When we go shopping for anything like groceries, clothing, a home, or a car we always know the price before we purchase it. We don’t order a car and say send me the bill 60 or 90 days later. We don’t buy groceries without knowing the price of the items. We don’t buy a home or anything else without knowing the price.  Why do we buy healthcare without knowing what the prices?

 

It’s about the only thing in this country that we purchase in advance of the service and don’t know the price in advance. You can ask what something is going to cost but it’s very rare that you’ll get a legitimate answer. Oh, you may know that your office visit is $100 but you don’t know what your cost is when you go to the emergency room, have surgery, or are admitted to the hospital.

 

Healthcare administrators and officials say that it’s very complicated and difficult to show costs. I understand that sometimes complications can occur when you have surgery or are in the hospital for particular procedure, but notwithstanding a complication you still can’t get an answer about the cost. The reality is that every hospital has to file a report with the Federal Government – the Centers for Medicare and Medicaid – about their actual cost. This report in turn, is the basis of their reimbursement from the Federal Government for their Medicare and Medicaid patients. So for a hospital administrator to say they don’t know what the cost is, is simply not true. They know exactly what their cost is.

 

I wrote a blog last week about my son having donated a kidney to high school buddy. I can’t imagine what that cost is going to be. Not only the cost of the procedure, but we couldn’t even get information from anyone about what the insurance company is going to pay for my son’s expenses – not the cost incurred in the hospital, but what they would cover for his expenses before and after the procedure.

 

There’s been a lot of talk over the years about transparency. In fact, commencing January 1, 2019 hospitals are supposed to publish their charges. This doesn’t include physician costs or prescription drugs, or anesthesia, etc., but it does allow us to shop for the same procedure at different facilities. This is good, right? However, it’s all relative. Just because one hospital’s charge is lower than the next, and notwithstanding all the other charges that are not going to be published, how do we know what the cost is?

 

Transparency is great. But it doesn’t give us information about what their cost is. A little over a week ago there was an article in the New York Times about hospitals charging 2 to 3 times more than what Medicare pays them for the same services. We all pay taxes to Medicare (public money), Medicare intern takes our tax money (public money) and reimburses the hospital for a Medicare beneficiary. Public money going in – public money coming out – public information. I subscribe to the American Hospital Directory which gives me public information about what a hospitals reported cost is, their average reimbursement from Medicare, and their average charge to you and me. I can assure you that a charge of 2 to 3 times what Medicare pays is on the low end. I’ve seen hospitals charge up to 1500% of what they get from Medicare, and for most hospitals Medicare reimbursements represent a fair and reasonable profit.  The biggest myth is that PPO discounts lower the cost of the claim.  Discounts mean nothing when a hospital is charging >6 to 8 times what they get from Medicare.  Smoke and mirrors.

 

The current state of the cost of healthcare is unsustainable and unaffordable in its present form. Something has to give. If you want to learn how to dramatically reduce your healthcare costs with transparency, pay providers a fair and reasonable profit on their costs, and exercising fiduciary responsibility, please call me at 970-349-7707, or email me at frank.stichter@strategichpc.com