The anatomy of a ripoff
My wife is the manager of budget and reimbursement at a hospital, and from many conversations with her, I can imagine that this article is accurate. However, if I were writing this, I would have given greater emphasis to the effect that Medicare has on these problems.The article does mention that Medicare typically pays fees that are below actual cost for the procedures, and that hospitals must therefore increase charges to other customers (the article says they must do this to make profit, but actually they must do this just to break even and stay in business).But the problem goes even farther than that. Because Medicare is essentially a monopsony and gets to call the shots as far as charges are concerned, it actually matters far less what the actual costs are. As a result, few hospitals today have modern cost accounting processes, and so they only have wild guesses as to what a given procedure costs. Obviously, then, their charge list is going to be made largely from guesswork, and so it's very much expected that two different hospitals will, at the micro per-item level at least, have very different charges.Medical care is the most highly regulated industry in the economy, and so nothing you see happening is going to bear very much resemblance to reality. And in the coming years this isn't going to get any better. What you are likely to see, though, is increased politicization of these charges, as the political process takes even greater control of the industry.