"... Why A Quick Visit To The ER Costs As Much As A Semester At Harvard." Time

 

"The total cost, in advance, for Sean to get his treatment plan and initial doses of chemotherapy was $83,900…The first of the 344 lines printed out across eight pages of his hospital bill — filled with indecipherable numerical codes and acronyms — seemed innocuous. But it set the tone for all that followed. It read, “1 ACETAMINOPHE TABS 325 MG.” The charge was only $1.50, but it was for a generic version of a Tylenol pill. You can buy 100 of them on Amazon for $1.49 even without a hospital’s purchasing power. Dozens of midpriced items were embedded with similarly aggressive markups, like $283.00 for a “CHEST, PA AND LAT 71020.” That’s a simple chest X-ray, for which MD Anderson is routinely paid $20.44 when it treats a patient on Medicare, the government health care program for the elderly.

Read more at http://wonkette.com/502126/time-magazine-helpfully-explains-why-a-quick-visit-to-the-er-costs-as-much-as-a-semester-at-harvard#mc0725bJGs5HO03I.99

-----------------------------------------

Every person in the US should read this article.  Time Magazine has performed a notable public service in researching and publishing this piece.

What is revealed here is that much of the cost inflation in American health care is simply created sui generis by health care institutions that reason backwards from desired income to the creative imagining of what they would like prices to the consumer to be.

Non profit business are often the most profitable from the point of the view of those who run them.  This is a prime example.  pl  

Comments

[Larry Kart]

A few questions here about Brill's conclusions (or non-conclusions):

http://www.slate.com/blogs/moneybox/2013/02/22/brill_on_health_care_steven_brill_s_opus_on_hospital_prices.html

[Lars]

In the late 60's, I was working as a computer programmer in one of the first hospitals to use computers in their operation. Prior to that, the hospital charged a fixed fee for using it and used whatever was medically necessary.

Once we were able to identify every aspect of care, it did not take long for the accounting department to assign "costs" to each item and the creative race was on. As was the need to use as many items as possible and thus insure income.

My doctor now says that we are moving more to the European model, where health outcomes decides income. Hopefully that will bend the curve.

[scott s.]

I don't see much benefit from the article myself. The reason the aspirin cost so much is that AFAICT, only an RN can dispense medicine. The RN has to get permission from the staff duty MD and then send an order to a licensed pharmacist. I don't know but imagine there are some pharmacy techs who actually fill the order. All that has to be paid for somehow. Then consider the problems if a med is scheduled, has to be kept in segregated storage with continual chain of custody, etc.

For ER, my observation is probably most of the cost is related to being ready for "worst case" and is being applied as overhead to all users. That cost is going to exist regardless if the proverbial "person with the sniffles" presents or not.

[egl]

If you want to thank a magazine for the research, apparently it should be --gasp-- The New Republic. http://www.huffingtonpost.com/2013/02/21/steven-brill-chris-hughes-new-republic_n_2733386.html

[r whitman]

What people do not realize is that MD Anderson Hospital is a version of Socialized Medicine. The hospital is owned by the State of Texas thru the University of Texas. All doctors are listed as faculty of the university and are on state salary.You can even look up the salary of your doctor on the Texas Tribune website.

I have been a Medicare patient at MD Anderson. Medicare is billed about $6500 for my annual checkup. Medicare pays about $700 to settle 80% of the bill. An additional $140 is provided by my supplemental insurance. The $6500 charge is to rip off people without insurance or foreigners.

[walrus]

At last someone is waking up to the obscene cost of Amerian healthcare. Having laboured on the (bleeding) edge of this business I can attest to its corruption.

On another note, my partner was diagnosed with colorectal cancer in 2011. She had keyhole surgery (hemicolonectomy) followed by Six months of chemotherapy (folfox -5) she then had a PET scan to check her over and they found more, so she is on another Six months of a different chemo regimen which seem,s to be working. Her outlook now (we believe) is that she will be on a "one pill per day" regimen for what we hope will be the rest of a long and normal life.

All treatment is by world class doctors in world class facilities in Public hospitals, and yesm the system does creek and groan sometimes.

Total cost to her zero if you don't count car park fees. We pay for this by a 1.5% medicare levy on all taxeable income. I don't see why Americans couldn't do likewise if they wanted to.

[jerseycityjoan]

Your explanation for the $1.50 is reasonable.

But how do you explain the many examples that involved thousands of dollars?

How would you feel if you were one of the unlucky people without good insurance, Medicare and Medicaid and you got bills for hundreds of thousands of dollars for services whose costs cannot be explained or justified by the hospitals themselves?

What about the drug and medical equipment costs which are also highly inflated?

Should we all just pay them because that's what the companies want?

[Mike Martin, Yorktown, VA]

Lars, my son works for a new outfit in DC called (and this is pure Washingtonese...) the Patient Centered Outcomes Research Institute
( www.pcori.org ) that stood up as part of the ACA. Among other things, they've funded a carefully screened set of proposals that pertain to improving outcomes.

[Tyler]

Illegal aliens and a culture that uses the ER as a general clinic.

[Lars]

I am glad to hear that your son is focused on this. I think that by reforming how income is obtained in the health care industry, it will provide better incentives and improve care.

[Frabjous]

The problem with our healthcare system is that we pay for, assess, and track procedures and devices and drugs rather than health (outcomes).

And the primary motivation of most of the people and organizations that implement those procedures and provide those devices and drugs is profit and not health.

Mark

[Jose]

The Obama-Care Nomenklatura will fix all these problems, so we shouldn't worry.

[Patrick D]

I had a sobering chat with an acquaintance who is a long-time ER MD with management responsibilities as well. Basically, he said they have little idea how much anything actually costs. I wonder how much of all this is just making the numbers work so the accounts aren't negative at the end of the month.

Regarding the "ER as a general clinic" issue. I had an eye-opening experience when my wife had a serious cycling accident. The waiting room was filled with people of all ages and races who had some kind of body chemistry issue related to diabetes, blood pressure, etc. and the associated drug cocktails. The staff clearly saw that kind of thing as the norm and were anxious and almost giddy to have an actual trauma patient (my wife).

[Tosk59]

There seem to be some assumptions made (or at the very least implied) in the article that I would think questionable - i) that what Medicare pays is the "correct price"; ii) That what is billed for items should simply be to recover the cost of the underlying item, (i.e ignoring all other expenses), etc.

That being said, the system is usually insanely complicated, with what is billed (the chargemaster price) bearing NO resemblance to what is actually paid; which is often a % off that is different for every insurance plan accepted by the hospital.

Some hospitals have a cut off for individually billing for supplies (e.g. they won't individually bill any supply under, say, $100) but they simply roll those costs into the room rate, procedure charge, facility fee, etc. Other hospitals bill all supplies, and they all generally have a tiered system for supplies (using semi-hypothetical numbers to provide an example: a supply costing between $1 and $50 is marked up by 400%; one between %50 and $100 by 300%; one between $100 and $500 by 250%; one between $500 and $1,000 by 200%; and everything over $1,000 by 150%.

So at the beginning of each fiscal year the hospital will figure out how much it needs to make and work backwards to tweak these percentages upward to get where they feel they need to be.

What is **grotesque** is that those in the worst position (i.e. no insurance) get hit with the highest, full price charges (unless they fall into certain categories e.g. x% of poverty in which case there are some legal protections in place).

How to get to a better system IS something that should be definitely examined, but this is sometimes muddied by the article dragging in inapt issues. Thus we read about a bill racked up for someone that in the end had nothing wrong with him... OK, you can fuss about the price tag *level*, but the tone implies that because there ended up being no medical issue there shouldn't have been an expense despite the resources being used. Silliness. There also seems to be an assumption that because this is healthcare and "non profit" the CEOs and top executives should make less in salary.

All in all, a story that needs to be told...

[Tosk59]

The difficulty is in defining outcome measures for medical issues. There aren't very many in existence, most disease states need them to be developed and defined.

Hopefully PCORI can "bend the cost curve". The big issue I see is that the very politicians who tout it as the way to define evidenced-based care and what should and shouldn't be done are the first to ignore the science in favor of anecdote...

So, when the USPSTF mammogram recommendations came out, Sebelius, then President Obama (and indeed a whole host of politicians) threw up their hands in horror, the panel was vilified and practically accused of doing their best to kill women, a law was passed so that insurance companies still had to pay for them, etc., etc.

There are umpteen other examples. For example whenever a particular drug or device is criticized as being unnecessary or not a good use of resources, lo and behold the politicians in the state where the drug- or device-maker resides come out in force on behalf of the drug or device!

Not a great augury for future success of similar efforts by the newly formed organization!

[Will Reks]

The obvious answers to the problem are to either adopt a single-payer model in line with many other Western countries or to adopt price-setting which the best private-sector healthcare systems (Singapore, Switzerland) all have. The key being that the government has a role in keeping costs down either through a health care budget or though price controls.

[mbrenner]

This insightful analysis and interpretation is confirmed by an abundance of empirical data. Just look at the experience of (almost) all other developed countries where the monetary input to medical service yield ratio is infinitely superior to that of the American non-system.

[fanto]

I apologize for the length of my comment, but the readership here seems to be more at home in other fields, so I will try to show some complexities of healthcare industry.
US healthcare has pluses and minuses; The pluses - good uniformity of care, i.e. small span between best and worst care; medical education is well standardized, as are requirements for continued education, sometime overburdening recertification requirements (every 2 years). So, on the quality side there is not much to bitch about, of course there are some ‘outliers’ as we deal with humans, on both sides of equation - patients and their healers. Among physicians one will find some alcoholics, wife-beaters, narcomans, cheaters, but by and large the physicians are better human beings than attorneys, IMO.
Now – the ‘minuses’ : the costs are huge, an illness can devastate a middle age person, because he/she is not yet in the Medicare category, and Medicaid can be accessed only after proving that one is indigent (s.c. ‘spend down’). Why are the costs so high? The answer is not the income of physicians (by some estimates only 2-8% of all healthcare dollars), but the greed of the s.c. ‘medical-industrial complex’ and the problem of the uninsured people, who drain the emergency system. Fareed Zakaria from CNN, had a program on healthcare. (I do not have the link to it but it is available somewhere in the internet, I am sure). He showed a community in Newark, N.J., where a single physician was able to improve the effectiveness of the healthcare delivery by cutting down on the emergency care provided to indigent population. Another hidden cost is the administration of hospitals and insurance companies – with salaries of hospital CEOs in small rural hospitals exceeding $500,000/yr. with echelons of vice-presidents and others who draw also over 100,000 each. Those types sit in their offices and are not productive members of society, they are counter-productive, and the more inept ones plant guns in physicians automobile – literally - (http://www.advisory.com/Daily-Briefing/2013/02/15/Jury-Hospital-CEO-framed-physician-by-planting-gun) or metaphorically, by engaging in phony peer reviews, ruining physicians careers, this latter is common)
Another huge factor – which President Obama, and the Democrats in general, are brushing aside, is the cost of “defensive medicine”. Physicians must, by threat of malpractice, do unnecessary, expensive radiologic tests (MRI, CT, esoteric labs ) just to be able to defend themselves from the accusatory interrogations by the lawyer : “doctor, did you or did you not, do this test, when it is known that it could have saved, prevented, averted so and so ….etc.etc.” (any ER physician will tell you that CT scan of the head is almost ‘de rigeur’ for any patient presenting with a headache). Trial lawyers and their wives give Democrats millions of dollars, one can look up on internet. President G.W. Bush tried to ‘spotlight’ it, he came to Belleville, Madison county, IL, known as the ‘malpractice hellhole’, and talked about this problem, but the lobby is more powerful than any single president. The whole population needs to realize that it pays for lawyers (plaintiffs side and the defensive side and they both sometime do underhanded under the table settlements – sad but true), they pay the elected officials who tax the citizens, so the circle is closed. The greed pervades the whole society, patients are also greedy and see any less than perfect outcome as a fortune’s lucky strike.
Uneven distribution of healthcare dollars is a huge problem – when, on one hand, some doctors make millions of dollars/year using mid-level substitutes and trainees, over-utilization by cardiologists, pathologist getting paid more for looking at three biopsies from colon, than the physician who took the samples, and under-payment of general surgeons on the other hand. Collusions between hospitals and some physician groups who monopolize the given field (s.c. exclusive contracts with radiologists or other specialties – you can fill in the blank…) are also unhealthy, costly, riddled with kick-backing schemes.
Lastly and possibly most costly - insurances also make it big in healthcare: the CEO of United Healthcare is reported to make 26 million/year. I could go on and on – but for sake of brevity I will stop.

[Will Reks]

Isn't there an assumption in the education sector or in the failure of any industry (automotive) that there is some group that is probably overpaid commensurate to the results? Seeing that healthcare costs are inflated and that executive pay and doctor pay is connected to that then I see no reason why pay shouldn't be on the table. The overhead for administrative costs is not an insignificant factor. I think Medicare runs at about 3% for overhead.

[Bill H]

Pnuemonia is normally resolved with a round of antibiotics and a followup visit. Case closed.

I have had pnuemonia for more than two months and it has not yet been resolved. I have been to the doctor countless times, have had x-rays every ten days, spent ten days in the hospital, received more than a dozen different antibiotics, and I still have pnuemonia.

Should my doctor not be paid because he has not achieved results? Should the hospital bot be paid because they did not get results?

Should the doctor who cured pnuemonia whit two doctor visits be paid more for his results that the poor guy who is fighting the good fight for me? Because he got a better result?

There is an increasing possibility that part of my lung may have to be surgically removed to excise the infection that is proving to be unstoppable. Should that be done at no cost because the diagnosis is still "pnuemonia?"

Yes, the concept of billing by procedure is subject to abuse, but the idea of billing simply by diagnosis or by outcome is absurd. The fact that my pnuemonia is not responding to treatment is not the doctor's fault.

[walrus]

The basic problem is that the provision of medical care is not a free market in economic terms and can never be one. Patients with medical conditions are not able to "shop around" because their need is often urgent, the symptoms of their condition (eg pain) may cloud their judgement and in any case 99% do not have the knowledge to make an informed choice of treatment anyway. Then of course there are the simply massive barriers to entry that further pervert the system and encourage rent seeking.

Since it ain't amenable to the checks and balances of a free market, the choice is then between some form of government regulation and the sweet attentions of monopolies, whose objective is to remove your last dollar as you take your last breath. There is one way out - the increasingly attractive option of medical tourism.

Contrary to some opinions, there is a huge body of scientific and economic work on the optimum system of providing healthcare and most developed countries have working and effective health bureaucracies designed to curb the voracious appetites of the international medical industry and ensure their citizens have access to high quality healthcare at affordable prices. It is a pity that this fact has been hidden from the American people.

For example, here is a link to our Pharmaceutical benefits scheme which is designed to ensure that you cannot be bankrupted by prescription costs.

http://www.pbs.gov.au/pbs/home

Then of course there is a universal single payer scheme.

http://www.humanservices.gov.au/customer/subjects/medicare-services

These are the good folk who are treating my girlfriends cancer:

http://www.petermac.org/

[kao_hsien_chih]

The thing that looking at the Time article reminded me of was the fact that Michelle Obama was/is an hospital bean counter, which suddenly explained everything about Obamacare, specifically why no one was talking about the biggest problem of them all, the abnormally high cost of healthcare in US. Obamacare may or may not be better than the status quo (it probably is, but I think the improvements are rather marginal at best, at least in my opinion), but it certainly is no fundamental reform of the deep-rooted problems....and that's no surprise given that Obamas are themselves a major part of the problem!

[Tosk59]

Some decent follow-up to Brill's opus... The first builds on some of Brill's points (but perhaps not in the way he intended; the second makes some corrections...

http://www.forbes.com/sites/chrisconover/2013/02/28/5-take-aways-from-steven-brills-time-tome-on-health-costs/

http://www.forbes.com/sites/chrisconover/2013/03/04/5-myths-in-steven-brills-opus-on-health-costs-part-1/#.UTS5ldp_LL0.twitter