This is absolutely true. But the question is <i>why</i> are they stuck at that rudimentary level?<p>My wife is at the center of this. She recently left a job as &quot;Director of Budget and Reimbursement&quot;, and now works as &quot;Directory for Regulatory Affairs&quot; for a healthcare financial consultancy. So she&#x27;s been the one directly responsible for the way the hospital accounts for its costs (or fails to do so).<p>The primary problem, at least from her perspective, is that they&#x27;re effectively forced to do it this way. Medicare, and Medicaid which largely rides on many of -care&#x27;s definitional coattails, is a monopsony player in the market. When you hear people claim that Medicare is more efficient than conventional commercial insurance, that&#x27;s significantly because they offload much of their administrative burden onto the healthcare providers. Every hospital has a department of several FTEs whose job it is to track a defined set of metrics, including various cost parameters, patient demographics, etc., and report them to the government (the so-called &quot;Medicare Cost Report&quot; that my wife and her department spent a month or so on every year). That is, getting paid by the source of the largest part of the hospital&#x27;s revenue entails tracking and reporting the way Medicare wants you to do it.<p>So that right there forces hospitals into watching their costs according to a scheme effectively mandated by the government. Thus, they&#x27;re not tracking the data in a way that would give relevant cost accounting data in the way you expect it.<p>There&#x27;s your proximate cause. But it still begs the question, &quot;why don&#x27;t they <i>also</i> track costs in a rational fashion, actually reflecting reality?&quot;. Part of the answer is that their margins are so low that they simply can&#x27;t afford a <i>second</i> set of accountants and the procedural overhead that it would require.<p>That&#x27;s not a wholly satisfying answer, because hospitals are the only industry I&#x27;m aware of that still makes extensive use of secretaries. You&#x27;d think that if they need to be so conscious of costs, they&#x27;d be looking at the kind of personnel expenses that most of private industry has figured out how to streamline. Conversation with my wife hasn&#x27;t yielded any insight beyond that.