Econ 101 for Hospitals

I’m a small businessman.  Have been for pretty much the whole of my life.  The largest organization I’ve ever worked for, since I left the employ of BYU when I graduated, was a presidential campaign, which technically has a couple of hundred employees but functionally has less than 20.  I currently run a branch of a mortgage company which has a varying number of loan officers, never (so far) exceeding 5.  I think of it as my own company, and I run it that way.  I have 20 years of small-business experience in several different industries, and I’ve been in leadership of the local Chamber of Commerce for a good while, which gives me that much more contact with all sorts of businesses large and small.

This thing with Gabriel has put me in contact with a huge number of enterprises that I’ve never had any dealings with before.  One thing that has absolutely rocked me is the whole hospital/health care thing.  Hospitals, I discover to my shock, are not businesses.

I’m talking about all hospitals, even nonprofit hospitals, which are many, because honestly there isn’t much difference between a nonprofit enterprise and a for-profit enterprise, in terms of how it operates.  Where the money comes from, yes, but otherwise no.  There are certain characteristics of businesses that hospitals lack in entirety.  One is a general connection between profit motive and sales.  Another is a cost basis.  Since I’m dealing with those up close and personal right now, those are all I’ll address, but there are more.

Here’s a core sample of the insanity currently running rampant in hospitals, and what you will see when you go there.  This list isn’t exhaustive, and it is, by necessity, restricted mainly to my experience with my child, but I’m told it isn’t atypical in any respect.

No matter what it is you’re there for, through the whole process, every time you ask about how much something costs, you’ll get a blank stare.  This means two things:

  1. It means that you’re a heartless bastard that cares more about money than his child.  This is a monstrous accusation, but it was leveled at me several times.  It’s going to get worse, I’m certain, because I’m going to keep worrying this point.  While it is laudable and noble to put the life and health of a person above financial considerations, the fact is that no one’s life and health are beyond financial considerations.  Gabriel does not exist in a vacuum.  He is one of ten people in the family.  Thousands of dollars spent on his care means thousands of dollars less to spend on the care of the other seven children in the family.  It just does.  One thing impacts the other.  There is not an infinite and unending supply of money.

This is not only poorly understood, even by adults, it is actively sneered at as being unworthy of consideration.  This leads to union protestors in Wisconsin, among other things, that seem to think that there is a bottomless fountain of money to pay for whatever they want.  There isn’t.  Money that is forked over by the state to pay for first-dollar medical coverage is money that cannot be spent on roads, or schools, or policemen.  There are tradeoffs.  We’re starting to see some of those on a state and federal level.

They’re much easier to see on a personal level, because the amounts are not hidden by billions of other dollars of spending.  When they put a morphine drip in my son’s arm, they’re taking away money I need for car insurance.  When they transport him 50 miles by ambulance, they’re wiping out my ability to makes six months of mortgage payments.  I see the tradeoffs everywhere, and though sometimes I might be willing to make those sacrifices, I’m never given the opportunity to decide.  Once you’re in the system, it is assumed that you want every possible convenience, even if the truth is that you’d prefer to eat next month, and you’d be willing to forgo heated blankets to make sure you could.

2. It means – and as a businessman, this was the most incredible to me – that nobody knows how to answer your question.  Yes, the staff is aware that things cost money; what they’re not aware of is how much.  They can’t tell you, because they don’t know.  You book the OR for a surgical procedure, there are seven hundred pieces of that procedure and nobody – absolutely no one – knows what they all cost.  Most of the hospital people don’t even know what THEY cost, except in hourly or annual terms.

So it isn’t as simple as getting a handle on what I’m paying for, even, because nobody can tell me even if they didn’t think I should be shot for asking.  Because the medical billing is routinely handled by another department, and that department usually send the bill to a monstrous, faceless corporation that will write checks without thinking about it (we call this “insurance” as if that’s what it really is), and THAT corporation is getting its money from another corporation (we call this an “employer”), that takes medical insurance premiums as part of a “benefits package” that has half a dozen other moving parts, we have divorced the consumer from the consumption to such a degree that normal free-market cost controls are absent.  Try this on:

You run a grocery store.  You have to pay for meat, then re-sell it.  The meat comes to you with no price tag.  How do you know how much to charge for it?  You can’t know.  You can find out what people will pay, simply by putting the meat out there at $50 a pound and dropping the price until some of it sells.  But what if every grocery store has the same problem, and they all sell meat for $50 a pound?  Oh, wait, it’s worse.  Because the people that come in and buy the meat don’t pay for it.  They pay a grocery insurance premium increasingly (and with single-payer programs, known as socialized medicine, completely) divorced from how much meat they actually buy.  In consequence, they buy all the meat they can, no matter how much it costs (which, as I said before, they can’t know even if they’re curious).  When the grocery premium goes up, it goes up for everyone, whether they bought meat at all.  And there you have the US medical billing system.  Absolutely guaranteed to drive up costs.  You couldn’t have designed a system that would do it better.

The hospital sells all sorts of things under the heading of “care”.  In fact, EVERYTHING the hospital does as “care” sells me something that I have to buy.  Rarely, exceptionally rarely, am I given any choice.  Sticking with the grocery analogy, I am required to have carrots if I have beef.  Never mind if I want to have green beans instead (although if I want them in addition, that can sometimes be arranged).  The grocery store has determined that in my best interests, I have to have carrots.  So I get them.  They are placed in my cart.  And I get to take them home, while the grocery store figures out what to charge me for them.  This isn’t a business.  I know business when I see it.  It isn’t a charity.  I know those things as well.  This is something…else.  I don’t honestly know what this is.

What is the actual cost of an MRI?  I mean, the real, amortized cost of the procedure to the medical institution so that it can recoup the value of the machine during its useful life.  No. One. Knows.  How is this possible?  A construction company knows to the penny how much it has to charge in order to meet its costs, including replacing equipment when it wears out.  A copy store knows that it has to charge a certain amount for copies in order to cover toner, paper, and wear on the machine.  But a hospital doesn’t know how much to charge for basic medical procedures?  No.  It doesn’t.  There are no pricing signals.

This does not, however, make the costs go away.  What happens is one of two things: either the costs express themselves through the “insurance” system or they express themselves in rationing.  There’s no other way.  If there isn’t enough meat to go around, then either the race is to the strong and the lucky, or you develop a lottery system, or both.  See National Health_Great Britain.  It’s simply the way things are.  No politician, no demagogue, no think tank, no well-intentioned billionaire can make these things not be true.  If the new health care law restricts insurance premium increases – and it does – then the artificial constraints placed on price increases will mean rationing of care.  Period.  You can stand in the rain, or you can stand under an umbrella, but if you stand in the rain you WILL get wet.

This is the outline of the problem.  I’d outline a possible solution, but I’m tired and I bet you are, too.

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Gabriel isn’t sleeping.  I mean, he sleeps, a little, but he never sleeps more than an hour or so at a stretch, and last night he cried for about 2 hours starting at 10pm and going to midnight before he finally fell asleep, then he woke up every hour or so for the rest of the night.  Nicholas did his best to help Jeanette and I get some rest, but eventually at 2 I ended up down there with him until morning.  Jeanette, because it was closing night for my play, had him for the Hell Watch of 8-11pm.  I’d adore suggestions that did not involve powerful narcotics.  I’m starting to think I’ll drop that condition here in another day or so.

*********

We are literally brought to tears by the generosity of our friends, and even our casual acquaintances.  We’ve seen Paypal money almost every day for a while now, in all sorts of amounts, each appreciated as much as every other.  We’ve gotten baskets and packages of toys and food.  There’s some discussion of a benefit concert, a family fundraising dance, bake sales, all kinds of things.  I can’t possibly express to you what this means to us.  It’s more than the money – though as those bills roll in, that’s becoming critical – it’s knowing that so many of you are praying for us or, as my good friend Sara says, sending peace and patience our way.  We feel it.  We rely on it.  What a miracle you all are.  May God bless you tenfold, as He has promised to do.

Since today we got to talk about how screwed up the medical system is, tomorrow I’ll tell you how unutterably fabulous the medical people are, and I mean that sincerely.

6 Responses to “Econ 101 for Hospitals”

  • Leslie Christofferson says:

    Sorry to hear about the predicament!! Try some children’s benedril. It should make him sleepy and you can get about 4 hours per tablet. That and a little tylenol through the night should help.

    I remember when each of the boys were born, the hospital made me go to the state and get medicaid to pay for each of them. They refused payments and wanted/no, demanded all of their money up front and so medicaid paid it all and sent me on my way. It boiled down to they refused to let me pay it. I was so shocked, I couldn’t beleive that the system was like that.

    Good luck my friends!!

  • Just to break it up I kind of want to through out a hallelujah rather than just an amen but that wouldn’t make sense as I am not in fact a fan of the fact that I as a medical professional have no idea what anything I do costs. So I’m back with the old standby, “Amen!”

  • Lyz says:

    First, I’d definitely go with the Tylenol (or Motrin or something) and maybe the Benedril, too. If that only helps a little, then my other suggestion is hymns. Lots of them. Let people take turns with a flashlight and a hymnal. You have a terrific voice, and I bet it runs in the family. I find songs like “Where Can I Turn For Peace,” “Lead Kindly Light,” and “Abide With Me” to be fitting prayers and to invite the Spirit to sooth little unhappy people and parents alike.

    Prayers for you, and especially Max. Poor little fellow. Recovering from broken bones is no fun. Hopefully it will heal quickly and the soreness will go away — but the cast… that will continue to be a nuisance. I hope he’s not getting raw spots under it. At least when they broke my jaw I didn’t need a cast.

    • chrisjones says:

      We actually have a CD of some primary songs, and he loves to go to sleep to that. The girls have for years listened to recordings of me, their grandparents, whoever reading stories to them as their bedtime ritual. I love that. Look forward to it every evening. I’m reading them The Horse and His Boy right now, and it’s great.

  • Sara says:

    I was telling a friend of mine (biomechanics doc student) about the goings on with Gabriel. Her comment: “OUCH!” But, she also said (when I told her about the not knowing what stuff costs)…”that’s kinda stupid. I mean, when I worked in a vet’s office, we could tell the patients the cost of every test, every dose, and in cases of more involved care, at least a ‘ball park’ of the amount of procedures.” So, doesn’t it seem ironic that you can find the financial impact of decisions that you would make for your pets, but not for your kids?

  • Jason Christensen says:

    Chris, it gets crazier. There are reasons no one knows the cost, and it’s mostly the insurance companies’ fault. I help my wife with her small business which happens to be a medical practice (audiology — hearing testing and hearing aids). Hearing aid prices are easy, mostly because there’s an identifiable cost per aid (from the HA companies) and the cost per hour of the employees, rent, utilities, etc; but also because no insurance company pays for hearing aids. Hearing tests are an entirely different story, because of insurance companies: i.e. for a certain test, my wife bills $85, HOWEVER, depending on which insurance company a patient has and depending on the billing code submitted (for which there are multiple options, even for the same test), my wife may receive anywhere from $12 to $135 FOR THE SAME TEST. Insurance companies tend to low-ball the first payment up front, afterwhich, the billing administrator RE-FILES the claim with the insurance. The insurance company may or may not then pay more, at which point they may or may not tell the doctor (my wife) that she may bill an extra $1 to $100 TO THE PATIENT (on top of the co-pay and/or the amount the insurance company already paid) OR the insurance company may TELL the doctor that she MAY NOT BILL ANY ADDITIONAL TO the patient or secondary and that she will have to TAKE WHAT SHE CAN GET AND JUST DEAL WITH IT, or be cut off from any FUTURE patient payments (i.e. my wife bills $85, the insurance company pays $35 and then says “that’s it – take it or leave it; if you try to bill for the remainder, we’ll cut you off.” So, Chris, while the doctor (or a billing department) may know what they BILL for something, they really don’t know what they’ll be paid and thus they may not know what it’s really worth. For you rare people that actually pay cash, there should be a discount, but the medical practicioners will be reluctanct to tell you that cost because if the insurance companies hear that a cash customer paid less than the insurance company was BILLED (even if it was more than the insurance company would have paid), it can get real ugly.
    The insurance companies ARE businesses — cartel-like ruthless, heartless, bottomline focussed businesses that are screwing both the patients and the medical practicioners — they’ve wedged themselves into the doctor/patient relationship, and now control both sides. I laugh when I hear hard-core conservatives talk about “Death Panels” connected to government run health care; you’re right about the rationing — it happens and will continue to get worse. We have “Death Panels” now, however, they’re run by insurance companies calculating the cost (to the bottom line) of keeping someone alive. So, yes, Socialized medicine will have ‘death panels,’ but the insurance run medicine also has them; and what you should ask yourself is whether you’d rather have a group of apathetic government bureacrats or a group of greedy insurance company reps deciding whether you live or die.
    Ultimately, I’d say there’s got to be another way; I just have no idea what it could/should be. My gut instinct suggests making the medical profession as a whole a ‘non-profit organization’, and having some kind of ‘pay as you go/pay per piece (test/service/pill/etc.)’ system. I don’t know. I just know that the system needs changing, but the proposed changes don’t appear to be what could fix the core problems.
    Sorry for rambling and taking so much space up on your blog, this is just something I feel passionate about (and it affects my family’s bottom line too).
    Our thoughts and prayers go out to your son and your fam (Isten aldjon meg benneteket).
    Jase

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