RIP off in healthcare

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A nice read to know why healthcare is so costly.
Am I the only feeling that its a RIP off and there is no law to prevent such exorbitant price.

http://healthland.time.com/2013/02/20/bitter-pill-why-medical-bi...

Few excerpts
$283.00 for chest x-ray where as medicare would only pay $21
$15,000 for blood test . Medicare would pay only few hundred

"We spend two or three times that much on durable medical devices like canes and wheelchairs, in part because a heavily lobbied Congress forces Medicare to pay 25% to 75% more for this equipment than it would cost at WalMart."

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I think there is already a bonus. At least in my case I have co-insurance 10% even if I have taken the best coverage fro... (more)

ggmon (Feb. 27, 2013 @ 11:20a) |

30 mins for a chest xray? no wonder we don't question anything in life!

eswarjj (Feb. 27, 2013 @ 2:57p) |

Even better, January 31 to September 1st.

CSREwallet (Mar. 07, 2013 @ 10:11a) |

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Medicare, how much ever anybody hates it is one of the most efficient organizations in the world with just 2-3% overhead costs, operating at a gigantic scale.
We should target for Medicare prices, not hospital prices and not insurance negotiated prices.

Wow. No wonder we are screwed. The sad reality from the following 2 paragraphs:

"Recchi’s bill and six others examined line by line for this article offer a closeup window into what happens when powerless buyers — whether they are people like Recchi or big health-insurance companies — meet sellers in what is the ultimate seller’s market."

"... the American health care market has transformed tax-exempt “nonprofit” hospitals into the towns’ most profitable businesses and largest employers, often presided over by the regions’ most richly compensated executives."



Might as well say it. Healthcare (Profit and Non-for-Profit) will push the price as high as you can for a very simple proposition: How much are you willing to pay to live without pain - or even further - to remain alive. I support capitalism, supply and demand, but there is a line that has to be drawn on the price of lives.

NorthStar2020 said:   Medicare, how much ever anybody hates it is one of the most efficient organizations in the world with just 2-3% overhead costs, operating at a gigantic scale.
We should target for Medicare prices, not hospital prices and not insurance negotiated prices.


I don't consider low overhead a big achievement when it's probably the single most defrauded entity on earth. The value of the estimated fake transactions is staggeringly high in the 10s of billions of dollars a year.

Once you add that to the cost of Medicare 'overhead' you get a very different percentage. Furthermore, once you compare that to an insurance carriers overhead(which admittedly is also high in waste) who has a fraction of the fraudulent claims you get a very different picture.

ggmon said:   A nice read to know why healthcare is so costly.
Am I the only feeling that its a RIP off and there is no law to prevent such exorbitant price.

http://healthland.time.com/2013/02/20/bitter-pill-why-medical-bi...

Few excerpts
$283.00 for chest x-ray where as medicare would only pay $21
$15,000 for blood test . Medicare would pay only few hundred

"We spend two or three times that much on durable medical devices like canes and wheelchairs, in part because a heavily lobbied Congress forces Medicare to pay 25% to 75% more for this equipment than it would cost at WalMart."


There would be no way for a medical provider to charge $15,000 for a blood test if the price was shared prior to it being performed and people didn't have a 3rd party pay for practically all of it which causes people to not care about the price.

Also, for almost all of Medicare reimbursements the price is set at a positive percentage to contribution margin and a way negative to profit margin. What that means is that let's say for x procedure I need y widget/service/etc. Y costs me $100k and is a fixed cost. I then estimate that I'll get 100 x procedures out of that over it's useful life. That means before taking into account any other costs associated with x procedure I need to at least average $1,000 per x procedure just towards paying for y. Now let's say some entity comes along representing 30 of those procedures and says, "We can only give you $300 towards that machine". Now, since the cost is already sunk you still don't refuse the payment you just have to shift a higher contribution margin onto the remaining 70 people. 30*$300=$9000. That means that the remaining 70 need to make up for the other $91,000 in cost. $91,000/70= $1300 each. Now had all 100 people been under that same umbrella organization and the price was set at $300 a person in contribution margin towards y than the y would never be bought and no one would receive the procedure because $300*100=$30,000 way less than the cost of acquiring y.

That my friends is basic cost shifting accounting 101. It's no different than airlines trying to charge business traveler flights more than for pleasure travelers to make up for their losses except in healthcare it's much, much worse.

MilleniumBuc said:   Wow. No wonder we are screwed. The sad reality from the following 2 paragraphs:

"Recchi’s bill and six others examined line by line for this article offer a closeup window into what happens when powerless buyers — whether they are people like Recchi or big health-insurance companies — meet sellers in what is the ultimate seller’s market."

"... the American health care market has transformed tax-exempt “nonprofit” hospitals into the towns’ most profitable businesses and largest employers, often presided over by the regions’ most richly compensated executives."



Might as well say it. Healthcare (Profit and Non-for-Profit) will push the price as high as you can for a very simple proposition: How much are you willing to pay to live without pain - or even further - to remain alive. I support capitalism, supply and demand, but there is a line that has to be drawn on the price of lives.


That is just blatantly incorrect. My sister has worked high up in exclusively hospital healthcare consulting for the last decade. Hospital balance sheets are among the most disgustingly bad wastelands you've ever seen. Most of them have been forced into all kinds of cost shifting, staff reductions, cost increases, etc. to stay afloat.

I mean seriously think about it straight for a second. Do you really believe that a $15,000 cost for a blood test at a non profit hospital(where a substantial portion of it's funds likely come from rich benefactors who donate annually) is done out of greed or out of desperation?

There is so much fraud in medicare that they justify the reimbursement rates.

There is no way that it is possible the true cost of a chest xray is $21 when the process normally involves 30min of time for an xray technician with a loaded salary of $80k/year ($50k pay + $30k benefits), cost for device time, facility cost, and billing cost. The only way this reimbursement rate is feasible is if a high percentage of claims are fraudulent (which they are).

Sure, the normal cost for these procedures is inflated, but the medicare cost is artificially low because a huge percentage of procedures which medicare pays are in actuality not done.

cristinaaaron said:   There is so much fraud in medicare that they justify the reimbursement rates.

There is no way that it is possible the true cost of a chest xray is $21 when the process normally involves 30min of time for an xray technician with a loaded salary of $80k/year ($50k pay + $30k benefits), cost for device time, facility cost, and billing cost. The only way this reimbursement rate is feasible is if a high percentage of claims are fraudulent (which they are).

Sure, the normal cost for these procedures is inflated, but the medicare cost is artificially low because a huge percentage of procedures which medicare pays are in actuality not done.


But don't tell that to the people that buy into the unbelievable bull$hit that Medicare prices are true prices of healthcare. They just want to ignore that so they can prefer to think bitterly that the difference is all greedy people screwing them.

dshibb said:   NorthStar2020 said:   Medicare, how much ever anybody hates it is one of the most efficient organizations in the world with just 2-3% overhead costs, operating at a gigantic scale.
We should target for Medicare prices, not hospital prices and not insurance negotiated prices.


I don't consider low overhead a big achievement when it's probably the single most defrauded entity on earth. The value of the estimated fake transactions is staggeringly high in the 10s of billions of dollars a year.

Once you add that to the cost of Medicare 'overhead' you get a very different percentage. Furthermore, once you compare that to an insurance carriers overhead(which admittedly is also high in waste) who has a fraction of the fraudulent claims you get a very different picture.


Medicare also doesn't even cover the cost of many medical procedures, so the rest of us not on a government health care plan have to pay higher rates.

stanolshefski said:   dshibb said:   NorthStar2020 said:   Medicare, how much ever anybody hates it is one of the most efficient organizations in the world with just 2-3% overhead costs, operating at a gigantic scale.
We should target for Medicare prices, not hospital prices and not insurance negotiated prices.


I don't consider low overhead a big achievement when it's probably the single most defrauded entity on earth. The value of the estimated fake transactions is staggeringly high in the 10s of billions of dollars a year.

Once you add that to the cost of Medicare 'overhead' you get a very different percentage. Furthermore, once you compare that to an insurance carriers overhead(which admittedly is also high in waste) who has a fraction of the fraudulent claims you get a very different picture.


Medicare also doesn't even cover the cost of many medical procedures, so the rest of us not on a government health care plan have to pay higher rates.


Some medicare reimbursements don't even cover the variable cost of certain procedures.
Practically all medicare reimbursements don't cover the variable and fixed cost of procedures.

The hospital cleaning staff, equipment, claims, assistants, utilities, etc. all need to get paid too not just a reduced price on the doctor's/nurse/lab technician's time that is performing the procedure/service/etc.

Last I remember, they proved Medicare wasted 10% of their budget on fraud, and they guessed it was probably closer to 20%. If you're not committing Medicare fraud, you're not getting your money's worth.

ggmon said:   A nice read to know why healthcare is so costly.
Am I the only feeling that its a RIP off and there is no law to prevent such exorbitant price.

http://healthland.time.com/2013/02/20/bitter-pill-why-medical-bi...

Few excerpts
$283.00 for chest x-ray where as medicare would only pay $21
$15,000 for blood test . Medicare would pay only few hundred

"We spend two or three times that much on durable medical devices like canes and wheelchairs, in part because a heavily lobbied Congress forces Medicare to pay 25% to 75% more for this equipment than it would cost at WalMart."


$15,000 was ALL THE TESTS, not a blood test. Should fix your original post.

How much does a chest x-ray machine cost, plus the maintenance of the equipment, salary of the doctor looking at the x-ray and nurses? Do you think it is $21?

Our system is developed such that some people pay for others, and the uninsured out-of-pockets get screwed (especially young people). Medicare underpays significantly, so others have to pick up the tab. Fair? No. But it's not a problem with the hospitals - it is the insurance and device manufacturers who are playing within a set of rules all controlled by the government. ObamaCare only worsens this trend by forcing insurance premiums to be closer together (regardless of risk) - so young people will pay way more.

dshibb said:   MilleniumBuc said:   Wow. No wonder we are screwed. The sad reality from the following 2 paragraphs:

"Recchi’s bill and six others examined line by line for this article offer a closeup window into what happens when powerless buyers — whether they are people like Recchi or big health-insurance companies — meet sellers in what is the ultimate seller’s market."

"... the American health care market has transformed tax-exempt “nonprofit” hospitals into the towns’ most profitable businesses and largest employers, often presided over by the regions’ most richly compensated executives."



Might as well say it. Healthcare (Profit and Non-for-Profit) will push the price as high as you can for a very simple proposition: How much are you willing to pay to live without pain - or even further - to remain alive. I support capitalism, supply and demand, but there is a line that has to be drawn on the price of lives.


That is just blatantly incorrect. My sister has worked high up in exclusively hospital healthcare consulting for the last decade. Hospital balance sheets are among the most disgustingly bad wastelands you've ever seen. Most of them have been forced into all kinds of cost shifting, staff reductions, cost increases, etc. to stay afloat.

I mean seriously think about it straight for a second. Do you really believe that a $15,000 cost for a blood test at a non profit hospital(where a substantial portion of it's funds likely come from rich benefactors who donate annually) is done out of greed or out of desperation?


I do not claim to know exactly what their books look like. I do have a family member that has been a nursing home administrator (not the same, but same field) for the last 8 years, and have constantly heard her talk about the cost of medicare patients, medicaid patients, private pay, etc, and her constant frustration with receivables and payables, and trying to stay at the minimum coverage required by state, and if someone doesn't show up, trying to arrange for coverage and all that. But I do not know more than that.

I'm speaking of the article itself, which for example list the following:

"As nonprofits, such hospitals solicit contributions, and their annual charity dinner, a showcase for their good works, is typically a major civic event. But charitable gifts are a minor part of their base; Stamford Hospital raised just over 1% of its revenue from contributions last year. Even after discounts, those $199.50 blood tests and multithousand-dollar CT scans are what really count.

Thus, according to the latest publicly available tax return it filed with the IRS, for the fiscal year ending September 2011, Stamford Hospital — in a midsize city serving an unusually high 50% share of highly discounted Medicare and Medicaid patients — managed an operating profit of $63 million on revenue actually received (after all the discounts off the chargemaster) of $495 million. That’s a 12.7% operating profit margin, which would be the envy of shareholders of high-service businesses across other sectors of the economy."




That is the only one I know of because it in the article, but just a little over 1% came from so called "donations", in an area that services a high 50% share of discounted Medicare and Medicaid patients. And its no just them. Out of the 2900 nonprofits, the AVG operating margin profit is 11.7%, which is greater than the 1000 for-profit hospitals after the for-profits’ income-tax obligations are deducted.

After reading 11 pages of this article, having seeing bills for 40,000 for a cesarean delivery with no complications and a healthy baby, seeing 300,000+ in bills for 2.5 weeks of intensive care, which they screwed up with the clotting medication for someone who couldn't move, and took it away from him once moved to regular care, only to watch him die within a few hours because of a blood cloth. After seeing how nonprofit hospital with good income cuts floor personal to save pennies and not provide the best care for the monies charged, I would say greed is not the first word that comes to mind.

ETA: And then receiving a bill for a dead person, with the word "discharged" like he went home. I do not think there is really a word for that.

If you don't think we have an issue here, you must be out of your mind. Who gets paid and how much is all debatable but the issue here is prices are grossly inflated. Hospitals are plainly milking you because your life is on the line. This is despicable. This is no different from selling someone a bottle of water for $100 during Katrina and then asking for $200 for the next bottle because now they got you in where they want you.

The sad part is that whatever money is paid is not even a guarantee they can even cure you. They do their "best" and your health may not even improve. If you bought a product for $50K, I bet you damn pissed if you didn't get what you paid for.

As for the costs of procedures, prices come down on volume and efficiency. Business are great at lowering the cost of products and service if the market is allowed to work. Obviously with our health care is not the case and to me price gouching is plain fraud.

In the past, I've only heard about these horror stories but I can personal relate to them as it has happened to me and my friends and family members. How da hell can you justify an ambulence ride that cost $1000 per mile? You can't!

You can hate Medicare all you want, in times like this and it seems like Medicare is the only one that makes any sense when in controlling health care cost.

MilleniumBuc said:   dshibb said:   I mean seriously think about it straight for a second. Do you really believe that a $15,000 cost for a blood test at a non profit hospital(where a substantial portion of it's funds likely come from rich benefactors who donate annually) is done out of greed or out of desperation?

I do not claim to know exactly what their books look like. I do have a family member that has been a nursing home administrator (not the same, but same field) for the last 8 years, and have constantly heard her talk about the cost of medicare patients, medicaid patients, private pay, etc, and her constant frustration with receivables and payables, and trying to stay at the minimum coverage required by state, and if someone doesn't show up, trying to arrange for coverage and all that. But I do not know more than that.
...
That is the only one I know of because it in the article, but just a little over 1% came from so called "donations", in an area that services a high 50% share of discounted Medicare and Medicaid patients. And its no just them. Out of the 2900 nonprofits, the AVG operating margin profit is 11.7%, which is greater than the 1000 for-profit hospitals after the for-profits’ income-tax obligations are deducted.


MilleniumBuc, the figure you're using (and that Brill uses) evades a big part of the fixed cost issue. He notes in his piece that he's defining "operating margin" essentially as EBITDA - he's adding back D&A, because depreciation "is an accounting expense." I agree that depreciation is an accounting expense, but for a relatively capital-intensive business like hospitals, he's using a metric which neither includes capital costs today (as Free Cash Flow would) nor includes them over time (as EBIT would).

His margin figure doesn't include _any_ capital costs at all. It does include fixed operating costs (keeping the lights on, the floors cleaned, etc), but doesn't include the cost of buying an MRI.

"Medicare is partially administered by outside agencies

First, other government agencies help administer the Medicare program. The Internal Revenue Service collects the taxes that fund the program; the Social Security Administration helps collect some of the premiums paid by beneficiaries (which are deducted from Social Security checks); the Department of Health and Human Services helps to manage accounting, auditing, and fraud issues and pays for marketing costs, building costs, and more. Private insurers obviously don’t have this kind of outside or off-budget help. Medicare’s administration is also tax-exempt, whereas insurers must pay state excise taxes on the premiums they charge; the tax is counted as an administrative cost. In addition, Medicare’s massive size leads to economies of scale that private insurers could also achieve, if not exceed, were they equally large.

Administrative costs are calculated using faulty arithmetic

But most important, because Medicare patients are older, they are substantially sicker than the average insured patient — driving up the denominator of such calculations significantly. For example: If two patients cost $30 each to manage, but the first requires $100 of health expenditures and the second, much sicker patient requires $1,000, the first patient’s insurance will have an administrative-cost ratio of 30%, but the second’s will have a ratio of only 3%. This hardly means the second patient’s insurance is more efficient — administratively, the patients are identical. Instead, the more favorable figure is produced by the second patient’s more severe illness."



http://www.forbes.com/sites/aroy/2011/06/30/the-myth-of-medicare...

MilleniumBuc said:   dshibb said:   MilleniumBuc said:   Wow. No wonder we are screwed. The sad reality from the following 2 paragraphs:

"Recchi’s bill and six others examined line by line for this article offer a closeup window into what happens when powerless buyers — whether they are people like Recchi or big health-insurance companies — meet sellers in what is the ultimate seller’s market."

"... the American health care market has transformed tax-exempt “nonprofit” hospitals into the towns’ most profitable businesses and largest employers, often presided over by the regions’ most richly compensated executives."



Might as well say it. Healthcare (Profit and Non-for-Profit) will push the price as high as you can for a very simple proposition: How much are you willing to pay to live without pain - or even further - to remain alive. I support capitalism, supply and demand, but there is a line that has to be drawn on the price of lives.


That is just blatantly incorrect. My sister has worked high up in exclusively hospital healthcare consulting for the last decade. Hospital balance sheets are among the most disgustingly bad wastelands you've ever seen. Most of them have been forced into all kinds of cost shifting, staff reductions, cost increases, etc. to stay afloat.

I mean seriously think about it straight for a second. Do you really believe that a $15,000 cost for a blood test at a non profit hospital(where a substantial portion of it's funds likely come from rich benefactors who donate annually) is done out of greed or out of desperation?


I do not claim to know exactly what their books look like. I do have a family member that has been a nursing home administrator (not the same, but same field) for the last 8 years, and have constantly heard her talk about the cost of medicare patients, medicaid patients, private pay, etc, and her constant frustration with receivables and payables, and trying to stay at the minimum coverage required by state, and if someone doesn't show up, trying to arrange for coverage and all that. But I do not know more than that.

I'm speaking of the article itself, which for example list the following:

"As nonprofits, such hospitals solicit contributions, and their annual charity dinner, a showcase for their good works, is typically a major civic event. But charitable gifts are a minor part of their base; Stamford Hospital raised just over 1% of its revenue from contributions last year. Even after discounts, those $199.50 blood tests and multithousand-dollar CT scans are what really count.

Thus, according to the latest publicly available tax return it filed with the IRS, for the fiscal year ending September 2011, Stamford Hospital — in a midsize city serving an unusually high 50% share of highly discounted Medicare and Medicaid patients — managed an operating profit of $63 million on revenue actually received (after all the discounts off the chargemaster) of $495 million. That’s a 12.7% operating profit margin, which would be the envy of shareholders of high-service businesses across other sectors of the economy."




That is the only one I know of because it in the article, but just a little over 1% came from so called "donations", in an area that services a high 50% share of discounted Medicare and Medicaid patients. And its no just them. Out of the 2900 nonprofits, the AVG operating margin profit is 11.7%, which is greater than the 1000 for-profit hospitals after the for-profits’ income-tax obligations are deducted.

After reading 11 pages of this article, having seeing bills for 40,000 for a cesarean delivery with no complications and a healthy baby, seeing 300,000+ in bills for 2.5 weeks of intensive care, which they screwed up with the clotting medication for someone who couldn't move, and took it away from him once moved to regular care, only to watch him die within a few hours because of a blood cloth. After seeing how nonprofit hospital with good income cuts floor personal to save pennies and not provide the best care for the monies charged, I would say greed is not the first word that comes to mind.

ETA: And then receiving a bill for a dead person, with the word "discharged" like he went home. I do not think there is really a word for that.


The bolded part of your statement is pretty typical the rest of what you wrote is lacking in context and understanding and is for the most part manipulated data trying to sell a story that doesn't exist.

First of all operating margin does not equal profit margin, but we'll get into that in a second.

Next, let's start with what a non profit is. You seem to not understand what that is based on your comments. If a true net profit margin was achieved does it go to any shareholders? No! It gets reinvested back into the non profit to either increase future quality or reduce future prices for customers. So your point is lacking in basic understanding of how different classes of entities are governed and set up.

Back to operating margin vs. profit margin. Profit margin is net income divided revenue. Operating margin is operating income divided revenue. What is operating income? Operating income is the same as net income except for taxes, interest expense, and non reoccurring investments i.e. capital expenditures that aren't made regularly such as a new piece of equipment or settling a lawsuit.

Furthermore let's say a non profit hospital does book a net income profit for a given year. That money gets booked to retained earnings and is either meant to be used to on future capital expenditure, future price stability, or to provide a large financial buffer against unforeseen future problems(which is particularly important to a non profit because they have limited access to capital markets as a non profit(i.e. they can't sell stock).

Most importantly, what this article doesn't say is whether a hospital could maintain the same operations next year, the year after, and the year after that and generate operating income. Essentially, that is the question of whether price increases are driven by operational factors or done out of the desire to grow profitability. Since I know the answer I'll just tell you. If you as a hospital maintained the same costs and the same prices after several years you will be bleeding cash. So most of the price increases come to put the hospital at least back in the black. From there they might book some extra free cash flow which they'll add to their reserves in case they have problems in the future.

Lastly, the government regulates that in order to receive charity care payments for the uninsured I believe at least 30% of that has to be funded by donations. In some instances that doesn't have to be a lot. In some instances where charity care cases are a problem at said hospital that can be a high requirement. Still doesn't matter that much though because the government defaults on the vast majority of those obligations every year.


Okay?

cestmoi123 said:   MilleniumBuc said:   dshibb said:   I mean seriously think about it straight for a second. Do you really believe that a $15,000 cost for a blood test at a non profit hospital(where a substantial portion of it's funds likely come from rich benefactors who donate annually) is done out of greed or out of desperation?

I do not claim to know exactly what their books look like. I do have a family member that has been a nursing home administrator (not the same, but same field) for the last 8 years, and have constantly heard her talk about the cost of medicare patients, medicaid patients, private pay, etc, and her constant frustration with receivables and payables, and trying to stay at the minimum coverage required by state, and if someone doesn't show up, trying to arrange for coverage and all that. But I do not know more than that.
...
That is the only one I know of because it in the article, but just a little over 1% came from so called "donations", in an area that services a high 50% share of discounted Medicare and Medicaid patients. And its no just them. Out of the 2900 nonprofits, the AVG operating margin profit is 11.7%, which is greater than the 1000 for-profit hospitals after the for-profits’ income-tax obligations are deducted.


MilleniumBuc, the figure you're using (and that Brill uses) evades a big part of the fixed cost issue. He notes in his piece that he's defining "operating margin" essentially as EBITDA - he's adding back D&A, because depreciation "is an accounting expense." I agree that depreciation is an accounting expense, but for a relatively capital-intensive business like hospitals, he's using a metric which neither includes capital costs today (as Free Cash Flow would) nor includes them over time (as EBIT would).

His margin figure doesn't include _any_ capital costs at all. It does include fixed operating costs (keeping the lights on, the floors cleaned, etc), but doesn't include the cost of buying an MRI.



Million green to the other person with a brain.

Have to say that I'm really impressed with many of the knowledgeable responses on here. Sometimes when topics like these come I really wonder if the FWF really has the brain power I think it does because some idiot who doesn't understand anything about the issue gets 100 green and then 50 other people drop on to harp about something they also don't understand.

Today I realize my worry was misplaced. These forums have some of the brightest people in the country posting on a regular basis and you only have to look at some of the responses above.

dshibb said:   ggmon said:   A nice read to know why healthcare is so costly.
Am I the only feeling that its a RIP off and there is no law to prevent such exorbitant price.

http://healthland.time.com/2013/02/20/bitter-pill-why-medical-bi...

Few excerpts
$283.00 for chest x-ray where as medicare would only pay $21
$15,000 for blood test . Medicare would pay only few hundred

"We spend two or three times that much on durable medical devices like canes and wheelchairs, in part because a heavily lobbied Congress forces Medicare to pay 25% to 75% more for this equipment than it would cost at WalMart."


There would be no way for a medical provider to charge $15,000 for a blood test if the price was shared prior to it being performed and people didn't have a 3rd party pay for practically all of it which causes people to not care about the price.

Also, for almost all of Medicare reimbursements the price is set at a positive percentage to contribution margin and a way negative to profit margin. What that means is that let's say for x procedure I need y widget/service/etc. Y costs me $100k and is a fixed cost. I then estimate that I'll get 100 x procedures out of that over it's useful life. That means before taking into account any other costs associated with x procedure I need to at least average $1,000 per x procedure just towards paying for y. Now let's say some entity comes along representing 30 of those procedures and says, "We can only give you $300 towards that machine". Now, since the cost is already sunk you still don't refuse the payment you just have to shift a higher contribution margin onto the remaining 70 people. 30*$300=$9000. That means that the remaining 70 need to make up for the other $91,000 in cost. $91,000/70= $1300 each. Now had all 100 people been under that same umbrella organization and the price was set at $300 a person in contribution margin towards y than the y would never be bought and no one would receive the procedure because $300*100=$30,000 way less than the cost of acquiring y.

That my friends is basic cost shifting accounting 101. It's no different than airlines trying to charge business traveler flights more than for pleasure travelers to make up for their losses except in healthcare it's much, much worse.


I disagree... Business travelers get the perks and get different treatment and they are not seated in the same class as economy. In this case everyone falls into the same class and get the same treatment

Just to bring a counter voice, you have to look at where it says MD Anderson made a profit of $500 million on $2 billion of revenue. So, total costs were $1.5 billion. Even if they were to force themselves to run at a razor margin, and pass all that money back to the consumer/patient it only amounts to a 25% discount. So this guys treatment which cost $80,000 out of pocket would have been $60,000. That is still a devastating amount. The hospital is right when it says billing is a very complex thing. You can't line item things and criticize the hospital. The hospital has to maintain total revenue and they have to deal with indigents, patients not paying their share after insurance, insurance refusing to pay...

A second point to be made, the decision to go to MD Anderson was an emotional one. And they got stuck with a bill they deserve for a bad decision. They could have gone to a local medical center or any other hospital that would have taken their insurance. Guess what, medicine isn't some magical, mystical world. His disease isn't some super rare thing. The treatment for his condition would be the same where ever he went. Medicine is very standardized.

dzyr4tt said:   dshibb said:   ggmon said:   A nice read to know why healthcare is so costly.
Am I the only feeling that its a RIP off and there is no law to prevent such exorbitant price.

http://healthland.time.com/2013/02/20/bitter-pill-why-medical-bi...

Few excerpts
$283.00 for chest x-ray where as medicare would only pay $21
$15,000 for blood test . Medicare would pay only few hundred

"We spend two or three times that much on durable medical devices like canes and wheelchairs, in part because a heavily lobbied Congress forces Medicare to pay 25% to 75% more for this equipment than it would cost at WalMart."


There would be no way for a medical provider to charge $15,000 for a blood test if the price was shared prior to it being performed and people didn't have a 3rd party pay for practically all of it which causes people to not care about the price.

Also, for almost all of Medicare reimbursements the price is set at a positive percentage to contribution margin and a way negative to profit margin. What that means is that let's say for x procedure I need y widget/service/etc. Y costs me $100k and is a fixed cost. I then estimate that I'll get 100 x procedures out of that over it's useful life. That means before taking into account any other costs associated with x procedure I need to at least average $1,000 per x procedure just towards paying for y. Now let's say some entity comes along representing 30 of those procedures and says, "We can only give you $300 towards that machine". Now, since the cost is already sunk you still don't refuse the payment you just have to shift a higher contribution margin onto the remaining 70 people. 30*$300=$9000. That means that the remaining 70 need to make up for the other $91,000 in cost. $91,000/70= $1300 each. Now had all 100 people been under that same umbrella organization and the price was set at $300 a person in contribution margin towards y than the y would never be bought and no one would receive the procedure because $300*100=$30,000 way less than the cost of acquiring y.

That my friends is basic cost shifting accounting 101. It's no different than airlines trying to charge business traveler flights more than for pleasure travelers to make up for their losses except in healthcare it's much, much worse.


I disagree... Business travelers get the perks and get different treatment and they are not seated in the same class as economy. In this case everyone falls into the same class and get the same treatment


Perks yes. But there are numerous tricks airlines employ to gouge an employer paid for flight. For instance paying for a Friday flight 5 months in advance is typical for a vacation flyer vs. paying for a Tuesday flight 1 day in advance is much more common for a flight expensed by a corporation. Do you think that the latter is on average cheaper?

One of the annoying things about health insurance is private insurers probably fight with patients too often over things that should be covered and Medicare apparently doesn't do so often enough.


From page 10 of the article cited by the OP:

"Too Much Health Care?
In a review of other bills of those enrolled in Medicare, a pattern of deep, deep discounting of chargemaster charges emerged that mirrored how Alan A.’s bills were shrunk down to reality. A $121,414 Stanford Hospital bill for a 90-year-old California woman who fell and broke her wrist became $16,949. A $51,445 bill for the three days an ailing 91-year-old spent getting tests and being sedated in the hospital before dying of old age became $19,242. Before Medicare went to work, the bill was chock-full of creative chargemaster charges from the California Pacific Medical Center — part of Sutter Health, a dominant nonprofit Northern California chain whose CEO made $5,241,305 in 2011.

Another pattern emerged from a look at these bills: some seniors apparently visit doctors almost weekly or even daily, for all varieties of ailments. Sure, as patients age they are increasingly in need of medical care. But at least some of the time, the fact that they pay almost nothing to spend their days in doctors’ offices must also be a factor, especially if they have the supplemental insurance that covers most of the 20% not covered by Medicare.

Alan A. is now 89, and the mound of bills and Medicare statements he showed me for 2011 — when he had his heart attack and continued his treatments at Sloan-Kettering — seemed to add up to about $350,000, although I could not tell for sure because a few of the smaller ones may have been duplicates. What is certain — because his insurance company tallied it for him in a year-end statement — was that his total out-of-pocket expense was $1,139, or less than 0.2% of his overall medical bills. Those bills included what seemed to be 33 visits in one year to 11 doctors who had nothing to do with his recovery from the heart attack or his cancer. In all cases, he was routinely asked to pay almost nothing: $2.20 for a check of a sinus problem, $1.70 for an eye exam, 33¢ to deal with a bunion. When he showed me those bills he chuckled."


http://healthland.time.com/2013/02/20/bitter-pill-why-medical-bi...

Too much Medicare fraud. Take a look at what is happening with "The Scooter Store"... Their offices were raided because of fraud.

It's fashionable to complain about Medicare. However, Medicare is not the only entity affected by fraud. Many government depts are mired in corruption including the beloved military.
It boils down to this:
- Medicare uses a cost plus approach to pricing. This at least provides transparent pricing across the board.
- Hospitals use a market based approach. Charge whatever the market can bear. There is no incentive for hospitals to reduce their pricing since patients have no alternative but to go to the US hospitals. No transparency as observed in the article, hospitals refuse to show the chargemaster book.
Sometimes, it makes sense to pay money out of pocket and go to India/Thailand and get the care you need.

You know the funny thing is that you can lay all of this information bare for anybody to see and understand and for those that instead want to believe in some conspiracy theory to gouge the average person they'll just block it all out. They don't care! They don't want to know what is really going on they would much rather believe in their myth that an entire industry of people are colluding against them.

The real problems in healthcare are A) Overutilization and B) Cost shifting and they have been the same problems that have been increasingly getting worse for several decades thanks to these conspiracy theorists stupid notions.

Take a look at Obamacare. It's just another bill to encourage even more overutilization and introduce cost shifting now into the insurance marketplace.

Overutilization:
-Increase the proportion of people that rely upon near 100% reimbursement from government entities so they no longer care about the cost of the services rendered
-Add on more requirements for insurance carriers to cover more healthcare expenses driving up utilization of new services
-Just like in Massachusetts when HHS finishes it work standardizing all insurance plans discourage high deductible plans(hell make it illegal to get an insurance policy to have a deductible above x) so that even less people care about cost than there are people that do now driving up utilization rates even more.
-Discourage HSA's

Cost Shifting:
-Introduce cost shifting into the insurance marketplace through community rating(no pre-existing conditions) so that healthcare costs of older and unhealthier people get shifted onto younger people through insurance premiums(and an insanely low maximum premium multiple between the old and young) and when this takes full affect prevent younger people from running for the exits by assessing a penalty for not having insurance(which is likely still going to be lower than the insanely higher premiums those younger people will have to pay which means government revenue goes up, coverage rates fall, charity care rises of which the government will continue to default on and pass onto everybody else for more cost shifting at the hospital).


We've been on a highway to hell for over 50 years and each every time the government gets a hold of it they pass a bill to increase utilization and cost shifting. I mean what the hell do you think got us in this position? Do you think procedure costs in the $10s of thousands and differences of costs of several thousand percent between different providers is a normal marketplace? Damn people are stupid!

NorthStar2020 said:   It's fashionable to complain about Medicare. However, Medicare is not the only entity affected by fraud. Many government depts are mired in corruption including the beloved military.
It boils down to this:
- Medicare uses a cost plus approach to pricing. This at least provides transparent pricing across the board.
- Hospitals use a market based approach. Charge whatever the market can bear. There is no incentive for hospitals to reduce their pricing since patients have no alternative but to go to the US hospitals. No transparency as observed in the article, hospitals refuse to show the chargemaster book.
Sometimes, it makes sense to pay money out of pocket and go to India/Thailand and get the care you need.


Bold: Wrong explanation. They charge what ever the market can bare(trying to stay afloat) because the patient ***Isn't paying for the vast majority of the bill***. Because the truth is that the hospital across town decided to do their cost shifting somewhere else and charges maybe 20% or less for the same thing. But does the patient know or consider that? No because they have this thing called a 3rd party payer and they will pick up the tab.

When hospitals talk about the cost of providing care to uninsured patients, what rate structure are they basing these numbers on?

"IF" a hospital charges a Medicaid patient $10,000, a privately insured patient $20,000 and an uninsured patient $100,000 for the same service; when an uninsured patient doesn't pay, what is the cost of uncompensated care? Since requiring people to have insurance reduces the cost of uncompensated care, it would be reasonable to say that the cost to the hospital is the amount that it would have received if the patient had been insured and not the chargemaster rate that no insurance company pays.

ER mandated by most states to treat everyone with or without insurance. Medicare and insurance companies pay actual cost of procedure + some extra $$$ . Yet hospital has cost involved in providing services to uninsured . Most uninsured do not pay ER bills , therefore hospitals forced to bill some astronomical amounts in hopes to recover some cost . Additionally, even insurance companies are paying some extra $$ to offset cost of uninsured patients . Buttom line - most of us already paying for medical cost of uninsured patient

ryeny3 said:   When hospitals talk about the cost of providing care to uninsured patients, what rate structure are they basing these numbers on?

"IF" a hospital charges a Medicaid patient $10,000, a privately insured patient $20,000 and an uninsured patient $100,000 for the same service, when an uninsured patient doesn't pay what is the cost of uncompensated care? Since requiring people to have insurance reduces the cost of uncompensated care, it would be reasonable to say that the cost to the hospital is the amount that it would have received if the patient had been insured and not the chargemaster rate that no insurance company pays.


That's actually a very, very good question. I'm sure my sis has an answer for it. I'll ask her and post back her response to it.

gendos said:   ER mandated by most states to treat everyone with or without insurance. Medicare and insurance companies pay actual cost of procedure + some extra $$$ . Yet hospital has cost involved in providing services to uninsured . Most uninsured do not pay ER bills , therefore hospitals forced to bill some astronomical amounts in hopes to recover some cost . Additionally, even insurance companies are paying some extra $$ to offset cost of uninsured patients . Buttom line - most of us already paying for medical cost of uninsured patient

I think he means it more as an accounting question. What number do they report if they attempt to file a government claim for charity care for example. And how do they mark charity care on their books.

There is no question we're all paying for this, but how it is accounted for on their balance sheet is actually a very interesting question.


By the way 'actual cost of procedure' should be all costs associated with performing the procedure(including a portion towards overhead) not just it's variable cost.

ryeny3 said:   When hospitals talk about the cost of providing care to uninsured patients, what rate structure are they basing these numbers on?

"IF" a hospital charges a Medicaid patient $10,000, a privately insured patient $20,000 and an uninsured patient $100,000 for the same service; when an uninsured patient doesn't pay, what is the cost of uncompensated care? Since requiring people to have insurance reduces the cost of uncompensated care, it would be reasonable to say that the cost to the hospital is the amount that it would have received if the patient had been insured and not the chargemaster rate that no insurance company pays.


In this case, an answer already exists. It'd be the cost plus model. The hospital should only write off what their actual costs are. This is a rule that IRS imposes for other businesses.
If you are a business selling widgets, cost of each widget is $10 and you sell it at $20. Let's say you sold 100 widgets to a customer and that customer stiffed you. You can only deduct $1000 as expenses in your tax return. IRS will not allow you to deduct $2000. Don't know why hospitals should be given a free pass.

ryeny3 said:   When hospitals talk about the cost of providing care to uninsured patients, what rate structure are they basing these numbers on?

"IF" a hospital charges a Medicaid patient $10,000, a privately insured patient $20,000 and an uninsured patient $100,000 for the same service; when an uninsured patient doesn't pay, what is the cost of uncompensated care? Since requiring people to have insurance reduces the cost of uncompensated care, it would be reasonable to say that the cost to the hospital is the amount that it would have received if the patient had been insured and not the chargemaster rate that no insurance company pays.


Thanks for asking the question. I've frequently wondered about this. It has become accepted as "fact" that emergency rooms are an incredibly expensive place to get care. It would not surprise me if the numbers are grossly inflated because the cost figures used are those that are billed as opposed to actual costs.

Ex. XYZ procedure gets billed at $600 at the emergency room. They will accept a payment of $125 for patients with insurance. When someone doesn't have insurance and doesn't pay, do they count this as $600 of medical care?

NorthStar2020 said:   ryeny3 said:   When hospitals talk about the cost of providing care to uninsured patients, what rate structure are they basing these numbers on?

"IF" a hospital charges a Medicaid patient $10,000, a privately insured patient $20,000 and an uninsured patient $100,000 for the same service; when an uninsured patient doesn't pay, what is the cost of uncompensated care? Since requiring people to have insurance reduces the cost of uncompensated care, it would be reasonable to say that the cost to the hospital is the amount that it would have received if the patient had been insured and not the chargemaster rate that no insurance company pays.


In this case, an answer already exists. It'd be the cost plus model. The hospital should only write off what their actual costs are. This is a rule that IRS imposes for other businesses.
If you are a business selling widgets, cost of each widget is $10 and you sell it at $20. Let's say you sold 100 widgets to a customer and that customer stiffed you. You can only deduct $1000 as expenses in your tax return. IRS will not allow you to deduct $2000. Don't know why hospitals should be given a free pass.


But that isn't all of it.

There is tax accounting, financial accounting, and managerial accounting.

You sort of answered the first of the 3. I'm expecting to be given in answer for the latter 2. The last one is probably the most important because that governs how they operationally treat that loss for purposes of determining the amount of cost shifting they'll need to do in to make up for that loss.

In terms of the tax question if you are a for profit hospital you already are deducting the overhead, salaries, etc. associated with the business. So once you get to the actual procedure you are just going to write off the variable cost of service rendered, but not paid. But that doesn't represent your true cost you incurred because all of the other costs aren't factored in to that number(they don't need to be they were already deducted).

After thinking about it this what my guesses are:
From a financial standpoint the smart bet is that they would first figure out how much benefactor donations they'll receive for the year. They then look at that number and then realize that the most they can report for charity care claim is a number where the benefactor donations represent 30%(or whatever the percentage is I don't remember) of said number. They then try to go back and *likely* adjust the estimated losses down to fit with that percentage because otherwise if they reported a number where donations represented a lower percentage they wouldn't have a hope of receiving any claim money because they ran afoul with government regulated percentage of donations to be eligible for charity care claims.

My guess from an operational standpoint is that it might be a little bit all over the board, but I bet many use the full estimated insurance claim amount. I guess there it really doesn't matter all that much because if you assess a lower amount for the charity care cases than your going to be already assessing a higher amount for your normal insured patients and then add a lower journal entry adjustment to the insured group(and determine cost for the people that can pay for it). If you assess full estimated insurance claim amount to charity care patients than the journal entries for direct cost for normal insured patients will be lower, but with a higher journal entry adjustment added to those patients costs to account for the charity care group(the net affect is the same because obviously in both instances it's the people that can pay that will pay for that cost, but I think from a desire to find true operational cost so they can make the best decisions they'd likely use full estimated insurance reimbursement rates).


I don't know this is just what I was able to think up now. I'll know the real answer here soon.

NorthStar2020 said:   ryeny3 said:   When hospitals talk about the cost of providing care to uninsured patients, what rate structure are they basing these numbers on?

"IF" a hospital charges a Medicaid patient $10,000, a privately insured patient $20,000 and an uninsured patient $100,000 for the same service; when an uninsured patient doesn't pay, what is the cost of uncompensated care? Since requiring people to have insurance reduces the cost of uncompensated care, it would be reasonable to say that the cost to the hospital is the amount that it would have received if the patient had been insured and not the chargemaster rate that no insurance company pays.


In this case, an answer already exists. It'd be the cost plus model. The hospital should only write off what their actual costs are. This is a rule that IRS imposes for other businesses.
If you are a business selling widgets, cost of each widget is $10 and you sell it at $20. Let's say you sold 100 widgets to a customer and that customer stiffed you. You can only deduct $1000 as expenses in your tax return. IRS will not allow you to deduct $2000. Don't know why hospitals should be given a free pass.
I am fairly familiar with GAAP and IRS rules. In my example, I would assume the deductible cost of uncompensated care is somewhere between the Medicare rate and the private rate.

On the other hand, much of the information we hear about the cost of treating uninsured patients comes from people who are neither accountants nor disinterested parties. When a doctor talks about the amount of money he loses treating uninsured patients, does he ignore the value of his time (which is not a deductible expense) or is he or she only counting deductible costs. It wouldn't have surprised me to hear a politician referring to a hospital having to write off the billed amount instead of the actual loss.

dshibb said:   ryeny3 said:   When hospitals talk about the cost of providing care to uninsured patients, what rate structure are they basing these numbers on?

"IF" a hospital charges a Medicaid patient $10,000, a privately insured patient $20,000 and an uninsured patient $100,000 for the same service, when an uninsured patient doesn't pay what is the cost of uncompensated care? Since requiring people to have insurance reduces the cost of uncompensated care, it would be reasonable to say that the cost to the hospital is the amount that it would have received if the patient had been insured and not the chargemaster rate that no insurance company pays.


That's actually a very, very good question. I'm sure my sis has an answer for it. I'll ask her and post back her response to it.
Thank you!

"The expensive technology deployed on Janice S. was a bigger factor in her bill than the lab tests. An “NM MYO REST/SPEC EJCT MOT MUL” was billed at $7,997.54. That’s a stress test using a radioactive dye that is tracked by an X-ray computed tomography, or CT, scan. Medicare would have paid Stamford $554 for that test.

Janice S. was charged an additional $872.44 just for the dye used in the test. The regular stress test patients are more familiar with, in which arteries are monitored electronically with an electrocardiograph, would have cost far less — $1,200 even at the hospital’s chargemaster price."


The article goes on to say that the cheaper stress test would have been more than sufficient, however the hospital ordered the more expensive test to drive revenues and pay for their machine. While I agree that this like a part of the reason, the article doesnt mention (didnt get through the whole thing, so it may actually) about how these more advanced procedures are often driven out of fear of being sued. Should the patient have actually had legitimate heart problems and died, I guarantee you her family would have sued saying she would still be alive had the more advanced test been administered. Instances like these further drive up costs and overconsumption of healthcare services.

Obligatory quote:

P.J. O'Rourke - "If you think health care is expensive now, wait until you see what it costs when it's free."

If there's one thing I hate more than Students abusing their Financial Aid it's how the medical industry screws the American public. $18 for one blood test strip? or $1000 for a 4 mile ride to the hospital that's insane!

When I was between jobs and didn't have insurance I had a medical issue (not that serious, but symptoms appeared serious) that required medicine. Trying to find the most frugal way to get help I went to the Free clinic, but they refused to diagnose me. I later went to the emergency room saw the doctor for 10 mins pulled his fingers as a test (no I'm not joking) and was prescribed meds. The cost for the diagnoses was $1,500

Skipping 177 Messages...
ryeny3 said:   BrodyInsurance said:   PhrugalPhan said:   BrodyInsurance said:   The IRS and Tresury considers a single day of coverage per month as a full month, so you would be exempt if you had coverage from January 1 to October 1 and no coverage for the rest of the year.

Go from January 31 to October 31st and we're down to 8 months of coverage.

Depending upon the rules and the PITA factor, one might only need coverage for 9 days.
You mean Jan 31 - Oct. 1, right?


Yes. And for "9 days", I was talking about just keeping insurance for one day a month in each of 9 months.
If the maximum gap is < 3 months, then it's 10 days. If <= 3 months then 9 days. Regardless, it's a clever idea.

Even better, January 31 to September 1st.



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