Why are medical bills soaring? Blame a 42% hike in hospital prices.

hospitalprices-300x162Patients and reformers attacking skyrocketing health care costs may want to focus less on doctors and more on big, shiny hospitals, where in just five years prices soared by 42 percent for inpatient care versus the still sizable 18 percent price hikes that MDs scored.

Those findings are part of a new study that examined medical costs based on actual payments, focusing on common procedures like deliveries of babies (vaginal and cesarean), colonoscopies, and knee replacements.  “Hospital prices grew much faster than physician prices for inpatient and outpatient hospital-based care in the period 2007–14 … The same pattern was present for all four of our procedures,” wrote the researchers from Yale, MIT, and Carnegie Mellon. They found that hospital costs also spiked for outpatient care, increasing 25 percent, versus 6 percent for doctors.

This meant that for a knee replacement costing $30,000 or so, the doctors’ mean price was almost $4,900, while the hospital price was almost $25,000. For a $13,000 C-section, the doctor’s mean price was $4,600, while the figure for hospitals was $8,300. These numbers were derived from analyzing hundreds of thousands of procedures.

While others have found that hospitals jack up prices just because they can — “spit balling them,” rather than basing them on hard data — the authors of this study, published in the journal Health Affairs, reported that “the majority of the growth in the total price of [hospital] care was driven by growth in facility prices.”  They don’t dive into these but do note that they ruled out the possibility that hospitals, during the study period, increase the quality or amount of their care.

Instead, what the record shows is that hospitals keep building, growing, and expanding — in costly and too often unneeded equipment, services, and facilities, as well as sometimes new enterprises, such as stand-alone urgent and emergency care centers and surgery shops. These initiatives, pushed by guys in suits with business degrees, fatten hospital profits —  Americans spent more than $1 trillion in 2017 on hospital care — but don’t necessarily improve matters for patients.

That’s a point raised, separately, in another pointed study published in the Journal of the American Medical Association, digging into the billions of dollars that hospitals are throwing at robot-assisted surgery, with more than 1 million such procedures performed each year now. The UCLA doctors and researchers reported:

Despite evidence questioning the clinical benefit, the use of the robotic platform for surgical procedures is increasing. No benchmark exists for the cost of acquiring and operating robotic systems, and previous cost evaluations have either omitted key expenses, or utilized billing records that do not itemize costs with sufficient granularity. Because one company supplies most robotic technology, and all their revenue comes from system, service, and instrument sales, the minimum cost to hospitals can be estimated by examining the revenue in this company’s financial statements.

Here’s what the medical scientists found, digging into public information from Intuitive Surgical, maker of the field dominating Da Vinci robot system, for which hospitals pay roughly $1.5 million to buy and at $100,000 to $200,000 annually to maintain:

  • In 2017, hospitals paid the primary supplier more than $3 billion, equating to $3,568 per procedure
  • The instruments and accessories used in robotic surgery cost an average of $1,866 per procedure
  • In addition, $1,701 per procedure was dedicated to purchasing and maintaining the system, costs that are novel to robotic surgical procedures

To put these sums in perspective, researchers noted the total cost of common operations like removing a gallbladder ($3,000) or a pancreas ($7.000) without robotic assistance. If surgeons operate in key-hole fashion, disposable instruments for laparoscopic procedures run about $1,000 of those operations’ cost.

Translation: Patients get saddled for thousands of dollars per operation in needless costs because doctors and hospitals want to rely on the unproven and dubious “upgrade” of robotic surgery, likely so individually and institutionally, they can increase their profits and promote themselves as being on medicine’s desirable “cutting technological edge.”

In my practice, I see not only the harms that patients suffer while seeking medical services, but also their struggles to access and afford safe, efficient, and excellent medical care. This becomes a daunting challenge as costs head to the skies for treatments and prescription drugs and the complexity and uncertainty also rises about medical options. No one wants to stand in the way of significant medical advances. But with robot surgery, why should already sick or injured patients get gouged for medical services that aren’t demonstrably better for them?

Hospital prices matter, as the cost-focused researchers wrote:

Growth in health spending … can slow wage growth, increase the scale of federal subsidies for insurance bought on the Marketplaces, and make it more difficult for people to access health care services. Previous work suggests that in the short run, growth in health care providers’ prices plays a larger role in driving growth in health spending on the privately insured than the role played by changes in case-mix or utilization

They suggest that patients, lawmakers, and regulators consider tough steps to curb cost outrages, including hospital-focused pricing laws and anti-trust actions to ensure institutions don’t engage in anti-competitive dealings and mergers. They say that federal programs like Medicare and Medicaid should arm-twist hospitals using their giant reimbursement power to wring out excesses and to set valuable pricing benchmarks. Hospitals should be prodded to provide more information and transparency about their prices, and doctors should get with the program and be more diligent in where they refer patients and where they practice.

Communities do not need to be held hostage by profit-hungry hospitals, yet another report suggests. The Amish and Anabaptists — religious folks who may be viewed as objects of curiosity for their unwillingness to march in step with many aspects of the 21st century — have forced hospitals near their population centers to adapt and treat them with a medical and financial respect that may be a model, as the trade publication Modern Healthcare reported:

The Amish and other Anabaptists, including Mennonites, do not carry commercial health insurance; they prefer to pay for healthcare and other goods and services in cash, and they are famously thrifty shoppers. They wanted one all-inclusive [hospital] price for tests, procedures and episodes of care, rather than a lengthy list of itemized charges that didn’t even include professional fees. So, over the years … administrators, physicians and staff [at Pomerene Memorial Hospital in Millersburg, Ohio] painstakingly costed out dozens of services, from diagnostic tests to elective surgical procedures. Over the last two years, they tackled the hardest type of service for which to calculate input costs—inpatient care. Now the 55-bed hospital, about 60 miles south of Cleveland, offers more than 300 services with guaranteed package prices—including all types of inpatient care episodes—to the Amish and any other self-paying patients. That has drawn Amish and other Anabaptist patients from around the country seeking care.

A hospital that puts in the hard work to ensure its patients’ needs, including their financial concerns, are taken fully into account — and the institution thrives because of it goes an extra mile? Now that’s sounding downright divine.

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