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Hospital Systems’ Abuses Of The Healthcare System


In my very first blogs in
2006 I made the point that all the stakeholders are to blame for the dysfunctional
healthcare syste

Most of the incentives that
created a technology driven healthcare system have been perverse. All the major
stakeholders’ incentives are misaligned.

The major stakeholders are
consumers, physicians, government, healthcare insurance companies,
pharmaceutical companies and employers.

The primary stakeholders
are consumers and physicians. The government, healthcare insurance companies,
pharmaceutical companies and employers are secondary stakeholders. Some
secondary stakeholders provide administrative services and some reimbursement.
None provide medical care.

None of the actions of any
of the stakeholders are transparent. All the stakeholders are trying to take
advantage of the payers (consumers, employers and the government).

The government should be
the neutralizing force. It should level the paying field for all the stakeholders.
Government should not permit one stakeholder take advantage another

Everyone except the
primary stakeholders “patients and physicians” figured out the money game in
the healthcare system early on.

Government and employers
were next to last in figuring out the game of money gouging.  This happened in the early 1980’s when both
said they cannot pay any higher price for healthcare services.

At that point the hospital
systems and the healthcare insurance industry figured out another way to continue
the money gouging. The result was HMOs and managed care. They did not work.

The opacity of pricing
continued, cost shifting flourished, and the price of medical care continued to

Physicians are not
blameless. However, they are the easiest to blame. Physicians are the least
organized and least aggressive stakeholders in the healthcare system.

In the past, I have
pointed out the real problems that have resulted in the dysfunctions of the
healthcare system.
Health policy wonks seem to ignore the real problems.

Consumers and physicians
are mere pawns in this money game.

Without consumers or
physicians there would be no healthcare system.
They generate the engine that
provides the need for medical care and administrative services.

I have covered much of the
abuse of the healthcare system by most of the stakeholders.

I have been relatively
easy on hospital systems and pharmaceutical companies until now.

However, the basic problems
in the healthcare system must be to be recognized and then fixed. All of the
problems have to be recognized at the same time and fixed simultaneously.

A patch on one problem
simply intensifies the overall problems.

Obamacare does not solve
any of the real problems. It is an attempt at patching a problem. It will only
make the problems worse and will not reduce the cost of care.

On February 20,2013 TIME
Magazine published an article by Steven Brill. The article is an excellent article
pointing out the abuses of the hospital systems.

“Bitter Pill Why Medical Bills are Killing Us” presents
examples of the abuses of large and small hospital systems.

The basic philosophy that
hospital systems should operate by should be “Patients First.”  It is not. It is how much money can I make
from each patient.

Steven Brill asked the
major question. “ Why are hospital bills so high?”

He presented the answer:,32068,2178453595001_2136781,00.html

The answer is obvious to
all physicians.

One fellow physician


we know much of this, this is an excellent overview of healthcare costs.


All Americans ought to
understand the distortions hospital system pricing creates. The government
ought to make hospital pricing transparent to everyone..

The government should include
the hospital system’s retail price, wholesale price and actual cost for an item
or service.

Then, consumers can choose
the hospital system to go to.

Policy makers continually criticize
this ideal saying that illnesses are sudden and patients are not in a position
to choose a hospital system or negotiate price.

If the hospital system is
compelled to compete on price the price will be the same as the competitive
price when the patient gets sick. If one hospital is much higher than the next
hospital the patient will know this before hand.

Hospital system charges
are actually higher than they appear. Most hospital systems are non-profit
organizations. The hospital systems do not pay taxes.

Hospital charges are
opaque to everyone, including physicians. Physicians generate the services
hospitals charge for.

As seen in Steven Brill’s
article oncology charges are extremely high.

One oncologist wrote to me
and said he could administer the same therapy in his office for one-tenth the hospital

However, neither the government nor the healthcare insurance industry
would reimburse him for the office procedure. It is the same procedure he performs
in the hospital.

Doesn’t that seem strange? What is going on?

Steven Brill discovered
that it is almost impossible to find out what hospital systems are charging.

The same opacity is true
for pharmaceutical charges.  The
pharmaceutical charges are further inflated by multiple middlemen involved in
drug distribution.

This has been less true
for drugs since Internet Drug stores publish drug prices.

However, since the patients’
physicians prescribed the drug patients are hesitate to use substitute drugs.
The patients’ attitude is that the healthcare insurance company will pay for
the drug less the copay.

Therefore the patients are not interested in looking
up the difference in price or the options for substitution.

This is the reason consumers need skin in the game.

The result of consumer apathy is an increase
in healthcare insurance premiums.

Steven Brill covers the
grotesqueness of retail hospital system charges. He also points out the amount
Medicare reimburses for the grossly inflated charge.

The consumers without
insurance are the consumers that get stuck with the retail charges. Insurer consumers recieve a large discount.  The uninsured
consumers are least likely to be able to afford these charges.

In some cases Medicare
reimbursement is less than 20% of the hospital retail charge. Steven Brill
points out that at this time Medicare reimbursement to hospitals is still 10
times its actual costs.

The article “Bitter Pill” is
excellent. It covers many categories of hospital system abuse by the use of
case studies.

The facts are
overwhelming.  I am going to try to
categorize these facts in my next blogs. The abuses will be easier to remember.

Consumers must be educated.
The hope is consumers can be activated by education. Only a consumer driven
healthcare system can drive the abuse out of the healthcare system. 

Americans will have an affordable healthcare system.

 The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

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