The principle problem with hospital costs (list prices) for services is their unreasonable value, relative to their costs of services. Pricing then is not reflective of the true value of services but, rather, a manipulation based on market forces. Insurance companies then decide on contractual adjustments. The problem with this model is it leads to uncontrolled cost inflation without checks and balances, especially as hospital networks get bigger.
There will be a break point when consumers will not pay for services. Let’s take, for example, the $5,000 charge for an outpatient stress test at a local hospital vs. the same test at an independent facility where the charge may be $1,100. Despite the same test, hospitals may charge Medicare higher fees as facility charges and get higher reimbursement.
Unfortunately, the patient is directed to have the test without full disclosure about the impact on their deductible or total cost prior to service. If disclosed, it is rare and requires effort on the part of the patient and hospital. Unfortunately, the patient has no leverage over the list price or negotiating the price, or may not want to pay for the service at that price at that time. Medicare has done little in policing appropriate hospital charges, one of the single largest costs for them.
The current hospital charge model is not unlike other monopolies. Pricing is based and leveraged under large monolithic health care systems whereby all providers under a network are bought out, including doctors. This consolidation is marketed as efficiency; however, in truth, (it) impedes competition and fair pricing. In fact, many independent physicians have much more reasonable rates for services than comparable hospital-owned facilities and are fully accredited. The hospital lobby, though, is strong and powerful.
The only way to correct this is by regulating the cost structure, which Obamacare will do indirectly through health-exchange options with clarity on costs, or hospital networks will need to have competitive cost/charge sharing with reimbursement commensurate to level of service. Comparison with private physicians should also be sought.
The real travesty is that the consumer has no idea what a service is going to cost. Already there are patients in “sticker shock” for health services and per-capita Medicare access is going down because people are afraid to go to the hospital. This is bad for health care altogether. In economic terms, there has to be better utility for the patient consumer so better health decisions can be made. We need hospital cost transparency and avoidance of cost shifting and padding fees which undermine faith in medicine. … DR. CEFERINO CATA, KETTERING
‘Obvious solution is universal coverage’
Re hospital costs: It’s nice to see some momentum on this issue spawned by Steven Brill’s article in Time magazine. As the debate continues, I suggest the media dispel one of the chief excuses hospitals offer for their egregious practices: “We have to set high prices to offset the large amount of ‘bad debt’ we accrue from noninsured patients.” The flaw here is that their “bad debt” is calculated, using exorbitant pricing rather than their actual costs.
The obvious solution is to provide universal Medicare coverage with premiums assessed based on annual income. Unfortunately, this cannot happen because it requires an act of Congress, which is controlled by the huge health and pharmaceutical lobby.
Democracy is a great thing, but capitalism? Maybe not. DAN BECKER, CENTERVILLE