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“WHO GETS ALL THAT MONEY?”

by Paul Hollrah, ©2014

Where do the billions of dollars paid to hospitals and other medical providers go?

(May 11, 2014) — A quick review of current literature on healthcare costs and healthcare cost containment is not a very productive use of one’s time.  Within minutes of beginning a review of the published literature, the researcher quickly finds himself so deep into the weeds that it is impossible to make any sense of what is being conveyed.

Throughout the entire public debate over the efficacy of Obamacare, no one seemed to be asking the pertinent questions.  No one has asked, why is healthcare so expensive, and who gets all that money? 

I can recall once reading a story in the Philadelphia Inquirer about a Southeast Asian family who arrived in Philadelphia with their infant daughters… Siamese twins joined at the abdomen. Upon examination by a team of surgeons and pediatricians, doctors concluded that it would be possible to surgically separate the twins and that, after a period of recovery, the two little girls could expect to live happy and productive lives.

But then one of the reporters asked the operative question.  The Asian family had no healthcare insurance and very little money, so the question arose, how much would the estimated eleven-hour procedure cost?  The hospital spokesman responded, quite matter-of-factly, saying, “About a million dollars.” 

No one batted an eye; no one questioned the estimate and no one asked for a cost breakdown.  Yet, it is necessary to ask, who gets all that money?  How many physicians would participate in the separation procedure?  How many nurses?  What would be the cost of disposable medical equipment?  What would be the cost of post-operative care?  A million dollars is a lot of money for an eleven-hour surgical procedure and a month or so of post-operative pediatric care.

If we assume five attending physicians… two surgeons, an anesthetist, an obstetrician, and a pediatrician… at $1,000 each per hour for eleven hours, the cost for physicians’ services would come to $55,000.  If we assume five operating room and neo-natal nurses at $100 per hour for eleven hours, the cost of nursing care would come to $5,500.  If we assume a cost of $1,000 per hour for the use of the operating theater, the cost of surgical facilities would come to $11,000.  And if we assume a cost of $5,000 for drugs, medicines, and miscellaneous medical equipment, the direct costs accumulated on the day of the separation procedure would come to $76,500. 

Then, if we assume a post-operative stay of 30 days for the twins, at $400 each, per day, for a bassinette in neo-natal recovery, that cost would come to $24,000.  And if we assume a cost of $1,000 per day to have surgeons look in on their patients, $500 per day for nursing care, and $500 per day for miscellaneous medicines, food, and diapers, the total cost of post-operative care would come to $84,000.  That would bring the total cost of the separation procedure and the post-op care to $160,500. 

All of these estimated costs and daily and hourly rates are admittedly inflated.  So if the hospital prepares an invoice for $1,000,000, who gets the other $839,500?

No one in Congress, the White House, or in the mainstream media is asking the operative question that needs to be addressed.  No one is asking why healthcare is so expensive.  No one is asking, who gets all that money?

A part of the answer to that question was suggested by a recent caller to the Rush Limbaugh radio show.  The caller was a bookkeeper in the finance department of a major hospital; her husband was an orthopedic surgeon who practiced at the same hospital.  The woman explained that each time an orthopedic surgeon performed a hip-joint or knee-joint replacement, he/she was paid a flat rate of $1,250 for their time and talent.  However, when the manufacturer billed the hospital $8,000 for a prosthetic hip joint, the hospital routinely billed the patient, or the patient’s insurance company, $32,000… a 300% markup for the hardware.       

Over the past three or four years, a close friend and neighbor has survived a serious bout with cancer.  And although I am unaware of the total cost of his cancer treatments by local physicians and cancer specialists at the M.D. Anderson Clinic in Houston, I am aware that the bill for his bone marrow transplant procedure came to approximately $1.2 million.

Again, how many physicians and nurses actually saw him?  How many hours did they spend treating him?  What was the actual cost of a few hours of operating room usage?  How was that $1.2 million split up among a few doctors, a few nurses, a few lab technicians, and the clinic itself?   Who got all that money?

In recent weeks, Dr. Tom Coburn has announced that he will retire from the U.S. Senate with two years remaining on his current term.  Dr. Coburn is one of the two or three finest members of the U.S. Senate and his departure will be a great loss to Oklahomans and to the country.  Unfortunately, Dr. Coburn suffers from cancer and is undergoing treatment at M.D. Anderson in Houston.  What caught my attention was a recent statement by Dr. Coburn, saying that each time he has a consultation at M.D. Anderson, he is billed for $32,000.

Again, how many physicians and nurses actually see him on each visit?  How many hours do they spend treating him or evaluating his condition?  What is the actual cost of the tests he undergoes?  How is that $32,000 split up among a few doctors, a few nurses, a few lab technicians, and the clinic itself for just a few hours of their time?   If the same team of doctors, nurses, and technicians see even as few as eight patients a day, the total income generated would come to $256,000.  Who gets all that money?

Those who work in the healthcare industry… in hospitals, clinics, and doctors’ offices… always have a ready answer.  They claim that it is the cost of high-tech equipment and facilities that runs up the cost of healthcare.  Baloney!  There are few hospitals or clinics in the country that cannot obtain the most expensive items of diagnostic equipment, such as MRI machines, through local philanthropy. 

And those large portraits of distinguished-looking men and women hanging on the walls of hospitals and surgical wings?  Those are not oil portraits of the hospital’s “Employee of the Month.”  No, those are the portraits of the men and women who have shared their wealth by donating millions of dollars to build a wing onto the local hospital and whose names are enshrined in concrete and marble over the front door.

What is needed is a complete understanding by all concerned… especially those of us who pay the bills… of how a single dollar bill makes its way through the healthcare system and how it is divvied up at the end of the day.  To do so, it would be necessary to conduct a complete micro-economic study of a select number of major medical facilities, identifying over a specified period of time the source of every dollar that comes in the front door, and the recipient of every dollar that goes out the back door.

In other words, in any overhaul of our healthcare system, our first order of business should be to figure out exactly who is bilking the system… who is getting rich, and who is being bankrupted in the process.  Compared to the actual direct cost of healthcare, the price that consumers are asked to pay is far out of balance… perhaps by a factor of as much as four or five.  So who gets all that money? 

Early in his first term, Barack Obama promised that he and congressional Democrats would reshape the American healthcare system.  They promised to insure 40 million uninsured, to substantially reduce the cost of healthcare for everyone, to save the average family as much as $2,400 a year in out-of-pocket healthcare costs, to increase the quality of healthcare for all Americans, and to do it all without increasing the number of doctors, nurses, and hospitals. 

No one with an I.Q. larger than his hat size would believe they could do what they promised.  But enough low-information Kool-Aid drinkers fell for Obama’s false promise and they elected him.  Now they have to live with what he, Nancy Pelosi, and Harry Reid have produced.  When the small company and large company extensions granted by Obama expire sometime in 2016, or before, everyone will be able to see the disaster that Obamacare is. 

It is likely that, beginning in 2015, a Republican-controlled House and Senate will be left with the task of cleaning up Obama’s mess.  And when they do, we can only hope that they will be wise enough to begin by asking the question, who gets all the money that pours into the healthcare system?  Until we confront that question, real healthcare reform will be nothing more than an impossible dream.

phollrah@yahoo.com

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  1. Another side is outsourced lab technicians who know nothing about health. I all of a sudden got dizzy spells while standing at my kitchen counter. Whoa! What a duzie. Went to doctor who said I needed blood test and cat scan. He spent 45 minutes trying to get the scan approved by yes-an outsourced agency. It was declined b/c they said I needed to try pills first. When I got home I called my healthcare provider. She said there was nothing she could do but quite agitated said if it happened again go straight to the hospital emergency room. Well the next morning it happened and I went to the emergency. I stayed there all day while they did everyking of test you could think of finally leaving at around 5 pm. Now the cat scan would cost $1900.00. The bill for the emergency room was a whopping $25,000!!!!!!!!!!!!!!!!!!!! Go figure.

  2. A partial answer that is often given for the “up-charges” on hospital bills is to cover the costs of unrecoverable expenses for services given to non-paying patients who the hospitals are ‘required” to serve coupled with the shortages encountered in the “cap’s” on charges under medicare/caid.

    But as the article suggest that may be a too obvious and incomplete response when attempting to get to the FACTS as they exist in the Healthcare Industry that is a large proportion of the total economic activity of the U.S.

    Another question that might lead to a more complete picture of what’s going on would be what happens when a million dollar bill is given and only $164,000. is paid … ? Does the other $836.000. offset the Fed Taxes on profits and at what rate…??? … and do they convert to “Tax Credit Certificates” that are transferable among the Boards and Vendors, et al…?