Read the Time's article "Bitter Pill: Why Medical Bills Are Killing Us" and saw a post on the Vine referencing the same that I responded to and thought it might be an interesting article for my first post.
The Time's article, while a good piece, is not necessarily a full and complete picture of hospital charge practices.
There are a couple of basics that everyone should know about not for profit and for profit hospitals. First, all hospitals, including not for profit hospitals must make a profit to stay in business (unless they happen to be a local tax supported hospital...in which case even then the tax payers want to minimize their tax and so insist the hospital strive for profitability). The difference between a not for profit hospital and a for profit hospital is the tax code. Obviously, a for profit hospital pays taxes on the money it makes, whereas a not for profit does not pay taxes and instead must use any profit for community benefit (e.g. provide care for the poor and uninsured as well as the underserved). The IRS, and many state tax boards are reviewing the issue of not for profit status as some hospitals that are not for profit do not appear to be providing the community benefit required (a good place to start might be Sloan-Kettering and M.D. Anderson as the Time's piece does indeed suggest unreasonable profits). A larger question would become if, hypothetically, everyone is insured, what would the need for a not for profit system be? In fact, what would be the role of a for profit if reimbursement is preset to minimize cost...(would it pay the investor's as bond?)but that's another discussion. I would also note that there approximately 1,600 hospitals (mostly small community hospitals) have closed since the late 1990's and less than 300 have opened. Further of the 300 openings almost all were reopenings of previously closed hospitals. So, a hospital is not a money printing machine...in fact most hospitals (especially those that are less than 300 beds or those that are in the inner city regardless of size) struggle mightly to stay open.
The Times article noted outrageous markups and provided some standard comparisons which are indeed outrageous when taken by themselves. However, what was left unsaid when comparing cost between a hospital lab charge and a free standing laboratory charge for the same test, or a free standing radiology charge and a hospital charge for the same x-ray was the difference in cost incurred by a hospital versus these free standing entities. The hospital must be open 24 hours a day, 365 days a year and be prepared to provide any of their services during any part of the day. The free standing centers are open only during the busiest part of Monday through Friday. Effectively, the hospital has about 60% more cost due to this issue alone. Additionally, the free standing centers provide care only to those that can pay for the care. Patient's without adequate insurance or other resources (credit or cash) are not provided care, even in urgent/emergent situations and instead are left to find whatever care they can on their own. A hospital will provide care to those patients. Of course because this care is unlikely to be paid for this adds addtional cost that the hospital must bear. Typically, this is anywhere from 7-30% of all care provided (inner city hospitals have very high uncompensated care levels). Because it is known that the hospital needs to provide the care, but the doctors do not, many doctors insist that the hospital pay them for under/un-compensated care. This adds additional cost to the hospital that a free standing center never has to cover. Perhaps a good question to ask would be why are free standing center's allowed the cherry-pick the patients that are most able to pay while hospitals must then cover the rest? Finally, it should be noted that the Center's for Medicare and Medicaid Services (CMS) publish an annual listing of every (Medicare participating, which is virtually every hospital) hospital's cost-to-charge ratio. That is, what is the cost associated with every dollar charged? The national average is about 0.25:1. That is, there is 25 cents in cost for every 1 dollar charged. I am not suggesting that a four times markup is acceptable, only letting you know what the true cost of care is as measured annually by CMS and suggesting that you not look at individual prices (which can indeed by off the charts!).
I am not saying change is not needed, but a full understanding of cost is required and the Time piece failed to address that aspect.