, no FDA approval. It is illegal to dispense a drug without a prescription, and the sample is not for a patient, so it can take some maneuvers to get a legal sample. Or the drug company can change a tiny feature of the drug, re-patent the new drug, and then destroy/withhold all the old drug. No old drug sample, no FDA approval of an "identical" generic. The drug companies will contract with a generic company that never, actually gets to production (wink, wink). Those contracts are finally being understood by judges, so now they are going to a second level of contract obfuscation that is even harder to notice, but still keeps the generic off the market. [0]http://www.econtalk.org/archives/2017/06/robin_feldman_o.html http://www.econtalk.org/archives/2017/06/robin_feldman_o.htm... [1]https://www.amazon.com/Drug-Wars-Pharma-Raises-Generics/dp/1107168481/ https://www.amazon.com/Drug-Wars-Pharma-Raises-Generics/dp/1...
  • rtpg 9y ago
    Is this a worldwide problem? Or is this really an American failing?
    • toyg 9y ago
      Some of these techniques (like tweaking and repatenting a formula) are definitely used worldwide.
    • maxerickson 9y ago
      I think it is worse in the US. India goes as far as waiving patents if a drug is too expensive.
      • sseth 9y ago
        There are companies which have patented drugs in India, but do not make their drugs available in India. The Indian Patent Law allows for compulsory licensing of such drugs to another manufacturer under certain conditions which meet public interest. This is not a free for all - there are significant legal tests that the manufacturer has to meet to get the CL, and i think only one or two cases have been granted. This provision of indian IPR laws has led to having India being put on an IP watchlist in the USA, though India's laws are compliant with the TRIPS agreement.
• ultim8k 9y ago
  Why not having even "open source" medicine? IT industry got a huge benefit from it.
• known 9y ago
  effectivehealthcare.ahrq.gov does good comparative analysis
• AllegedAlec 9y ago
  People don't seem to understand how prohibitively expensive it is to develop new drugs and get them approved for use. Yeah, drug companies charge huge premiums, and they don't like generic versions of their product, but with a good reason: they spend huge amounts of money not just to make the drugs, but also to make the process more efficient, and before they even know whether a product will be successful, they spent a fortune on research and development. Take for example the case of Matuzumab, a medicine which was to be used against various forms of epidermal cancer. In 2007 a clinical trial failed and they had to give up on the idea. This company spent tens millions of dollars on the costs of this research, only for it to fail.
• chiefalchemist 9y ago
  It will be interesting to see which side Amazon takes. In theory, it would seem to be these hospitals. However, Big Pharma has the (financial and political) muscle (and will) to add friction to any Amazon.
• thousandautumns 9y ago
  A lot of people here seem to conflate the pharmaceutical companies causing the issue with the entire pharmaceutical industry. Even in the article, the hospital reps say they are specifically targeting the handful of bad actors, like Valeant Pharmaceuticals and Martin Shkreli types, who specialize in buying up cheap/old drugs and jacking up the prices. This is not a group of hospitals trying to take on the entire industry. Nor is it an entire industry taking advantage of hospitals/patients.