> Hospitals have an operating margin of 2-5%
Very curious where this comes from and how accurate it is. For example the $37 a provider charges for an Aspirin seems like more than 2-5% margin.
Very curious where this comes from and how accurate it is. For example the $37 a provider charges for an Aspirin seems like more than 2-5% margin.
When the hospital charges you $37 for an aspirin, that singular pill might have a crazy profit margin in isolation. But your entire treatment could very well be losing the hospital money.
In my own anecdotal experience, the one hospital I know enough details about to comment on specifically, had something like 85% of patients costing the hospital more money than the hospital made. It was entirely funded by the relatively small number of people who had the “right” insurance and had the “right” procedures done.
Eg Kaufman: https://www.vizient.com/insights/reports/national-hospital-f...
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Administrator pay scale is completely irrelevant to the point
Really need to step back and start from first principles.
When I go to urgent care I get 15 minutes with a doctor who on average makes about $300K and maybe another 15 minutes with a nurse assistant who might be making $100K (or less). So that is less than $50 in doctor+nurse salary. Of course there are then all the overhead of rent, utilities, etc, etc but those are not so different from any other business in the same strip mall. So let's say total cost for my visit is maybe $100. But I'm charged $500-$600 for the visit. Someone is pocketing a lot of money and it is not the doctor nor the nurse.
We could do the same exercise for surgery, the costs for surgeons and anestethicians is much higher, but you'll be hard pressed to find any realistic scenario where the cost of a two hour surgery is more than $100K.
My surgeon friends routinely complain about the inordinate amount of time they personally need to spend fighting with insurance, in the form of filling endless forms that insurance insists must be filled and signed by the doctor. This is in addition to whatever time/cost the hospital staff wastes fighting with insurance paperwork.
The surgeon time is not cheap, but the insurance companies expect these doctors to do all this paper pushing for free on top of their day job.
But if it's a team of nurses, doctors, and other healthcare specialists rushing around doing checklist work to make sure you get that aspirin, that's just evil.
The principle is only applicable to our industry and closely adjacent industries.
The $37 for an aspirin offsets huge costs elsewhere for (non-NP) nurses, receptionists, janitors, orderlies, etc., who can’t bill directly to medicare.
When you see $37 aspirin on the line, nobody actually pays $37 for it. The billed amount is replaced with whatever insurance rate is allowed for that. If someone is cash paying they get a large discount.
The billed items also have to cover everything. It’s not directly $37 for the aspirin, or the $5 or whatever allowed coverage it ultimately gets billed it. That had to cover the facilities, the salaries of the pharmacy staff who reviewed the request and dispensed it, the staff who inventory and order the medications, and the cost of billing insurance.
The only part that nationalized health care would change are the allowable billed rate and maybe the administrative overhead of billing different insurances. Even nationalized health care systems have admin overhead though.
You can think of it like when you have to pay $11 for a single glass of wine from a bottle that the restaurant paid $10 for. You’re not just paying for the liquid, you are paying into a big bucket of charges that all need to add up to more than the cost of the supplies, staff, building, and everything that goes into running it. The margin on individual products doesn’t make the entire operation profitable.
That's the same as any? CVS charging $5 for aspirin has to cover their staff who stocked and checked out the item, the shelf space, the marketing, and the looting.
The comparison you make between a bottle of wine vs a glass is not the right one. It's two different stores selling the same product. What's different about hospitals?
The discourse also underestimates how much of our health care costs go to our significantly higher salaries throughout the medical system. No politician wants to propose reducing the salaries of doctors, surgeons, or even researchers making new medications. The only acceptable villains are the administrators and insurance companies, but even in this inefficient system that's a much smaller slice of the pie chart than most people imagine.
One of the reasons hospitals operate in this convoluted way and still barely clear a profit is that we require them to treat everyone and attempt to collect payment later. A lot of what you and I pay for health care goes to cover people who can't or won't pay.
Well, the salaries of medical personnel only account for about 20% of total healthcare spending. So even cutting those by half wouldn't change much.
> One of the reasons hospitals operate in this convoluted way and still barely clear a profit is that we require them to treat everyone and attempt to collect payment later. A lot of what you and I pay for health care goes to cover people who can't or won't pay.
If that was a major reason, then those who don't pay would balance out those who pay and the grand total of all healthcare spending in the US would be pretty average despite individual premiums and out of pocket costs being sky high. But in reality, the total healthcare spending is just as sky high (several times more per capita then median OECD country).
Yep. Hospital "bills" are a fiction. On one occasion I was presented with an "Explanation of Benefits" for a hospital stay where I was "charged" for being in two hospital rooms at the same time. As if that weren't enough I was also "charged" with having a "Pap smear"[0], even though I don't have a cervix.
I complained bitterly and after making a big stink was informed by the hospital my insurer that the items weren't actually "billed". Rather, the insurance company paid $1500/day regardless of the treatment provided.
It's disgusting!
A Pap smear[0] is a diagnostic test to detect (pre)cancerous cells on one's cervix[1].
This is one of the areas where more standardization would certainly help. If there were more standardization of which codes disallow which other ones (which can currently vary wildly by plan even with the same insurer, must less across insurers), then a lot of line items could actually get removed as truly redundant, vastly simplifying the bill.
I would be able to dispute a double room billing, but I was sedated and dying so I took whatever they offered, assuming good faith.
ER’s for example are money pits, but society really needs them.
https://www.definitivehc.com/resources/healthcare-insights/h...
And while that law is obviously humane and reasonable, my only gripe is that the rest of our system is so backwards that it increasingly forces people to leverage that. There was a story about a woman who needed dialysis but had no insurance. So basically, she had to wait every couple weeks until she started breaking down, go to the ER, get emergency dialysis, get sent home. Rinse, repeat.
I don't blame her but really just the system that made this her best possible option.
https://kdvr.com/news/local/every-week-this-woman-nearly-die...
Do you have any citations for this? I've heard this rhetoric before, but every time I look into it, searching around for studies on google scholar or the web, I can only find studies and reports indicating that health outcomes trend better in countries with more universal coverage. There are think pieces with anecdata of course, but no actual peer reviewed publications I can find.
Heck when I went to college in Ohio's capital, the recommendation on how to get psychiatry or therapy as a new patient was to call the suicide helpline and claim that you were suicidal. That would get you a new patient appointment within 72 hours versus over 3 months on average for patients looking to get into care through normal channels.
The US maintains the highest hardware capacity of the three nations with roughly 43 scanners per million people and performs around 245 to 290 scans per 1,000 residents per year. non-emergency wait times are 1 to 7 days. The UK has 10 scanners per million people and ~100 scans per 1,000 residents, using centralized triage to keep non-emergency wait times between 1 and 6 weeks for NHS targets. Canada does 160 scans per 1,000 residents and 14 to 15 scanners per million, with wait times of 5 to 9 weeks.
When you consider that the US population is not fully covered by insurance, the number of scans is even higher
> Among patients undergoing cancer surgery, waiting times to initiation of first-course therapy have steadily increased since 2012, particularly at high-volume academic centers and among patients referred for definitive care. With continued consolidation and expansion of health systems, system-level strategies are urgently needed to monitor and mitigate delays in the delivery of surgical care for cancer.
> Delays were more pronounced at academic compared with community hospitals and among patients referred for care. Predictors of longer waiting time included Medicaid insurance (5 of 6 cancers), lowest-quartile income (6 of 6 cancers), Black race (5 of 6 cancers), increased travel distance (4 of 6 cancers), care in the West region (6 of 6 cancers), and treatment at academic institutions (6 of 6 cancers). Receipt of robotic operations was linked with longer waiting times for nonbreast malignancies (5 of 5 cancers).
Why would I want to trade my top tier private insurance for that?
And who was in the country illegally so she couldn't use Medicare or Medicaid. Still a terrible situation, but not representative of the typical American.
I’m making a serious point here: medical overspending is not just gobs of money ending up in a single pocket. The US medical system really is incredibly complex, and the money is moving all over the place and being spent on many things. Most of those cost centers may all zero or even negative value to the patient, but that doesn’t mean they don’t exist.
The margin built into the prices bulled is not the actual margin the hospital ends up with.
Also, then, of course, we need to cover the United Healthcare guy's salary, which decreases margins.
All of which are willing to fight tooth and nail to preserve "their" fat slices of the obscenely bloated pie.
And on top of that you've got synergies like the horrific cost of housing in the US - which drives up the cost of every employee, no matter how essential they might be to providing actual medical care.
Its all coming out of revenue.