Crisis in the making?

CDC says too late to contain U.S. flu outbreak

"WASHINGTON, April 24 (Reuters) - The U.S. Centers for Disease Control and Prevention said on Friday it was too late to contain the swine flu outbreak in the United States. CDC acting director Dr. Richard Besser told reporters in a telephone briefing it was likely too late to try to contain the outbreak, by vaccinating, treating or isolating people. "There are things that we see that suggest that containment is not very likely," he said. He said the U.S. cases and Mexican cases are likely the same virus. "So far the genetic elements that we have looked at are the same." But Besser said it was unclear why the virus was causing so many deaths in deaths in Mexico and such mild disease in the United States."

Essentially, US cases could turn deadly any time...people with weakened immune systems will be at great risk.

Recommendation for change in MD education in the US

I think that eliminating the requirement of a four year college degree as a prerequisite to admission to medical school is long overdue. Prospective MD's basically mark time in undergraduate school, as the course of study in undergraduate is irrelevant to the medical school admissions process.

A better process would simply to base the admission decision in part on high school performance along with the MCAT result and whatever the other criteria that medical schools now use. The chain of predictors of success from high school performance to undergraduate performance to success in med school correlate well, I think. So cutting out the undergraduate step wouldn't change the quality of med school graduates and would eliminate a huge waste of time and money for taxpayers and prospective MD's.

Major concerns with the US health care system

In the July issue of HFM, the journal of the Healthcare Financial Management Association, an article included a list per the title of this post. The headline of each item on the list was as follows:

1. High and growing healthcare costs

2. Cost shifting

3. Clinical variation and inconsistent quality

4. Inconsistent access to care

5. Weak and/or perverse market incentives

6. Administrative complexity and high overhead

7. Shortages of clinicians

The biggest problems in my view are the perverse incentives that exist throughout the system, price opacity in that the patient has a difficult task in understanding what their care will cost and whether the cost is worth the benefit, and the high incidence of unnecessary medical procedures being performed.

Solutions to the above problems are welcome:)....

Please read Arnold Kling's post regarding Michael Moore's new film "Sicko

where Dr. Kling discusses the concept of "Hail-Mary" medicine; the idea being that when someone is about to die, doctors suggest non-standard therapy in hopes that such therapy might save the patient. Kling also discusses how

"beliefs shape the health care system. My guess is that other countries believe that when someone has passed the point where reasonable, proven treatments are available, it is ok to stop throwing lots of resources at the patient and instead use those resources where they are more helpful. In the United States, this runs up against an intense belief in saving lives, an enormous faith in doctors, and a strong desire never to give up.

In this country, we have not really come to terms with the ethical issues concerning hail-Mary health care. Some people even view desperate, last-ditch measures as an entitlement. As long as we believe that, the component of our health care spending that goes for futile care will not go down."

Kling describes Michael Moore in these terms:

"Speaking at the premier, Moore was mild-mannered, witty, and self-effacing. He made a plea with the audience to reach out to conservatives and Republicans, and when this received a tepid response from his partisans, he expressed gentle disappointment."

Ranking of top 100 health care blogs

The top 10:

1.	Random Acts of Reality		6	19	24	8	57
2.	Medgadget.com		6	14	26	8	54
3.	Bad Science		6	16	25	7	54
4.	NHS Blog Doctor		6	13	24	8	51
5.	Kevin M.D. Medical Blog		4	16	19	9	48
6.	Respectful Insolence		7	7	25	8	47
7.	Healthbolt		5	4	27	9	45
8.	The Health Care Blog		6	12	18	9	45
9.	DiabetesMine.com		6	13	18	8	45
10.	The Examining Room of Dr. Charles		6	10	18	8	42

Unnecessary medical procedures

The Street Light points out a

"Pennsylvania government survey of the state’s 60 hospitals that perform heart bypass surgery, the best-paid hospital received nearly $100,000, on average, for the operation while the least-paid got less than $20,000. At both, patients had comparable lengths of stay and death rates"...

With respect to heart surgery, I noticed a roundtable discussion in Businessweek about cardiac surgery that opens the discussion as follows:

Each year, Americans get about 400,000 bypass operations and 1 million angioplasties, in which doctors open up narrowed arteries and typically insert metal tubes to hold the vessels open. That works out to a rate far higher than that of any other country.

Are we performing too many of these heart operations? Some doctors say yes, pointing to data that show only a small minority of patients get a longer life or suffer fewer heart attacks as a result of the operations. Other physicians say that the benefits, mainly in reducing angina and disability, outweigh the risks.

There are many good quotes from the researchers participating. The participants in the discussion included:

-Nortin Hadler, M.D., is a professor of medicine at the University of North Carolina at Chapel Hill

-Timothy J. Gardner, M.D, is co-editor of Operative Cardiac Surgery. Formerly a professor of surgery at the University of Pennsylvania School of Medicine, he is now a cardiothoracic surgeon at the Christiana Care Health System in Delaware.

-Robert A. Guyton, M.D., a professor of surgery and chief of the division of cardiothoracic surgery at Emory University School of Medicine,

-L. David Hillis, M.D., is professor and vice-chairman, department of internal medicine/division of cardiology at the University of Texas Southwestern Medical School

Dr. Hadler says "Americans invented the concept of a back injury in the 1930s. Before that, if your back was hurting, you would not come in to the doctor -- instead you'd consider it like a headache [which would eventually go away or you would live with it]. With workers compensation, it became an injury, and doctors did surgery. Other countries never leapt to that. Similarly, for carpal tunnel syndrome. Only the American wrist gets sliced. Ours is the only country willing to do the surgery and pay for it."

The moderator of the discussion, responding to Dr. Hadler, states that "you show in your book that, except in a small percentage of cases, patients in clinical trials got no benefit in survival from coronary bypass surgery or angioplasty"...that is quite provocative...

Dr. Gardner, referring to coronary bypass surgery, says "The issue when you look at coronary bypass surgery is whether it's justified to put yourself though that kind of procedure to improve quality of life and longevity. It's one of the questions that have been there from the beginning of the bypass era...Certainly it isn't the majority of patients who get a clear survival benefit. Here's an example of the dilemma for a heart surgeon. We see an 85-year-old woman in assisted living. She has chest pain and shortness of breath with minimal exertion and is unable to function comfortably. Is it reasonable to offer her surgery? We say to her, You're at a stage where your heart is deteriorating. You will be increasingly limited, and no medical therapy can restore you to your old level of activity. But we have an operation. It has a 10% risk of death and other risks, but it can get you back on your feet and allow you to live out the next several years with more functional capacity. A lot of people want that"...

Q: Does coronary bypass surgery extend life?
Guyton: The average prolongation comes to six to seven months. In patients where the degree of impairment of [blood flow] to the heart is serious, we can prove statistically that coronary bypass will prolong life...

Q: But the clinical trials showed only a small percentage of patients survived longer than those who didn't get the surgery.
Guyton: The problem with many clinical trials is...you're not going to get a statistically significant difference unless you're looking at 100,000 patients. Some would leap to the conclusion [that there's no survival benefit in most patients] when the real answer is that the trials are just underpowered.

Beyond that, even if there isn't an expectation of prolonging life, we often operate for relief of symptoms.

Q: The clinical trial data suggest that coronary bypass surgery and angioplasty don't enable most people to live longer. Are those data right?
Hillis: The overwhelming number of heart procedures that are done these days exert no influence whatsoever on mortality. The patient's survival would be similar with only medical therapy.

The conclusions that I draw from the discussion are that in many cases, a person won't seek out a medical professional unless someone else is perceived to be paying the bill; that most heart procedures do not prolong life, and that operations are being performed on individuals whose life expectancy is effectively zero. Cost-benefit analysis of medical care is long overdue in the US system...

McKinsey on health care payment reform

A recent edition of the McKinsey Quarterly discusses payment reform, and the abstract of that discussion is as follows:

• The hugely inefficient US health care payment system is ripe for transformation.
• The inefficiency is concentrated in the $250 billion that consumers pay doctors and hospitals and the $1.3 trillion that insurers send to these providers. The heart of the problem is a mix of high transaction-processing costs and the lack of an efficient way to make consumer-to-provider payments.
• Over the next five years, rapid innovation may lead to a restructuring of the value chain of health care payments and to a shift in the sector’s balance of power. Financial institutions have an opportunity to take on a more prominent role, while payers risk losing influence to new entrants. Providers stand to benefit as fewer dollars are wasted on transaction-processing inefficiencies.

The system has certainly been ripe for transformation for a while...the basis for high transaction processing costs lies at least partly in conflicting incentives of payers and providers that exist...for example, payers may stall payment as long as possible...

Remove employers from health care equation

Clive Crook, of National Journal, writes,

Much more needs to be done to push employers out of the health insurance market. Most of the reforms now being touted, by Democrats and Republicans alike, aim to do the opposite.

...You could give everybody a voucher (which could be used as partial payment for a more expensive policy) and recover the cost from general taxation. Or you could give full vouchers only to people on low incomes, tapering the value to zero as incomes rose, again asking taxpayers to pick up the check -- and in this case also mandating that everybody buy at least the basic plan. You could satisfy the "ignore pre-existing conditions" criterion either through regulation or by adjusting the value of vouchers according to health risk. The cost would depend on such details, and many more besides -- but you can be sure it would not be small.

Eliminating the tax deductibility of business expense on health care premiums would be a good start...

Negative consequence of employer-funded health care

The link is to an article in the NY Times titled "Health costs spur monitoring of workers' health"...the title says it all. Employers already know an enormous amount about their workers; giving employers health information adds risk of accidental disclosure of this confidential information and adds the temptation to use the health data for personnel decisions...

Some things wrong with the US healthcare system

After perusing the June issue of the Healthcare Financial Management Association magazine, I came away with the sense that progress in improving how health care is paid for is going slowly. A transcript of a roundtable on shifting payment systems to electronic systems indicated that hospitals are having a hard time getting insurance companies to set up electronic systems and also are having a hard time getting payers to agree on a consistent set of transactions that would ease a shift to electronic payment. This is in spite of the fact that the HFMA estimates that $35 billion could be saved by shifting to electronic payment.

Also in this same issue I learned that doctors regularly fail to write down basic things on medical records such as reasons for a particular therapy, thereby delaying payment for treatments. That is a sad fact.

Hospitals as they now exist are doomed?

The April 2007 edition of the "Managing the Margin" newsletter published by the Healthcare Financial Management Association includes an interview with author Michael Rindler who has written a book "Strategic Cost Reduction: Leading Your Hospital to Success."

Rindler states in the interview that "physicians and clinics are taking...profitable services for themselves and moving them out of the hospital into their physician or office setting." Based on that, his thesis is essentially that hospitals to stay financially viable have to focus on cutting costs, because hospitals essentially won't be able to stop the trend of medical procedures being performed in buildings that are not owned or operated by hospitals.

The creation of doctor-owned medical facilities has been a response to the cost-cutting efforts of hospitals which led to decreases in doctor pay. In my view the concept of the doctor-owned medical facility makes sense because the economic incentives of both the facility owner and the service provider are aligned due to the fact that owner and provider are the same entity. In addition, this concept would result in reduced complexity of paperwork because patients would get a reduced number of bills.

If each set of doctors in particular specialties nationally withdrew from hospitals and set up independent medical facilities, there would be little revenue left for a "hospital" as we know it in the traditional sense. A key question is what medical benefit lies in having all of the different medical equipment and activity located in the same facility...a subject for another post...

Differential pricing...on the other hand

I then discovered the following research which came up with a rather counter-intuitive finding:

Hospitals profit less from privately insured patients than from Medicare patients and profit least from Medicaid and self-pay patients

Payments for patient care at U.S. hospitals generally fall into four groups: Medicare, Medicaid, private insurance, and uninsured. The payment rates can be more or less "generous" in relation to the hospital's cost of caring for the patient.

Since 2001, budget pressures and growing hospital costs have forced government at all levels to consider cutting payment rates for the publicly insured (Federal Medicare and State Medicaid programs). In a recent study, researchers examined hospital financial reports—with detailed accounting by the four payer groups—and found that hospitals profit less from privately insured patients than from Medicare patients, and they profit least from Medicaid and self-pay patients.

Bernard Friedman, Ph.D., of the Agency for Healthcare Research and Quality, and his colleagues developed a model to estimate hospital profitability by hospital and payer in four States using data from hospital accounting reports in FY 2000 and detailed hospital discharge summaries from AHRQ's Healthcare Cost and Utilization Project. They found the profitability of inpatient care for privately insured patients to be about 4 percent less than for Medicare patients but 14 percent higher than for Medicaid and only 9 percent higher than for self-pay patients.

The overall inpatient revenue for the four States was 102.5 percent of costs. After controlling for State and hospital characteristics, the privately insured group was slightly less profitable than the Medicare groups but still significantly more profitable than Medicaid or self-pay and charity patients. Self-pay patients were more profitable than shown in previous reports due to the effects of State and local budget allocations, as well as programs that redistribute payments from insurers and obtain Federal subsidies under the Disproportionate Share provision of the Medicaid program.

Patients with more generous payers typically received more resource-intensive treatment for problems such as pneumonia and heart attack. There were no spillover effects from the generosity of one payer to the resources used for patients in other payer groups. Differences in hospital profitability appeared to be driven more by hospital payer mix than other hospital characteristics.

For more details, see "New evidence on hospital profitability by payer group and the effects of payer generosity," by Dr. Friedman, Neeraj Sood, Ph.D., Kelly Engstrom, M.B.A., and Diane McKenzie, M.S., in the International Journal of Health Care Finance and Economics 4, 231-246, 2004.

Reprints (AHRQ Publication No. 04-R069) are available from the AHRQ Publications Clearinghouse.

Hospitals make the most money from Medicare patients? The main-stream media would have us believe that hospitals were getting crushed because government payments for health care were being restricted.

With respect to my previous post about differential pricing; it seems that hospitals charge self-pay patients more because they don't think they'll get full payment at any price. So why not jack up the price and probably some portion of self-payers will pay the same portion of a higher charge, with the result being increased cash flow. Since a particular procedure costs the hospital the same regardless of who the payer is, a better policy would be to charge self-payers the Medicare rate, or at least the private insurer rate, as the debtor would be less intimidated by a smaller bill and might pay a greater percentage of that bill.

Differential pricing by hospitals depending on payer

I found this tidbit earlier today which describes yet another serious problem with the US healthcare system:

Study: Hospitals Charge Uninsured, Self-Pay Patients 2.5 Times What Other Health Insurers Pay

People who lack health insurance and those who pay for care out of their own pockets were charged on average 2.5 times more for hospital services in 2004 than what health insurers pay and three times more than Medicare-allowable costs, a leading health policy researcher reported in the May-June 2007 issue of Health Affairs. The gap between rates hospitals charge to self-pay patients and other payers has widened greatly since 1984, study author Gerard F. Anderson reports.

“Over time, the uninsured have been paying higher and higher prices for hospital care compared to what the insured population pays,” said Anderson, director of the Center for Hospital Finance and Management at the Johns Hopkins Bloomberg School of Public Health in Baltimore, Md. “The markup on hospital care for these individuals, especially for those who can afford it least, is unjustifiable.”

The ratio of what hospitals asked self-pay patients to pay and Medicare-allowable costs was 3.07 in 2004. Thus, for every $100 in Medicare-allowable costs, the average hospital charged a self-pay patient $307. For-profit hospitals had the highest charge-to-cost ratio, at 4.10, while public hospitals had a charge-to-cost ratio of 2.49. The markup of charges over costs was much greater in small urban hospitals than in rural hospitals--3.25 compared with 2.42.

There is no basis in scale economics for charging self-payers more; in 99% of procedures I think it is fair to say that a hospital's cost is the same whether the patient being treated has their care paid for by Medicare or by the patient.

The American Health Care System

A search using Google Scholar turns up a wealth of discussion of the revenue and cost structure of the American health care system...

Update: Per Yahoo News, "Americans get the poorest health care and yet pay the most compared to five other rich countries, according to a report released on Tuesday.

Germany, Britain, Australia and Canada all provide better care for less money, the Commonwealth Fund report found.

"The U.S. health care system ranks last compared with five other nations on measures of quality, access, efficiency, equity, and outcomes," the non-profit group which studies health care issues said in a statement.

Canada rates second worst out of the five overall. Germany scored highest, followed by Britain, Australia and New Zealand.

"The United States is not getting value for the money that is spent on health care," Commonwealth Fund president Karen Davis said in a telephone interview.

The group has consistently found that the United States, the only one of the six nations that does not provide universal health care, scores more poorly than the others on many measures of health care."

Not news to me...

Unintended Consequences of Publicly Reporting Quality Information

is the title of a post at Healthcare Economist that quotes a review of health care report cards for a procedure called coronary artery bypass graft as follows:

"In Pennsylvania, which also introduced CABG report cards, 63% of cardiac surgeons admit to being reluctant to operate on high-risk patients, and 59% of cardiologists report having increased difficulty in finding a surgeon for high-risk patients with coronary artery disease since the release of report cards. New York had a similar experience after the release of report cards, reporting that 67% of cardiac surgeons refused to treat at least 1 patient in the preceding year who was perceived to be high risk."

I see this as a positive consequence of measuring the outcomes of medical procedures. Clearly, the surgeons don't want to put themselves in a position where they could potentially be sued. However, if the patient is defined to be high-risk, that means that regardless of who performs the surgery the patient is seen as having a high likelihood of dying on the operating table. A high risk patient faces two options: do nothing and hope that they live as long as possible, or undergo surgery where the probability of dying during surgery is high. I don't know what the average life expectancy for the patient if they choose not to have surgery is, but that would be important information to have before making the decision.

The key here is that if the surgeon doesn't think you'll survive surgery, you shouldn't have the operation. Not having the operation saves the patient and his/her insurance company and by extension every person in the country the cost of the surgery.

If the two states decided to eliminate the report cards, the result would be a return to high-risk patients undergoing surgery without real consideration of the risk of death, because there would be no incentive for surgeons to tell their patients that they think that surgery is too risky. In fact, surgeons would have financial incentive to disregard the relative risk for specific patients.

Remarkably, with respect to the procedure discussed here,

"The past 20 years has seen a proliferation of bypass surgery and angioplasty, in spite of strong scientific evidence that neither may be helpful in the long run for the overwhelming majority of patients. In general, the only reason for the one million such procedures each year is the high number of working cardiologists and cardiovascular surgeons in the medical community and the extremely high profitability of these procedures, around $70,000 for a bypass and $30,000 for an angioplasty.

The landmark CASS Study (stands for Coronary Artery Surgery Study) in 1984 demonstrated the irrelevance of bypass surgery and angioplasty to survival after the diagnosis of coronary artery disease is made. Analysis of outcome in 780 patients demonstrated no statistical difference in survivability between patients who both went to surgery and were treated medically and patients who were treated medically without surgery. Nevertheless, this extremely well documented study is generally ignored by doctors who do these procedures and never mentioned to patients who they consider candidates for bypass or angioplasty"...per Ron Kennedy, M.D., Santa Rosa, CA

In essence, surgeons are wasting money and killing patients...for profit...

Yet another serious healthcare problem comes to light

According to the AP today, "The maker of the powerful painkiller OxyContin and three of its current and former executives pleaded guilty Thursday to misleading the public about the drug's risk of addiction, a federal prosecutor and the company said...Purdue Pharma L.P. and the executives will pay $634.5 million in fines...the plea comes two days after the Stamford, Conn.-based company agreed to pay $19.5 million to 26 states and the District of Columbia to settle complaints that it encouraged physicians to overprescribe OxyContin"...

Further, "With its OxyContin, Purdue unleashed a highly abusable, addictive, and potentially dangerous drug on an unsuspecting and unkowing public", said U.S. Attorney John Brownlee.

There has been plenty of main stream media coverage of the skyrocketing of Oxycontin abuse in the US...the guilty pleas and settlements are remarkable. The excess cost to the US healthcare system due to overprescription of the drug and treating abuse of the drug, as well as the cost of handling related criminal activity, is likely to be large.

US health care system massively fouled up--example

Marketwatch posted today "Doctors reap millions for giving patients anemia drugs" which is summarized as "Two of the world's largest drug companies are paying hundreds of millions of dollars to doctors every year in return for giving their patients anemia medicines, which regulators now say may be unsafe at commonly used doses, The New York Times reported in its Wednesday editions."

As an example, the story describes how "documents given to The New York Times show that at just one practice in the Pacific Northwest, a group of six cancer doctors received $2.7 million from Amgen for prescribing $9 million worth of its drugs last year."

There are two key points which were outlined in the story:

-"Federal laws bar drug companies from paying doctors to prescribe medicines that are given in pill form and purchased by patients from pharmacies, but companies can rebate part of the price that doctors pay for drugs, like the anemia medicines, which they dispense in their offices as part of treatment. The anemia drugs are injected or given intravenously in physicians' offices or dialysis centers. Doctors receive the rebates after they buy the drugs from the companies. But they also receive reimbursement from Medicare or private insurers for the drugs, often at a markup over the doctors' purchase price"...

-"The payments are legal, but there is a concern in the industry that the payments give physicians an incentive to prescribe the medicines at levels that might increase patients' risks of heart attacks or strokes...On Tuesday, the Food and Drug Administration released a report that suggested that anemia drug use might need to be curtailed in cancer patients. The report, prepared by F.D.A. staff scientists, said no evidence indicated that the medicines either improved quality of life in patients or extended their survival, while several studies suggested that the drugs can shorten patients' lives when used at high doses"...

The rebate itself isn't a big deal, as far as what the doctors pay for the drugs because it is just an accounting transaction. The doctors know what their end cost for the drugs will be. The issue is that the pharma company has its list price for the drug, and its discounted price, which is what the doctors wind up paying depending on how much of the drug they buy. Charging a markup on the drug isn't necessarily unreasonable, depending on what the markup is since a doctor will have some overhead costs for keeping some inventory of the drug on hand and for staff costs. The problem is that different patients or their insurance companies will wind up paying a different price for the drug depending on how much of the drug a particular doctor prescribes in a year. If you were a self pay patient, you'd have an incentive to find out what doctor has the lowest price on the medication. But right now that information is unavailable. So patients wind up paying a different price for the same medication, based on factors that are invisible to them. I think most would agree that is fundamentally unfair.

The bigger issue is the FDA finding that the medication in question is essentially useless at best, and possibly harmful to patients at worst! Doctors are profiting from selling massive amounts of a drug that appears to do nothing. To sum up, this is an example of how our health care system is massively fouled up because a drug's price is inconsistent and the drug is useless anyway. Its an outrage!

Update: The Houston Business Journal reports that "Heavy charges weigh on U.S. Oncology first-quarter results"...due to issues related to the anemia drug in question...two quotes from the HBJ story are below:

-"The Senate Finance Committee Chairman found that the value of the approximately $300 million-a-year Medicare Demonstration Project to report on a patient's level of nausea, vomiting, pain and fatigue was for nothing.

CMS paid chemotherapy providers $130 per report, per infusional-chemotherapy recipient, on a patient's level of nausea, vomiting, pain and fatigue. However, HHS' inspector general's office found these providers were being paid an extra $130 to simply forward the data that was already collected.

A continuance of the Medicare Demonstration Project would have exacerbated existing economic and clinical problems instead of resolving them by increasing the temptations for physicians to overuse injectable drugs and promise to aggravate the economic problems Congress attempted to fix with the new Medicare law."

-"In panel discussion that highlighted the 12th annual conference of the National Comprehensive Cancer Network, Lee Newcomer, former chief medical officer and currently an executive with Minneapolis-based United Health Group, pointed out that in reviewing records of patients who were prescribed the drug erythropoietin, said that 44% of those patients had blood work-ups that would indicate they were not anemic"...patients were prescribed a drug they didn't need, and they suffered significant side effects from the drug...

Much medical research a waste of money

due to flaws in the design and carrying out of the studies. The Bayesian Heresy pointed out a story in The Economist which documents the poor quality of medical studies and includes this mind-boggling paragraph:

"Unfortunately, many researchers looking for risk factors for diseases are not aware that they need to modify their statistics when they test multiple hypotheses. The consequence of that mistake, as John Ioannidis of the University of Ioannina School of Medicine, in Greece, explained to the meeting, is that a lot of observational health studies—those that go trawling through databases, rather than relying on controlled experiments—cannot be reproduced by other researchers. Previous work by Dr Ioannidis, on six highly cited observational studies, showed that conclusions from five of them were later refuted. In the new work he presented to the meeting, he looked systematically at the causes of bias in such research and confirmed that the results of observational studies are likely to be completely correct only 20% of the time. If such a study tests many hypotheses, the likelihood its conclusions are correct may drop as low as one in 1,000—and studies that appear to find larger effects are likely, in fact, simply to have more bias."

Observational studies result in valid findings only one-fifth of the time!! And the public is basing its health policy decision making on these studies, many of which get a lot of publicity in the main stream media!!

The fundamental problem in health care economics

Thanks to "Econlog", I found this excellent quote:

"Citizens everywhere desire unrestricted access to state-of-the-art technologies. Increasingly, they insist on choice and control, too. Yet they are unwilling to pay what those things cost. People demand as a right the best health care money can buy, delivered in the way that best suits them, expense be damned. All that, and the price must be affordable.

Nowhere can this self-contradictory demand be satisfied."

Exactly...

How to price healthcare-by justifiability?

The website of the US-based Healthcare Financial Management Association has a summary of an article published in one of their newsletters titled "Justifiable Pricing Strategies For CFOs." The summary begins as follows:

"Providers are increasingly being drawn into personal healthcare financing for consumers as patients' out-of-pocket costs rise. In order to develop new price strategies to meet this trend, CFOs will need to analyze the true costs of every service that patients want to buy, whether it's a gall bladder operation, hip replacement or normal childbirth. Open-ended pricing will be acceptable only in the case of unpreventable complications and life-saving emergency care."

The concept of "open-ended pricing" should horrify anyone who has had any education in the field of economics. One of the core premises of economics is that resources are finite. Any health care system that is based on the idea that any patient may be entitled to unlimited amounts of resources is fatally flawed.

Also mind-boggling is the idea that hospitals don't know the true costs of services that they provide. In most industries, failure to understand your business's cost structure inevitably will lead to the bankruptcy of your enterprise.