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banyon 03-09-2013 07:26 AM

Bitter Pill: Why Medical Bills are killing us
Read this article recently and did not see it discussed here. This appears to me to be an entire facet of health care problem that is not being discussed at all nationally. I found the pricing practices to be extremely disturbing.

Also saw this guy on the Daily Show. It's a long article, but worth the read IMO.

Bitter Pill: Why Medical Bills Are Killing Us

By Steven Brill
Feb. 20, 2013

1. Routine Care, Unforgettable Bills
When Sean Recchi, a 42-year-old from Lancaster, Ohio, was told last March that he had non-Hodgkin’s lymphoma, his wife Stephanie knew she had to get him to MD Anderson Cancer Center in Houston. Stephanie’s father had been treated there 10 years earlier, and she and her family credited the doctors and nurses at MD Anderson with extending his life by at least eight years.

Because Stephanie and her husband had recently started their own small technology business, they were unable to buy comprehensive health insurance. For $469 a month, or about 20% of their income, they had been able to get only a policy that covered just $2,000 per day of any hospital costs. “We don’t take that kind of discount insurance,” said the woman at MD Anderson when Stephanie called to make an appointment for Sean.

Stephanie was then told by a billing clerk that the estimated cost of Sean’s visit — just to be examined for six days so a treatment plan could be devised — would be $48,900, due in advance. Stephanie got her mother to write her a check. “You do anything you can in a situation like that,” she says. The Recchis flew to Houston, leaving Stephanie’s mother to care for their two teenage children.

About a week later, Stephanie had to ask her mother for $35,000 more so Sean could begin the treatment the doctors had decided was urgent. His condition had worsened rapidly since he had arrived in Houston. He was “sweating and shaking with chills and pains,” Stephanie recalls. “He had a large mass in his chest that was … growing. He was panicked.”

Nonetheless, Sean was held for about 90 minutes in a reception area, she says, because the hospital could not confirm that the check had cleared. Sean was allowed to see the doctor only after he advanced MD Anderson $7,500 from his credit card. The hospital says there was nothing unusual about how Sean was kept waiting. According to MD Anderson communications manager Julie Penne, “Asking for advance payment for services is a common, if unfortunate, situation that confronts hospitals all over the United States.”

Diagnosed with non-Hodgkin’s lymphoma at age 42. Total cost, in advance, for Sean’s treatment plan and initial doses of chemotherapy: $83,900. Charges for blood and lab tests amounted to more than $15,000; with Medicare, they would have cost a few hundred dollars

The total cost, in advance, for Sean to get his treatment plan and initial doses of chemotherapy was $83,900.


The first of the 344 lines printed out across eight pages of his hospital bill — filled with indecipherable numerical codes and acronyms — seemed innocuous. But it set the tone for all that followed. It read, “1 ACETAMINOPHE TABS 325 MG.” The charge was only $1.50, but it was for a generic version of a Tylenol pill. You can buy 100 of them on Amazon for $1.49 even without a hospital’s purchasing power.

Dozens of midpriced items were embedded with similarly aggressive markups, like $283.00 for a “CHEST, PA AND LAT 71020.” That’s a simple chest X-ray, for which MD Anderson is routinely paid $20.44 when it treats a patient on Medicare, the government health care program for the elderly.

Every time a nurse drew blood, a “ROUTINE VENIPUNCTURE” charge of $36.00 appeared, accompanied by charges of $23 to $78 for each of a dozen or more lab analyses performed on the blood sample. In all, the charges for blood and other lab tests done on Recchi amounted to more than $15,000. Had Recchi been old enough for Medicare, MD Anderson would have been paid a few hundred dollars for all those tests. By law, Medicare’s payments approximate a hospital’s cost of providing a service, including overhead, equipment and salaries.

On the second page of the bill, the markups got bolder. Recchi was charged $13,702 for “1 RITUXIMAB INJ 660 MG.” That’s an injection of 660 mg of a cancer wonder drug called Rituxan. The average price paid by all hospitals for this dose is about $4,000, but MD Anderson probably gets a volume discount that would make its cost $3,000 to $3,500. That means the nonprofit cancer center’s paid-in-advance markup on Recchi’s lifesaving shot would be about 400%.

When I asked MD Anderson to comment on the charges on Recchi’s bill, the cancer center released a written statement that said in part, “The issues related to health care finance are complex for patients, health care providers, payers and government entities alike … MD Anderson’s clinical billing and collection practices are similar to those of other major hospitals and academic medical centers.”

The hospital’s hard-nosed approach pays off. Although it is officially a nonprofit unit of the University of Texas, MD Anderson has revenue that exceeds the cost of the world-class care it provides by so much that its operating profit for the fiscal year 2010, the most recent annual report it filed with the U.S. Department of Health and Human Services, was $531 million. That’s a profit margin of 26% on revenue of $2.05 billion, an astounding result for such a service-intensive enterprise.1

The president of MD Anderson is paid like someone running a prosperous business. Ronald DePinho’s total compensation last year was $1,845,000. That does not count outside earnings derived from a much publicized waiver he received from the university that, according to the Houston Chronicle, allows him to maintain unspecified “financial ties with his three principal pharmaceutical companies.”

DePinho’s salary is nearly two and a half times the $750,000 paid to Francisco Cigarroa, the chancellor of entire University of Texas system, of which MD Anderson is a part. This pay structure is emblematic of American medical economics and is reflected on campuses across the U.S., where the president of a hospital or hospital system associated with a university — whether it’s Texas, Stanford, Duke or Yale — is invariably paid much more than the person in charge of the university.

I got the idea for this article when I was visiting Rice University last year. As I was leaving the campus, which is just outside the central business district of Houston, I noticed a group of glass skyscrapers about a mile away lighting up the evening sky. The scene looked like Dubai. I was looking at the Texas Medical Center, a nearly 1,300-acre, 280-building complex of hospitals and related medical facilities, of which MD Anderson is the lead brand name. Medicine had obviously become a huge business. In fact, of Houston’s top 10 employers, five are hospitals, including MD Anderson with 19,000 employees; three, led by ExxonMobil with 14,000 employees, are energy companies. How did that happen, I wondered. Where’s all that money coming from? And where is it going? I have spent the past seven months trying to find out by analyzing a variety of bills from hospitals like MD Anderson, doctors, drug companies and every other player in the American health care ecosystem.

When you look behind the bills that Sean Recchi and other patients receive, you see nothing rational — no rhyme or reason — about the costs they faced in a marketplace they enter through no choice of their own. The only constant is the sticker shock for the patients who are asked to pay.

Gauze Pads: $77
Charge for each of four boxes of sterile gauze pads, as itemized in a $348,000 bill following a patient’s diagnosis of lung cancer

Yet those who work in the health care industry and those who argue over health care policy seem inured to the shock. When we debate health care policy, we seem to jump right to the issue of who should pay the bills, blowing past what should be the first question: Why exactly are the bills so high?

What are the reasons, good or bad, that cancer means a half-million- or million-dollar tab? Why should a trip to the emergency room for chest pains that turn out to be indigestion bring a bill that can exceed the cost of a semester of college? What makes a single dose of even the most wonderful wonder drug cost thousands of dollars? Why does simple lab work done during a few days in a hospital cost more than a car? And what is so different about the medical ecosystem that causes technology advances to drive bills up instead of down?

Recchi’s bill and six others examined line by line for this article offer a closeup window into what happens when powerless buyers — whether they are people like Recchi or big health-insurance companies — meet sellers in what is the ultimate seller’s market.

The result is a uniquely American gold rush for those who provide everything from wonder drugs to canes to high-tech implants to CT scans to hospital bill-coding and collection services. In hundreds of small and midsize cities across the country — from Stamford, Conn., to Marlton, N.J., to Oklahoma City — the American health care market has transformed tax-exempt “nonprofit” hospitals into the towns’ most profitable businesses and largest employers, often presided over by the regions’ most richly compensated executives. And in our largest cities, the system offers lavish paychecks even to midlevel hospital managers, like the 14 administrators at New York City’s Memorial Sloan-Kettering Cancer Center who are paid over $500,000 a year, including six who make over $1 million.

Taken as a whole, these powerful institutions and the bills they churn out dominate the nation’s economy and put demands on taxpayers to a degree unequaled anywhere else on earth. In the U.S., people spend almost 20% of the gross domestic product on health care, compared with about half that in most developed countries. Yet in every measurable way, the results our health care system produces are no better and often worse than the outcomes in those countries.

According to one of a series of exhaustive studies done by the McKinsey & Co. consulting firm, we spend more on health care than the next 10 biggest spenders combined: Japan, Germany, France, China, the U.K., Italy, Canada, Brazil, Spain and Australia. We may be shocked at the $60 billion price tag for cleaning up after Hurricane Sandy. We spent almost that much last week on health care. We spend more every year on artificial knees and hips than what Hollywood collects at the box office. We spend two or three times that much on durable medical devices like canes and wheelchairs, in part because a heavily lobbied Congress forces Medicare to pay 25% to 75% more for this equipment than it would cost at Walmart.

The Bureau of Labor Statistics projects that 10 of the 20 occupations that will grow the fastest in the U.S. by 2020 are related to health care. America’s largest city may be commonly thought of as the world’s financial-services capital, but of New York’s 18 largest private employers, eight are hospitals and four are banks. Employing all those people in the cause of curing the sick is, of course, not anything to be ashamed of. But the drag on our overall economy that comes with taxpayers, employers and consumers spending so much more than is spent in any other country for the same product is unsustainable. Health care is eating away at our economy and our treasury.

The health care industry seems to have the will and the means to keep it that way. According to the Center for Responsive Politics, the pharmaceutical and health-care-product industries, combined with organizations representing doctors, hospitals, nursing homes, health services and HMOs, have spent $5.36 billion since 1998 on lobbying in Washington. That dwarfs the $1.53 billion spent by the defense and aerospace industries and the $1.3 billion spent by oil and gas interests over the same period. That’s right: the health-care-industrial complex spends more than three times what the military-industrial complex spends in Washington.

When you crunch data compiled by McKinsey and other researchers, the big picture looks like this: We’re likely to spend $2.8 trillion this year on health care. That $2.8 trillion is likely to be $750 billion, or 27%, more than we would spend if we spent the same per capita as other developed countries, even after adjusting for the relatively high per capita income in the U.S. vs. those other countries. Of the total $2.8 trillion that will be spent on health care, about $800 billion will be paid by the federal government through the Medicare insurance program for the disabled and those 65 and older and the Medicaid program, which provides care for the poor. That $800 billion, which keeps rising far faster than inflation and the gross domestic product, is what’s driving the federal deficit. The other $2 trillion will be paid mostly by private health-insurance companies and individuals who have no insurance or who will pay some portion of the bills covered by their insurance. This is what’s increasingly burdening businesses that pay for their employees’ health insurance and forcing individuals to pay so much in out-of-pocket expenses.

Rest of article (LONG)

banyon 03-09-2013 07:31 AM

Brill on Charlie Rose

Brill on Daily

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jiveturkey 03-09-2013 07:40 AM

There needs to be some basic capitalism applied to the healthcare system. There should be open pricing, especially since deductibles have gone up and most people are probably responsible for a majority of their own expenses. Add in competition for quality outcomes and I believe we'd see quick improvements.

banyon 03-09-2013 07:46 AM


Originally Posted by jiveturkey (Post 9479254)
There needs to be some basic capitalism applied to the healthcare system. There should be open pricing, especially since deductibles have gone up and most people are probably responsible for a majority of their own expenses. Add in competition for quality outcomes and I believe we'd see quick improvements.

Price transparency is something that the author discusses quite a bit. I think if someone told me they were going to charge me $1.50 per aspirin, I'd say, "hang on a sec, I'll run to Walgreens and bring my own".

I agree that there are needed market-type reforms, probably some regulatory reforms also.

banyon 03-09-2013 07:51 AM

Also just heard, this is the longest article ever published by Time magazine.

jiveturkey 03-09-2013 07:55 AM


Originally Posted by banyon (Post 9479257)
Price transparency is something that the author discusses quite a bit. I think if someone told me they were going to charge me $1.50 per aspirin, I'd say, "hang on a sec, I'll run to Walgreens and bring my own".

I agree that there are needed market-type reforms, probably some regulatory reforms also.

That's probably where I got the idea. I know that I saw this guy on TV recently or someone talking about something similar.

banyon 03-09-2013 08:31 AM

This guy does as good a job as anyone explaining why Obamacare doesn't work (it does nothing to control increasing costs).

"Healthcare is not a marketplace" on the Charlie Rose vid

BucEyedPea 03-09-2013 09:37 AM

Most of that is govt induced pricing due to interference.

banyon 03-09-2013 01:19 PM


Originally Posted by BucEyedPea (Post 9479357)
Most of that is govt induced pricing due to interference.

That is pretty much the opposite conclusion of the article, but you don't read anything that doesn't align with your preconceptions, so why bother discussing it?

cosmo20002 03-09-2013 02:59 PM


Originally Posted by BucEyedPea (Post 9479357)
Most of that is govt induced pricing due to interference.

That's why there's a 1000% mark-up on an aspirin?

BucEyedPea 03-09-2013 03:02 PM

It's because there is no free market in healthcare. Where some exists, such as elective surgeries like Lasik the price has dropped.

Taco John 03-09-2013 03:29 PM

The market is already adapting to this stuff:

Couple examples of it in the market:

Of course, I expect the government to eventually react to this by forcing these doctors to play by their rules.

BlackHelicopters 03-10-2013 06:27 AM

Wanna have some fun? Ask a physician what a procedure csts. PM when you find a physician that can tell you.

chiefzilla1501 03-10-2013 07:44 AM

I'll be honest. Couldn't read through the entire thing. Really long, but will be sure to do more than a skim-through at some point. A terrific article.

I have a doctor in the family. It has become thankless work. You kind of miss the days when doctors used to carry a doctor bag around. They don't anymore for fear of getting sued. You miss the days when doctors were experts. Nowadays, patients believe they are experts and will sue you if they hear something they don't want to hear. Insurance companies and government are experts, and they dictate care. The article smartly revealed that doctors are becoming too over-cautious. They perform procedures they don't necessarily want to do, often multiple times, either for fear of being sued or to follow somebody else's procedure. Health care was a hell of a lot better when doctors were allowed to do their job.

Because the nature of the business is... doctors are imperfect. Their job is to solve a puzzle where the solution isn't always clear. And they deserve the leeway to make mistakes. The "safe harbor" rule proposed in the article is crucial. I'm sorry, but the litigious nature of our society pisses me off. You're right to sue and receive ridiculous payouts affects my health care costs. Knock it off.

But let's be real. There are other big problems with the private sector's running of the program too. So let's not act like regulation isn't necessary to some level. First of all, insurance is a scam, and must be reformed. But on the other hand, let's also not forget how insurnace companies make and lose money. They are a pool of premiums, and they have to pay out when people get sick. News flash. Americans are fat and unapologetic about it. And when people eat their way into diabetes, it drives up my health care costs. So rather than curse out soda bans and tease Michelle Obama for her attempts to fix this problem, why not embrace them?

The other big problem is pricing. Pricing isn't easy. People blame doctors and hospitals for poor pricing, but often times, it's because you have doctors with no business background running an office and/or the payback system has become so complicated, you need Steven Hawking to figure it out. Simplify the payback system, force price transparency, and offer more basic office training before a doctor is allowed to run a private practice.

chiefzilla1501 03-10-2013 07:48 AM


Originally Posted by theelusiveeightrop (Post 9482313)
Wanna have some fun? Ask a physician what a procedure csts. PM when you find a physician that can tell you.

Yup. But that's not on the physician. It takes a rocket scientist to understand how an insurance company will answer that question.

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