It’s the Money Stupid: Hospitals Cost to Charge Ratio

Health Affairs studied the cost to charge ratio in U.S. hospitals.  They found:

the average ratio of hospital charges for services (gross revenues) to payments received (net revenues) has grown from 1.1 to 2.6. This reflects a transition from predominantly cost- and charge-based payment systems to regulated and negotiated fixed payments. Hospitals have been able to squeeze additional revenues from remaining charge-based payers and services by sharply increasing charges, negatively affecting the uninsured.

Note that in the U.S. those least able to pay, i.e. those without health insurance are charge more, many times more in some instances, than those with insurance.

While most public and private health insurers do not use hospital charges to set their payment rates, uninsured patients are commonly asked to pay the full charges, and out-of-network patients and casualty and workers’ compensation insurers are often expected to pay a large portion of the full charges. Because it is difficult for patients to compare prices, market forces fail to constrain hospital charges.

The Washington Posts lists the hospitals and discusses the issue:

All but one of the facilities are owned by for-profit entities and the largest number of hospitals — 20 — are in Florida.


Understanding hospital pricing and charges is one of the most frustrating experiences for consumers and health-care professionals. It is virtually impossible to find out ahead of time from the hospital how much a procedure or stay is going to cost. Once the bill arrives, many consumers have difficulty deciphering it.

Medicynical Note:  Our money driven non-system of health care emphasizes revenue over health care quality, efficiency and value.  Overcharging patients is the norm and frankly the daily goal of hospital CFO’s.  Hiding the cost until the presentation of the bill is a little like the Mad Magazine cartoon from the fifties…Great Moments in Medicine.  While satire, it does represent the reality of American health care today. 




ASCO Meeting: Cancer Drugs Unsustainable Pricing, Getting Worse!

Only on rare occasions does the yearly meeting of oncologists (ASCO) confront the reality of spiraling drug costs for cancer.  After all, the meeting is largely sponsored by drug companies and most of the research oncologists are in the pay of the drug companies (literally and figuratively).  But this year Leonard Saltz raised the issue, as he has done in the past, a more or less lone voice in the wilderness.

Dr. Saltz’s remarks focused mainly on an experimental melanoma treatment made by Bristol-Myers Squibb Co. , but he also criticized pricing more widely. He cited statistics showing that the median monthly price for new cancer drugs in the U.S. had more than doubled in inflation-adjusted dollars from $4,716 in the period from 2000 through 2004 to roughly $9,900 from 2010 through 2014. Dr. Saltz cited studies showing that the price increases haven’t corresponded to increases in the drugs’ effectiveness.

And talking about a new regimen for malignant melanoma:

Dr. Saltz said the combination regimen’s benefit was “truly, truly remarkable for a disease that five years ago we thought was virtually untreatable.” But he said that combining the drugs would cost around $295,000 a patient over nearly one year, which he called unsustainable. If all U.S. patients with metastatic cancer took drugs priced at $295,000 a year, it would cost $174 billion to treat them all for just one year, Dr. Saltz said.

Medicynical Note:  The irony of drug development is that the most effective regimens require the least testing on patients because they work.  It’s the regimens with results that are marginal and maybe not even real that require large randomized studies to prove even a paltry few weeks delay in progression so as to get FDA approval. 

Whatever the cost of development, drug companies price drugs based at least in part on the seriousness of the illness treated.  The more desperate the situation, the higher the price.  A little like “your money or your life.”

Our congress doesn’t allow the FDA to evaluate cost effectiveness of regimens and doesn’t allow Medicare to negotiate prices with drug companies.  After all, the unstated goal of our non-system of health is NOT affordable care for all citizens but rather protection of the profits of patent holders and maintaining the cash flow of some of the most profitable corporations in the country. 

You think that’s why our health care is the most expensive by far in the world but only has average results? 

Psst, in case you are worried about American Exceptionalism, we also lead the world in bankruptcy from health care costs, we’re number 1

Health Care in America: Overcharge the patient whenever you can

The LA Times notes the wide disparity in charges for joint replacement surgery in the LA area.

New Medicare data show that Inglewood’s Centinela Hospital Medical Center billed the federal program $237,063, on average, for joint replacement surgery in 2013.

That was the highest charge nationwide. And it’s six times what Kaiser Permanente billed Medicare eight miles away at its West L.A. hospital. Kaiser billed $39,059, on average, and Medicare paid $12,457.

They also note:

The average charge nationwide for a major joint replacement operation was $54,239, according to federal figures.

This is an industry unaware of value and efficiency, intent on charging whatever it can, without regard to actual cost.  Revenue rules.

Medicynical Note:  Insurers can negotiate the actual price with the hospitals and doctors but individuals are at a huge disadvantage.  Without insurance they will pay what’s billed or negotiate a lower price which will be still more than the insurers.   And if a consumer can’t pay cash he/she will incur financing charges and/or go bankrupt.  It’s a scam,  but in this case it’s run by the most distinguished (sic) institutions in our communities.  

US Not Number 1……in murder rate, we’re only number 3 in the world

Graphic presentation of the murder rate around the world.  While we are number 3 in the world with 52/100,000 we can, however, take pride (sic) in that we do lead the industrialized world, in homicides, by a wide wide margin.

Medicynical note:  Think the number of guns in the U.S. has anything to do with it?  Is this collateral damage from our “freedom” to bear arms?   Has this anything to do with the wide disparity of wealth in our country?  Our failing educational system?  Our long standing institutional racism?  Take your pick.  The question is where we go from here and how to get ourselves out of this mess? 

Corporate Cheaters in Health Care? Shocking!

It becoming increasingly apparent that Big Pharma and other medical suppliers game the “system.”  Consider:

The past decade has seen a relatively constant rate of newly approved drugs every year. The number has even jumped in the past few years. Yet, despite such encouraging trends, we are actually facing a crisis in drug innovation today. That is because many of these new products do not offer substantial improvements over already available alternatives.


At the same time, novel and effective treatments for many diseases—both rare and common—remain elusive. For example, there is widespread concern over the lack of development of new antibiotics aimed at multidrug-resistant infections. Therapeutic innovation for central nervous system disorders such as dementia and psychoses, which affect almost 100 million Americans, has likewise stagnated.

In this climate, pharmaceutical manufacturers have nonetheless continued to thrive. The top eleven drug manufacturers made $711 billion from 2003 to 2012, including $68 billion in 2012 alone, translating to an industry profit margin on par with the banking sector.

Yet some of these profits have been acquired through illegal marketing practices that lead to unnecessary over-prescribing of their products, including issuing kickbacks to physicians, making false claims about their products, and marketing drugs for unapproved uses for which there is no evidence of efficacy despite important risks potentially leading to adverse patient outcomes. In the past five years alone, pharmaceutical companies have been required to pay over $13 billion for such violations.

Read the rest of the article here.

Medicynical Note:  Health Care in the U.S. is all about money.  Value, affordability, efficacy, whatever is not their first priority, maybe not even their second or third.

Big Pharma Manipulates the System to Increase Drug Prices—Anyone Surprised?

A drug company’s goal is to increase revenue.  Cost efficiency, value for the money?  Not their department. 

On Feb. 10, Valeant Pharmaceuticals International Inc.bought the rights to a pair of life-saving heart drugs. The same day, their list prices rose by 525% and 212%.

Medicynical Note:  Health care in case you didn’t notice is a perfect set up for blackmail.  The companies have something you think you want, something that you have been told you must have in order to survive.  Insurers are a buffer and in part delay the effects of price increases on drugs and pay the increased prices.  So companies raise prices whenever and however they can.  They think they can get away with it so they do it.

How else to explain the above increases?  How else to explain the fact that today we are paying in multiples of our median and average incomes for a single medications which  most often are  of modest value.  Panaceas?  Cures?  Not these.  But cash cows for Big Pharma and investors, yes.

What about regulations on prices?  What about some pay back for government funded research?  Both were given away by congressmen/women who guess what, receive lots of money from drug companies.  It’s a corrupt vile system.  But really it’s just business…….as usual.

Drug Costs Outstripping the Ability to Pay

Health Affairs’ blog had an interesting discussion of the problems of our drug patent system and it’s costly consequences.

One critical incentive for ongoing drug discovery and development is the temporary monopoly pricing that manufacturers can command for novel drugs. Yet this incentive, embedded in current patent and regulatory policy, does not guarantee that manufacturers will deliver novel products with clinically meaningful benefits. Indeed there are many diseases—including Alzheimer’s disease and Amyotrophic lateral sclerosis (ALS)—that pose significant patient, family, and societal burden but have not benefited from meaningful treatment advances.

Meanwhile, the American public appears increasingly wary of the unintended consequences of these market-based incentives. Since the early 2000s, regulatory actions have focused increasing public attention on shortfalls in the efficacy and safety of already marketed drugs — including the withdrawal of celebrated “blockbusters.” Recently, patient and insurer attention has focused on the list prices of novel specialty drugs, including those to treat cancer, that commonly exceed $50,000 per treatment course — these drug prices have also grown faster than all other medical spending.

Medicynical Note:  In the U.S. the medium and average family incomes are about $50-60,000/year.  So we are talking drugs that cost multiples of the annual incomes of families.  A few of these drugs have miraculous effects but most offer slight improvement in patint’s outcomes. 

Other countries try to control these expenditures by providing strong guidelines on expensive medications use; negotiating prices with the manufacturers and suggesting equally or more effective alternatives.   Their costs are significantly less than ours.  The Affordable Care Act has started this process but whether or not it’s political overseers (under the influence of  drug companies contributions)  will allow a rational implementation remains to be seen.