Peeling back the layers – The Real Cost of Healthcare

 

For decades the hospital industry has had free reign on pricing, marking up the cost of care to obscene levels.  All of us have seen bills where an aspirin costs $25 or an oral cleansing device (also known as a toothbrush) costs $45.  The industry has done little to hide these crazy prices.  They are also quick to point out how truly altruistic they are by offering a 20% discount off of billed charges.

Having served as a hospital CFO for Columbia HCA, I was intimately familiar with the hospital charge master.  It was very typical that our fees were marked up 400% to 600% more than the Medicare fees.  It needs to be noted that no hospital can survive financially on billing patients based upon the Medicare fee schedule.  The prices are too low.  The question is, when is mark up on charges excessive?  When is enough, enough?   How many of you in your business can mark up your prices 400%, then offer a 20% discount and be able to sell that product without any trouble?

This is article from John Hopkins uncovers the fact that some healthcare facilities mark their charges up over 1,000%.  http://www.jhsph.edu/news/news-releases/2015/some-hospitals-marking-up-prices-more-than-1000-percent.html.

As the healthcare industry moves to a Value-Based model for care, it is important to understand many of the key elements of how this works.  Just because the insurance carrier gives you a 20%, or even 50%, discount off billed charges, doesn’t necessarily mean it is a good deal.  It is important to understand how much the product was marked up in the first place and what is a reasonable charge for that service.  We, in the hospital business, have been very good thus far in keeping that information to ourselves.

Don’t ignore the power of aligning healthcare providers, brokers, employers and employees in reducing the cost of your employee benefits.  Try it.  You will be glad you did.