Saturday, November 23, 2013

More on healthcare costs

The October 14th, 2013 blog entry '$546 for Six Liters of Salt Water' grumbled that people seem to think that medical payments only cover the actual items and services provided, without taking into account all the overhead:

"... Second, these articles always act as if the patient charge is uniquely for the item itself... It is not, the patient charge is to generate revenue to pay not just for the item, but also for everything that goes into getting it to the patient (the organization has staff  that buy the product and do the receiving, inventory control and internal distribution; a physician has to write a medical order for the saline, the order has to be verified by a Pharmacist, a Pharmacy Technician pulls the item and labels it, then the  Pharmacist double-checks the item before it leaves the Pharmacy; and so on). Not to forget the  costs associated with expensive hospital infrastructure - construction running at $1 million per bed; huge capital investments such as MRIs, CT scanners, etc. PET scanners, MEGs, Da Vinci surgical robots... the list is endless...."

Clearly this is illustrated, even if they do not do it explicitly, by the American Hospital Association argument against "site neutral" payments, see below:

Click to enlarge:

So, it's the "overall cost structure" that is supported by patient charges. This needs to be taken into account while examining the variation in pricing/costs across hospitals providing the same service/procedure. Cost of living also factors in, with costs in California and on the East Coast likely higher than in the Midwest; and even when you compare geographically adjacent organizations clearly an academic medical center with research and education, etc. will probably have significantly higher costs than a community hospital (even if outcomes are comparable).

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