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We invited a dozen physicians for brunch this past weekend and they all had stories to share about how little they make per procedure compared to the amount the hospital makes.

Example 1: A procedure costs $6,000 to be done at a hospital. It prices out patients paying out of pocket. The doctor realized that he himself gets about $700 from it. So the doctor reached out to another facility who agreed to do it for $1,800 instead of $6,000 for the exact same procedure. You can imagine how happy the doctor's patients are, particularly ones paying out of pocket.

Example 2: A patient got upset a doctor's office wanted him to pay copay. The patient got the bill and felt the doctor already got paid $1,500. When the office informed the patient that out of the $1,500 the doctor only got about $300, the patient was shocked.

Really what we need is a doctor compensation to everything else index. When we get that, we will realize the sham most of the efforts to reduce healthcare cost is. Most healthcare cost efforts focus on paying the doctor a little less, say $300 instead of $400. Problem is, bulk of the cost is not the doctor's fees. It is the cost of the bed, breakfast, Tylenol etc. We need regulation on those fees.




For example 1: The reason why the hospital charges so much is the fact that it gets stiffed for a lot of emergecy patients without insurance. Many hospitals are on the brink of bankruptcy especially in poorer areas. This does not always reflect in the huge disparity in prices people pay, but is a big factor. Hospitals try to offset their losses by charging paying customers more.

The real problems here especially with emergency care are that hospitals are forced to eat the cost of treating non insured patients, and that patients have no idea what something costs when they are there or if the people treating them will be covered by their insurance. Insurance companies spend a lot of time negotiating rates and making them somewhat uniform for them, but this is totally opaque to the patient. We need to make it more clear to the people being treated what things cost, and who is "in network". There have been times that I went to an emergency room "in network" and I was "balance billed" by nearly every doctor there due to them not being in network. What is a patient to do? Sit there with a book of providers and procedures?


The real problems here especially with emergency care are that hospitals are forced to eat the cost of treating non insured patients

That problem is not unique to hospitals and emergency centers. My father runs a private practice and he can't collect payment on a double digit percentage of patients. Yet, because he is a private practice, he gets compensated significantly less than a hospital for same procedures.

I am not convinced that the root cause of high hospital cost is to make up for patients that don't pay. It seems to be a circular argument given that a decent percentage of patients can't pay because the cost is so high.


That's also a symptom.

One root cause is that the Federal government (ie. Medicare) must get the best deal. If you give anyone else a better deal than Medicare, you are committing an act of fraud, and DoJ will go after you. This is known as a price floor.

Layer upon this the web of contractual arrangements surrounding different insurance providers, and you get to a place where you need to mark up the MSRP of a procedure to safely operate as a business.

The issue with poor areas having bankrupt hospitals is obviously complex. Hospitals are good for emergencies, really sick people and procedures. Not so good or profitable for primary care -- they are a lowest common denominator. You cannot afford to scale up quality outpatient medical practices if you are reliant on Medicaid to pay everything, and you can't operate small medical practices effectively and deal with all of the compliance activity that medicaid comes with.


> One root cause is that the Federal government (ie. Medicare) must get the best deal. If you give anyone else a better deal than Medicare, you are committing an act of fraud, and DoJ will go after you. This is known as a price floor.

Interesting; I don't see any obvious reason why other insurance companies couldn't do exactly the same thing by contract.

Can you charge Medicare for things Medicare makes you do that other insurance companies or individuals don't, such as billing them for time spent processing their red tape?

> Layer upon this the web of contractual arrangements surrounding different insurance providers, and you get to a place where you need to mark up the MSRP of a procedure to safely operate as a business.

Sounds a lot like selling enterprise software: corporate purchasers expect to receive a discount, so you can either antagonize them by not giving them what they expect, or mark up the price enough that you can offer "discounts" back to the real price.


Do you have any links backing that statement up?

It sounds plausible but I'd love to verify it. I have no idea what % of people in the emergency room are uninsured and what % are not in an emergency setting.


It varies by region. Your state health department probably publishes the data.

Remember that emergency rooms cannot turn people away, doctors can.

Poor people in general often don't have primary care providers -- even with Medicaid or private insurance. Reasons are varied and complex. Access is a big issue... for example, if you don't have a car, how do you get to the only doctor who is accepting new medicaid patients across town?




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