Is a medical provider with a 26% Profit Margin the problem in health care?

This is an interesting article that was shared on FB and Twitter (by MannyH...) this AM. It mentions that MD Anderson, officially a nonprofit unit of UT, raked in profits of $530M on revenue of $2.05B. Perhaps refreshingly, the article doesn't mention diabetes however it has an informative case study of a patient with cancer that seems to have been pretty much a shakedown, "we won't see you without cash or credit card info up front..." due to a peculiar insurance situation. Everybody, myself included, looks at insurance companies as a large problem but this article suggests that medical providers are equally or perhaps more responsible for the general health care mess.

Does anyone have any interesting solutions? I am thinking that price controls, perhaps a schedule for service fees, would the be the way to go. Insurers generally pay less than the providers charge but considerably more than the "cost-based" pricing of Medicare. If everyone would negotiate pleasantly, a great deal of cost of negotiating and managing these fees, which provices little benefit to consumers or providers, mostly engendering risk managers and analysts and attorneys.

Sorry for the link to the article, as I know some people prefer to have the text of the article in the conversation but, since we are all avid health care consumers, I figured perhaps we might have an interesting conversation about these issues in the US, perhaps informed by folks with experience of other systems as well.

Medical costs spiraling to absurd levels is a complex and multi-dimensional issue. I believe the whole fundamental problem that has caused costs to skyrocket though, is that generally, across the board, the people who are receiving the care aren’t the ones paying for it (or are only paying a small portion of it) This sets the stage for price gouging. Insurance is a great thing, but when I only pay 10% of my medical costs myself… I only 10% care how high they are and there is 90% less motivation to find a good deal on medical goods and services. Multiply this attitude across the whole country, and it becomes pretty clear to me why the cost of medical care is no longer grounded in reality. Of course the people who are really hurt by this is the ones who don’t have insurance. But in my thinking, we would all be better off had history taken a different course such that healthcare insurance was only intended to cover catastrophic events.

While you're at it, you might want to take a look at tort reform. If you don't think malpractice insurance affects the cost and availability of care, just talk to the legion of gynecologists who have dropped OB from their practice to avoid paying the premiums. Fewer providers = higher prices charged by those who remain.

I’ve wondered what lasek would cost if insurance covered. I think the average cost is 3500-4000. I’m guessing it would be in the 15,000-20,000 range with insurance. Heart scans typically are not covered by insurance and it cost me 150 a couple of years ago. Would it cost 2000 with insurance. Just seems like once there is a third party payer the economies of scale go out the window.

Unfortunately they have us by the,UGH, Well, the you know whats. And I'm so afraid it will only get worse when Obama care kicks in fully. After all these are the great leaders that pay $150 for a hammer, Can we say Post Office.

I wouldn't say it's THE problem, but certainly a big part of it. The roots of dysfunction run pretty deep. For argument's sake; a salary cap for institutions that receive public funds or hold non-profit status. Also, lets cap the mark-up hospitals can charge for supplies. Say within 25%. So you (or your insurance) should be able to find the listed cost of items, bring them in, and knock down your bill.

Very interesting discussion, acidrock. In this country, How many of of us, particularly those of us at or post retirement age,will be able to afford high tech care as insulin dependent diabetics( pumps, CGms, quarterly, at least bi-yearly visits to specialists, endos), post January 2014? I may not ever be able to stop working, at least will have to have a part-time job like ,FOREVER;to avoid going back to MDI. I could do that, but my skin and my spirit do not like it...I already did 35 years of injections and am dreading going back if I have to. I will stay positive, but I must say I am concerned

God Bless,

The Affordable Care Act did a lot to increase coverage, but almost nothing to control costs. Why, the health care industry spends more money on lobbying than the defense industry. The ACA increases the number of customers so the industry views that as good, especially since they will be free to gouge these new customers.

Many times you hear that if free market principals could be introduced into the health care market things would get better. Unfortunately, health care is inherently not a free market. In the article AR quotes the consumers want to go to MD Anderson because they perceive it's the best, they are not factoring price in at all.

In addition, the insurance companies have an anti trust exemption that goes back to WWII. They can legally fix prices, does anyone think they do not avail themselves of this legal loophole? When this came up for discussion during the health care debate the free market advocates suddenly stopped talking about free market solutions. Why, you just have to follow the money.

Another fly in the free market ointment is that there is consolidation going on in the provider side of the equation. Dr's and hospitals are banding together in larger and larger health care delivery groups. This has caused the balance of power in the negotiation of prices to tilt in favor of the deliverers of health care. The only insurance provider that has enough size to counter this is Medicare, one reason Medicare pays substantially less.

One way to fix this would be to set the price at the government level. This has been tried many times before and always leads to shortages. Another solution, which I favor, is to regulate all businesses in the health care field similar to regulated a utility, like for instance a power company. They are guaranteed a modest profit, but the days of 25% profits would be over.

Here is a summary of the Swiss system which is a public private hybrid and which regulates the insurance companies as a public utility.

I think BadMoonT2 is on the right track here. Transparency and a free market system only work well where the consumer has a meaningful amount of power and has multiple providers of comparable quality to choose from. Many people don't have that.

The linked article illustrates that the uninsured person has almost no bargaining power and there are no limits on what a provider can charge. Some people have multiple care providers to choose from, many do not. I've lived in several places dominated by a single health care company and while I am lucky enough to have great insurance, which certainly helps smooth over most of these issues, I appreciate that not everyone has that luxury.

As noted by others not THE problem, but a significant part of it.

In the US, we will have to live for an unknown number of painful years under ObamaCare before there is another significant change to how healthcare is consumed, delivered and paid for.

The Affordable Care Act is based on an economic fallacy. It seeks to cover millions more people without doing anything to increase the supply of doctors. We already have a doctor shortage -- a rather severe one in my part of the country -- and all this will do is spread the available coverage even thinner. If you think it takes a long time to get an appointment now, just wait until this takes full effect.

But actually, the picture is even bleaker than that. With the steadily growing disincentives to enter the profession (insurance costs, etc.), the supply of HCPs was becoming more difficult to maintain anyway, even before this law was passed. Now it will be even worse. I have had doctors in my area tell me that, rather than operate under this new system, they will simply take early retirement and go fish, or whatever. Some are already doing it.

Is our health care system broken and in need of fixing? No doubt about it. But waving a wand and saying "Presto! Everyone is now guaranteed health care!" isn't going to make it better. It's just going to reallocate the problems differently. You can't ignore the supply side; it will bite, every time. To pretend otherwise is to rely on a logical impossibility.

As a very bright man once said, "No matter how you rearrange the beer glasses, you don't get champagne."

As you said, it is a complex and multi-dimensional issue. Whenever I have been in hospital and then see the resulting bills, my questions over the outrageous costs are brushed off by the insurance company with a "we have a lower negotiated rate" statement. What is that rate? Who knows? I don't get to see it.

Similar discussions come up when I have to pay for strips and insulin as part of my deductible. I know the pharmacy benefits manager pays a way lower price than I do.

Or worse, when you find out a doctor has actually harmed you, you still have to pay them. I have also given doctors specific written instructions (no cholesterol tests and treatments for example) and still had them order tests. Then when it was not covered by insurance, I was unable to get the doctor to intervene and ended up with a long drawn out battle for the several hundred dollars.

It is unfortunate, our system pays doctors for delivery of services, not for outcomes.
For anything serious a second opinion makes a lot of sense. And preferably not an opinion from a colleague of the first doctor.

Doctor shortages are just one of the items we will have to deal with. I was just reading an article in the Washington Post this morning about this. We can use technology and an expansion of the team concept to help enormously.

Require hospitals to invest a certain percentage profits to expand residency programs, rather than construction projects or bonuses. Create scholarships to encourage medical students.

There are certainly better solutions than or previous strategy of denying care to millions of people.