Why are hospitals like Mission so expensive?

Did you know there are 5,564 registered hospitals in the U.S., according to the American Hospital Association? (This includes federal hospitals, long-term care hospitals, psychiatric hospitals, institutions for mental illness, and substance abuse rehabilitation hospitals.)

But how much are they costing us?

The short answer: SO MUCH MONEY.

hospital.png

How much money?

Total expenses for all registered U.S. hospitals racked up to $936,531,524,400. That is almost ONE TRILLION DOLLARS.

(For context: Bill Gates is the richest person on earth, with a net worth of $87.4 billion. This means it costs almost 11 times more than what the world’s wealthiest person is worth to run America’s hospitals!)

Let’s break it down.

Technology

As technology advances, so do charges. The more it costs for a piece of state-of-the-art equipment, the more hospitals charge. Whether your insurer covers the cost out of your premiums or you’re ponying up the pretty pennies directly — you are picking up the tab for the tech.

While advances in technology can help medical diagnosis and treatment, there are times where they can be an expensive boondoggle. Are 3D mammograms (more expensive) really more effective than standard mammograms (less expensive) According to this study – yes, to a degree. The 3-D machines and their software can set medical facilities back about $760,000, and they pass those costs on to their patients. Some costly new technologies might actually be worth it, but others are more questionable.

For instance, dilation is a fairly standard and effective procedure you may encounter in your yearly eye exam. A new technology, the optomap — an innovative imaging technology that allows a doctor to see into the retina — performs the same function as dilation, but without the hassle of dilation eye drops. The machine can cost anywhere in the ballpark of $180,000. Is it really worth $180,000 to avoid a couple of eye drops?

People get the latest iPhone because it’s fancier and does extra “stuff” in a cooler way, not necessarily because their current iPhone doesn’t work. But at least when you buy the new iPhone, you know exactly what you’re getting and how much you’re paying for it. In healthcare, someone else is often spending your money without checking with you first.

Effective or not, does the latest technology have to be as costly as it is? And should patients be bearing the brunt of its costs without any say in the decision? Your insurer often cannot cover the cost for more questionable technology, meaning you’re left paying the difference while hospitals pocket the balance.

Expansion and renovation

Many hospitals have also undertaken expansion and renovation projects which sometimes meet actual needs, but often seem to be loaded with questionable luxuries. These projects also contribute to what patients pay for care at the hospital. (We talked about Mission Health’s renovation project here.)

Should hospitals always buy and build the latest and greatest? Does a hospital really need to run their own greenhouse to improve patient care? If it’s going to cost patients more unnecessarily (i.e., without compromising access to or quality of care) then hospitals should probably reconsider.

Medicare, Medicaid, and uninsured patients

The revenue, or lack of it, from patients has a big effect on hospital costs. As we explained in our Mission Health series here, negotiations between an insurer and a hospital determine how much insurance companies pay hospitals to cover patients’ medical bills. Because the payments from Medicare, Medicaid and uninsured patients rarely cover what hospitals claim are the the costs of care, the privately insured subsidize the costs of caring for everyone else.

So, when hospital expenses go up due to their often elective rising costs of technology, renovation or anything else, hospitals lose even more money on the Medicare, Medicaid and uninsured population. This gets passed on to the privately insured patients in the form of higher hospital rates and, ultimately, higher insurance premiums.

Everything else

Think about your home. You may pay rent or a mortgage; you cover bills like electricity, water and AC, and don’t forget the fridge you get your OJ from every morning and the TV you watch — you paid for those, too.

Now think about a hospital. It requires electricity and water, too — lots of it. (Would you want a doctor operating on your heart in dim light?) Hospitals also have cafeterias (where that OJ costs a wee bit more than what you pay at the supermarket), dozens of beds, and expensive medical equipment in each room.

And let’s not forget the doctors and staff who run it all (i.e., people who require salaries and wages.)  Glassdoor reports that the average anesthesiologist salary in Asheville, NC, is $381,487 — more than 29 percent over the national average.

This all requires substantial cash. And that cash ends up coming from you, the consumer.

How hospital costs cost you

It’s important to note that hospital operating costs vary by size, services offered, and many other factors. But the truth is in the price point — it takes a lot of cash to run a hospital, and those costs are passed on to YOU.

In fact, AHIP cited “underlying healthcare cost growth… (and) increased utilization of services” as two reasons premiums are on the rise. Many hospitals are also gaining wider market share and are better able to demand higher prices from patients.

So, what does this have to do with Mission Health? We’re glad you asked.

How this relates to Mission’s terminated contract with Blue Cross

As we’ve previously detailed, Mission Health — a hospital system in Asheville — has terminated its contract with Blue Cross NC effective October 5.

The reason? Mission couldn’t come to an agreement with Blue Cross on effective payment rates. Mission wanted to raise rates based on their belief that they need to increase revenue, but Blue Cross pushed back because it feared rate hikes would cause unreasonable rises in patient premiums.

We promised we’d keep you in the loop on some of the reasons why this is happening, and the cost of operating Mission Health is definitely something to consider. Along with its $400 million expansion project, Mission has made a lot of very costly choices on how they run their hospital. 

The question is, should consumers (i.e., you) pay for those costly choices? Tell us in the comments or weigh in on Facebook — we’d love to hear your thoughts.

In the meantime, one way we can lower North Carolinians’ healthcare costs is by rolling back state-based mandates that drive up the cost of care for everyone in our state. Want in? Join us.

Showing 1 reaction

Please check your e-mail for a link to activate your account.
  • commented 2017-08-04 18:36:03 -0400
    The City of Asheville should set up a single-payor health system. Pass the costs along to the residents who live there. Or, raise the BCBS premiums, and pass the cost along to the residents who live there. Either way …..

connect

Sign in with Facebook, Twitter or email.