I was corrected earlier in the pandemic: I thought Hospitals LOVED covid because of all the money they got for services.
Someone then pointed out that COVID prevents a lot of really high margin care, substituted instead for drudgery healthcare and is killing the hospital bottom lines.
I suspect what is REALLY going on here is a combination of both the surge of care for the explosive Omicron variant, and the loss of high-margin care is undermining the profitability again.
The four big mafiosos of US healthcare are Health Insurance, Drug/Device makers, Doctors/Hospital Providers, and the Malpractice Trial Lawyers. All four of them have REALLY powerful lobbying arms (even the Trial Lawyers, the least significant revenue wise and numbers wise of the four, but they are lawyers so they know how to gum up the system). They point to everyone else when the question of "why so expensive" comes up.
But it's all about the unsustainable profit margins/revenue structures in the US care system. If you see an article like this, I always suspect it's really about unsustainable profitability whatever complaining entity has setup.
Cry me a river. The more I've learned about it, the more it seems like hospitals are the ones making the majority of the profit in the US's strange and byzantine healthcare system. The cost of their services are generally absurd, and not adequately balanced by customers and competition because 'insurance will pay for it'.
US hospitals are ripe to attack. They make huge profits and use extremely outdated tech or use new (untested) software.
I take this opportunity to complain about regulatory capture and the medical cartels. Their constant irresponsibility (opioid epidemic, coronavirus response) affects everyone. Yet they still are paid more than any other industry.
Yet hospitals are not killing (no pun intended) it like apple or Microsoft. The massive margins are getting eaten somehow. Expensive equipment, salaries, commissions, patients telling them to shove the bill. I don’t know something is missing
Because the margin is so huge in healthcare products and services, especially at hospitals. Hospitals rely on astronomical margins on certain payer classes to subsidize uncompensated care costs.
The point is that providers are far more invested in maintaining the huge margins rather than minimizing the cost.
Problem is the payer mix has been shifting from insurance companies to patients via high deductible health plans over the past decade so it's starting to wreck their margins, even though the cost doesn't change.
I don't live in the US, but I've always though it was because it is for profit.
In most countries the hospitals don't have to return a profit to the owners and run at cost. In the US they have to pay the profit on top of the cost. In addition you have an insurance industry with high administrative cost and the need to turn a profit that makes it even more expensive.
This in addition to very high medicine prices results in an overall expensive healthcare system.
The article seems to support this notion although it doesn't spell it out directly. The punchline is “It’s not that we’re buying more pizzas, we’re just paying more for each pie,”
They don’t even have to fund loss making activities they just aren’t allowed to share profits with investors / shareholders.
They have to reinvest their profits back into the business that can be grants but can also be increasing pay to their staff or expanding their operation.
Two thirds of US hospitals are NFP (public, community, university etc) or government hospitals.
Ironically the more money they make and the bigger they are the higher prices they tend to charge because they can negotiate higher rates with the insurance providers.
The US system is simply broken the US healthcare has a huge problem with uncompensated care which is one of the primary reasons why most hospitals lose money on primary care.
This means that hospitals are “forced” to extract as much money as possible form insurers so your healthcare costs do not only incorporate the risks of all policy holders for your specific provider but also the uncompensated care costs of the hospitals.
The insurers then extract as much money as they can from their clients which primarily are business which don’t seem to care that much as they can often write of much of that cost as operating expenses.
This pretty much causes a cycle of inflation that is unsustainable under normal circumstances and will utterly brake the entire systems under extremes like the current pandemic.
Yup. And in healthcare most of the focus is on Pharma (which is certainly profitable and gouging Americans but is a small piece of the pie) and insurance companies (which don’t even make much profits), but not on hospitals which constitute around 70% of healthcare costs.
Have you seen the profit margins for the hospitals with these high prices? They certainly aren't raking it in.
I agree that's stupid, but that's how the system works for paying for medical care in the US. From the perspective of the hospital, it makes perfect sense.
Most hospitals run at profit margins well below 10%. Median operating margins are in the vicinity of 2% (https://www.modernhealthcare.com/providers/operating-margins...) And for the last few years, expenses have been growing faster than revenues (though the rate of growth of expenses has slowed.)
Whatever you imagine they're bringing in, they're not.
Nor is their job to maintain the long-term health of the country. That's literally the government's job.
[1] Those numbers have a historical reason behind them, which people are either ignorant of or choose to ignore. The short version is: hospital prices are set as a part of the negotiations with insurers. Insurers account for the vast, vast majority of dollars going into hospitals, so their business operations are built completely and entirely around insurance dollars. Uninsured patients register as barely more than a rounding error. So while, yes, being uninsured in this context sucks, hospitals aren't gleefully rubbing their hands and going "muahaha, $5K for stitches!" They don't expect to see that 5K, they don't rely on that 5K, and they're not trying to gouge that uninsured person who's almost certainly not good for that 5K. That person has just fallen into the crack(s) in our healthcare system, which are more complicated than "evil greedy hospital", or "evil greedy insurer."
Hospital profit margins are razor thin in the US. Their pricing is so convoluted because they have to come up with inane contracts with insurance companies to squeeze out every dollar they can.
In some instances, doctors in private practices have told me that taking Medicare or Medicaid means making less than minimum wage for certain procedures because the rates are fixed at such low values. In other cases, ER and intensive care units make nothing because they cannot legally turn anyone away for not being able to pay.
All of that has to be made up somewhere, and bilking insurance companies when they can are how they stay afloat.
Big companies can take the hit on high insurance rates. Drug makers live in boom and bust cycles (drugs are either fabulous money makers or bottomless pits that suck money from research, to testing, to the famously expensive FDA approval process).
The people hurt the worst are the small business employees and owners, the self employed, and the part time workers who can't afford to have the hospital come after them.
It's not like hospitals are wildly profitable to run though? I think the inflated costs are due to the little understood phenomenon of "cost disease" rather than owners of hospitals extracting outrageous rent for themselves as I think you are implying.
Most hospitals are already losing money or close to losing money. Taking away profit motive from them e.g. by subsidizing operation would only increase cost of care, because the incentive to run lean/efficiently goes away.
The insurance system and perverse incentives embedded in it is the primary reason healthcare is expensive here. Also many countries have price controls on drugs, and US does not (thus subsidizing RoW in regards to new drug research).
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.
tl;dr: US spends so much more than other nations because US hospitals (and by extension, doctors, which NYT is too chicken to say out loud), keep increasing prices for the same care.
There is nothing here about insurance companies. It's lack of competition on the supply side.
The hospitals themselves operate on relatively thin margins usually. Insurance companies, labor costs, pharmaceuticals, blood products, single use sterile items, housekeeping, taking care of uninsured patients that can’t pay the bills, and other regulatory requirements are extremely costly and eat up most of the budget. Reinvesting in IT infrastructure isn’t something that is a priority.
>...Seven of the top 10 most profitable hospitals in the United States are nonprofit facilities that each netted more than $150 million from caring for patients in 2013,
>...The study’s main purpose was to determine the characteristics of the nation’s most profitable hospitals. They found that facilities that were part of a system were more profitable because they were able to dominate their local market, which gives them greater clout in negotiating higher prices from private insurers. It also means consumers end up paying more if their health-care provider is out of network, Anderson said.
True, but that said, rates in US hospitals are massively over-inflated. They get away with it, insurance companies are not pressuring enough to lower cost (they're probably in on it), and there is no real competition.
Someone then pointed out that COVID prevents a lot of really high margin care, substituted instead for drudgery healthcare and is killing the hospital bottom lines.
I suspect what is REALLY going on here is a combination of both the surge of care for the explosive Omicron variant, and the loss of high-margin care is undermining the profitability again.
The four big mafiosos of US healthcare are Health Insurance, Drug/Device makers, Doctors/Hospital Providers, and the Malpractice Trial Lawyers. All four of them have REALLY powerful lobbying arms (even the Trial Lawyers, the least significant revenue wise and numbers wise of the four, but they are lawyers so they know how to gum up the system). They point to everyone else when the question of "why so expensive" comes up.
But it's all about the unsustainable profit margins/revenue structures in the US care system. If you see an article like this, I always suspect it's really about unsustainable profitability whatever complaining entity has setup.
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