Medical Costs

A number of years ago, when I was very young, I remember the hospital room policies. Insurance was not a major item. Individuals paid their own medical costs and you knew in advance what things were going to cost.

There were three options in spending time in the hospital as a patient. A Private Room with one patient in a room was about $20 per night. A Semi-Private Room had two beds in a room and it would be perhaps $14 per night. The third option was called The Ward. This would be a large room, with a large number of beds and curtains that could be closed around a bed for privacy during doctor’s visits. This might be $7 per night. If you were not having surgery, your regular doctor would visit you each day and his cost was known in advance.

Much of the equipment in use today did not exist and the most common test was an x-ray and a number of blood tests. The cost of the test was available and everybody paid the same price for the same test.

The hospitals have advanced in testing, evaluation and treatment like light years in the past 60 years. The cost of all of the equipment is enormous because the inventor and manufacturer have patented its features and the features are not available on other equipment. They inflate the prices very high. The hospitals then calculate how many times they will have to use the machine each year and will then set their prices for the service at a high rate to pay for it over the shortest possible time.

In product manufacturing, new equipment might be depreciated for seven years, but hospitals cannot afford to work on this long of a period because the technology is advancing so fast that the machine may be obsolete in a short period. Pricing for the use of new medical equipment should probably allow for paying for the machine in two to three years.

The cost of ordinary medications in hospitals will upset many of the patients, but for most of us, the insurance companies are now paying for them. An aspirin that might cost us 3 cents each at the local drug store but might be $1 each in the hospital. The product cost of hospital medications is calculated on how many people are involved. First of all, the patient tells the physician of a symptom that the physician thinks an aspirin might help. The physician must be paid for his time. He advises the nurse to give the aspirin. The nurse enters the request for the aspirin by computer. The nurse must be paid. In the hospital drug center, a pharmacist must get the aspirin and designate it for the particular patient. The pharmacist must be paid. A technician delivers the aspirin to the nurse station. The technician must be paid. The nurse gives the aspirin to the patient. The nurse again must be paid. The hospital also expects to receive a profit from the product and the service. This is included in the price. If a patient is taking regular medications the best plan is to bring them with you to the hospital in the prescription bottles and advise your nurse to use your own medicines.

One of the things the medical profession does that is a problem to me is the pricing method for billing purposes. They grossly overbill for their services. I receive notices from my insurance carrier about charges they have paid for me. Sometimes when the hospital or doctor bills $100 for their service, the insurance company pays $40 and the balance is written off. I understand why it is being done this way. All insurance companies do not pay the same amount for the same service and this allows the hospital or doctor to discount at different rates to different insurance companies. One problem that comes with this system is a bill that is not covered by the insurance company. It is billed at the full inflated price and it scares the patient because they don’t know how they can pay that much. They do not know to ask for the same discount that the insurance companies receive. It seems to me that a for-profit business would be better to have a fixed fair price list and require everyone to pay the same price. In a normal business transaction, the seller sets the price for the product or service but the buyer knows and agrees to the price before the transaction takes place. The insurance company may be going to pay the bill, but the buyer is still the patient. It should not be the function of the insurance company to tell the hospital or physician what they will charge for their service. The function of the insurance company should be to evaluate the services that will be required for the policy holders and advise the patient how much the premium for the insurance will be based on the cost given by the hospital and physicians.

Something has been happening in the medical profession that has alarmed many of us. I prefer that my physician be independent from the hospitals. Over the past eight years, a majority of the doctors have become employees of the hospitals. This is taking place all over the country. As humans we are naturally loyal to the person or company that pays our salary. When the patient pays the doctor directly, the incentive for the doctor is to give the patient the best service that he or she can give to keep the patient coming back. When the doctor is paid by a hospital, his incentive is to help the hospital make more money. That may mean sending the patient to the hospital for tests that would not have been done by an independent doctor. An independent physician might freeze off warts in his office. A doctor as an employee of the hospital might refer the patient to a specialist working for the hospital who will charge a higher rate and charge for another office visit in order to increase the revenue to the hospital. An independent physician who has a patient with an obvious heart problem will contact the best hospital for the problem and immediately have the patient admitted to the special hospital. A physician who is an employee of the hospital will first have the patient admitted to the local hospital and then transferred to another hospital to increase the revenue for the employer hospital.

I am a pretty good expert on how businesses should operate but I have never been involved with a doctor’s office or a hospital, so there is a tremendous amount that I do not know. My suggestions may not be worth very much. There also might be a lot of government regulations and ObamaCare rules that affect how these facilities are operated so add a little salt to my comments.