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Medicine United States

Hospital's Computer System Always Marks Up Costs Automatically, Leaked Records Show (msn.com) 224

Posted by EditorDavid from the magic-numbers dept.
"Ridiculous, seemingly arbitrary price markups are a defining characteristic of the $4-trillion U.S. healthcare system — and a key reason Americans pay more for treatment than anyone else in the world," writes a business columnist for the Los Angeles Times.

"But to see price hikes of as much as 675% being imposed in real time, automatically, by a hospital's computer system still takes your breath away."

Long-time Slashdot reader fahrbot-bot quotes their report: I got to view this for myself after a former operating-room nurse at Scripps Memorial Hospital in Encinitas shared with me screenshots of the facility's electronic health record system.... What they show are price hikes ranging from 575% to 675% being automatically generated by the hospital's software. The eye-popping increases are so routine, apparently, the software even displays the formula it uses to convert reasonable medical costs to billed amounts that are much, much higher. For example, one screenshot is for sutures — that is, medical thread, a.k.a. stitches. Scripps' system put the basic "cost per unit" at $19.30. But the system said the "computed charge per unit" was $149.58. This is how much the patient and his or her insurer would be billed.

The system helpfully included a formula for reaching this amount: "$149.58 = $19.30 + ($19.30 x 675%)."

You read that right. Scripps' automated system took the actual cost of sutures, imposed an apparently preset 675% markup and produced a billed amount that was orders of magnitude higher than the true price. This is separate from any additional charges for the doctor, anesthesiologist, X-rays or hospital facilities.

Call it institutionalized price gouging. And it's apparently widespread because the same or similar software is used by other hospitals nationwide, including UCLA, and around the world... Healthcare providers routinely ignore the actual cost of treatment when calculating bills and instead cook up nonsensical figures to push reimbursement from insurers higher. For the millions of people without health insurance, those sky-high prices are what they're stuck with (although most hospitals, including Scripps, typically will offer discounts in such circumstances).
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Hospital's Computer System Always Marks Up Costs Automatically, Leaked Records Show More

Hospital's Computer System Always Marks Up Costs Automatically, Leaked Records Show

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  • The last time I went to the hospital... (Score:4)

    by xanadu113 ( 657977 ) on Saturday December 18, 2021 @01:41PM (#62094605)
    The last time I went to the hospital, they forgot to give me the pain medication they were supposed to give me at the very beginning. They realized it 6 hours later.

    They told me if I wanted to wait ANOTHER 2-4 hours, they could give it to me. I declined.

    They STILL charged me for it.

    • Re: The last time I went to the hospital... (Score:4, Interesting)

      by jobslave ( 6255040 ) on Saturday December 18, 2021 @02:48PM (#62094823)

      That's our for profit Healthcare system for you. They talk about caring for people but it's only the green those at the top really care about. The people running these hospitals claim they are struggling and have to give free Healthcare to some. But the amount of money they get is insane. Nearly all employees working in the Healthcare system make from a good living wage (nurses,, billing people,, etc) to a very high wealthy income like the Dr's, surgeons and don't forget the board members running the system and fleecing those who need healthcare.

    • Re:The last time I went to the hospital... (Score:4, Interesting)

      by AleRunner ( 4556245 ) on Saturday December 18, 2021 @03:10PM (#62094871)

      They STILL charged me for it.

      So sue them. Which leads to the actual cause of this. There's a whole load of costs around US medicine which relate to lawsuits and insurance. If you have private insurance companies, then those private insurance companies have to make profits. If you have lawyers then someone needs to pay for their Aston Martins and Martinis. If your senior heart surgeon spends a couple of weeks of the year operating, a month or so on holiday and the rest of the year fighting litigation then, obviously, she needs big charges in those few working weeks to keep her in the kind of apartment that she expects to have by the beach whilst also covering her liability insurance.

  • The only excuse... (Score:3)

    by Vrallis ( 33290 ) on Saturday December 18, 2021 @01:44PM (#62094611) Homepage

    The only remote statement on a possible excuse is if the $19.30 is the hospital's material cost (what THEY pay). The markup is to intend to cover costs (employee time, use of space, use of related lesser-cost products, etc., and, of course, profit margin). This is how a lot of the food industry works, you take your food cost and multiply it by whatever factor is needed to cover overheads and still get a profit margin. It just makes it easier to come up with a 'fair' price.

    That said, our entire medical industry--especially costs--is completely fucking broken.

    • the food industry does have the cook bill you on top of the bill you get and out side of the USA tipping is not really an thing and they don't pay some workers $2.13/hr

    • Re: (Score:2)

      by sjames ( 1099 )

      Except they will also bill separately for the use of the room. The doctor or PA will charge separately as well.

    • The reason is because all health insurances demand 50-80% cuts in the asking prices, so they need to add stupid fat margins on the base price to be able to give those arbitrary rebates to the unnecessary middle men.

      • The reason is because all health insurances demand 50-80% cuts in the asking prices,

        More like over 90% discount.

  • Price caps are neccessary (Score:4, Insightful)

    by bubblyceiling ( 7940768 ) on Saturday December 18, 2021 @01:48PM (#62094621)
    Many countries often have price-caps for common procedures & medicines. Time for US to do the same

    • The US does have price-caps for common procedures and medicines (or rather, individual insurers do, including medicare/medicaid).

      This kind of price weirdness comes from multiple levels of back-and-forth, over decades, with insurers and hospitals trying to get as much as possible from each other, bending the rules in unintended ways.

  • Couldn't use the original link? (Score:3)

    by quonset ( 4839537 ) on Saturday December 18, 2021 @01:49PM (#62094627)

    This story comes from the LA Times [latimes.com] and was written by David Lazarus.

    Why use a source which scraped the original article, on top of which, it's from Microsoft?

    • This story comes from the LA Times [latimes.com] and was written by David Lazarus.

      Why use a source which scraped the original article, on top of which, it's from Microsoft?

      Note: I did provide the original LA Times article as the reference link when I submitted this [slashdot.org]. Don't know why it wasn't used. in TFS.

      • Good to know. I came across this article when it was online a week ago and shrugged. The more I've learned about the medical industry the less stuff like this surprises me. Adam explained why this occurs [youtube.com].

        I have also seen postings from people saying they had a bill of XXXX dollars and asked for an itemized list of services, and lo and behold their bill was reduced to XX dollars. It's getting more difficult to figure out who is worse, car dealers or hospitals.

  • We pay more because of private insurance (Score:5, Interesting)

    by rsilvergun ( 571051 ) on Saturday December 18, 2021 @01:51PM (#62094631)
    The markups are because they have to negotiate with insurance companies over every single penny. When you're negotiating you start high and then meet in the middle. That's what they're doing. You're not going to get costs down by trying to make imaginary numbers like this go down. At best you'll put the hospitals in a bad position to negotiate with your insurance company and they'll begin to cut back on the quality of care while you line the pockets of the Big four that control your access to healthcare.

    We know exactly how to get the cost of healthcare under control and it's single-payer healthcare. What most call Medicare for all. Anything else is just a Band-Aid on a gushing wound. I suppose it's better than nothing but it's not going to solve the problem and it's not going to get you access to healthcare as you age.
    • You're not wrong about the cause, but I'm not entirely convinced that a single-payer system will work as it should. The US government has a habit of feeding corruption by printing money. I recall past articles about the government spending exorbitant amounts on luxuries for congressmen; half of the problem is the tendency of congressmen to want to blow money on their constituents. Medicaid (which is not the same as Medicare, for those who don't know, since I didn't know a few years ago) is able to push pric

      • Re: (Score:2)

        by sfcat ( 872532 )

        many doctors refuse to take more than a minimum number of Medicaid patients, because Medicaid pays so much less than regular insurance

        This is true but not for the reasons you might think. The AMA (American Medical Association) is really a guild or a union. It controls the number of doctors who are allowed to be trained and to practice. This artificially allows doctors extra pricing power in the market that they should not have. Ever wonder why the place where you buy your tires seems more organized than the doctor's office? Because it is. When you don't have competition, you have poor performance. And while I'm sure many doctors ar

        • Doctors under age 60 or so already have to retest every ten years or so for their specialty. It’s an enormous racket that makes a pile of cash for the certifying board without doing squat for those in the field.

      • Re: (Score:3)

        by tlhIngan ( 30335 )

        The average US hospital billing department is staffed by more people than doctors. So a single payer system would at least help get rid of an entire department of people who do nothing but bill insurance companies.

        A doctor's office often has a FTE (full time equivalent) person who does nothing but deal with insurance companies, so that's another person of overhead who's not treating anyone, just dealing with billing. It's a full time job for a private doctor's office. And a whole department at a hospital st

    • Re: (Score:2)

      by shilly ( 142940 )

      I agree that single-payer is probably needed because of where you're starting from, and the huge difficulty you'd have in getting insurers to behave, but I'm always struck by the fact that there are plenty of examples of both tax-funded single-payer and regulated multi-payer systems that work well. In the latter camp, for example, is France, Germany, Belgium, the Netherlands, Israel. In the former is the UK, Spain, Denmark, Norway, Italy.

      • Medicare for all doesn't say you can't buy additional insurance. It just says society will pay for your medical care. Even in Canada there are still private doctors and private insurance primarily used by the wealthy. Although it's highly debatable whether the extra money really benefits them.

        Also if you dig into those hybrid systems the ones that work so heavily regulate the private aspects of it that it might as well be single-payer entirely. Sort of how you can have a "private" power grid. And if you

        • Re: (Score:2)

          by shilly ( 142940 )

          I dunno, I've studied this subject professionally for many years, and I think the differences between single-payor and multi-payor are pretty significant in terms of the mechanics of the system, the incentives, etc. Just strikes me that it might be easier to move to a quasi-Dutch model than a quasi-British one.

    • I think the medical insurance companies are in on this scam. First of all, these kinds of astronomical bills scare people into never wanting to go without medical insurance. Second, it allows the insurance companies to apply pressure to hospitals that are not in network because they know that most people would never be able to pay these rates. The result is either to go along with the insurance companies or face debt collection and bankruptcy.

      If medical bills were reasonable, then a lot fewer people woul

    • We know exactly how to get the cost of healthcare under control and it's single-payer healthcare. What most call Medicare for all

      Medicare does the same thing. Doing "Medicare for All" (which seems like an acceptable solution to me) wouldn't solve this problem.

  • Think its time (Score:3)

    by ArchieBunker ( 132337 ) on Saturday December 18, 2021 @01:52PM (#62094637)

    That the government stepped in and started regulating prices yet? The competition model doesn't seem to be working.

    • Re: Think its time (Score:4, Insightful)

      by BytePusher ( 209961 ) on Saturday December 18, 2021 @02:09PM (#62094685) Homepage
      Maybe the government could just provide essential services? Basic food, housing, healthcare and education? Sure, charge something on a wealth adjusted and cost basis scale and permit the free market to compete. You could even do away with regulations entirely as long as the public options meet reasonable safety and quality standards.

      • Re: (Score:2)

        by AmiMoJo ( 196126 )

        You have to be very careful letting private healthcare deliver services on behalf of the government though. What tends to happen is the private companies want guaranteed profits, and eventually some corrupt politician gives it to them. The public hospital isn't allowed to compete for those services anymore, they are forced to outsource even if they can do it cheaper.

        When setting it up, you need to be very careful to have something like a constitution that forbids that kind of thing and which is extremely di

  • Which insurance then knocks down ... (Score:3)

    by Krishnoid ( 984597 ) on Saturday December 18, 2021 @01:52PM (#62094639) Journal
    to a "negotiated rate", bringing them closer to their actual costs, plus some buffer to handle future and past cases with complications where insurance says "negotiated amount for a heart attack, we're not paying any more than this, doesn't matter if you grafted a pig heart into them for five hours to complete the surgery, and then put their regular heart back in and restarted it."
    • People go into medicine everywhere in the world, including countries with socialized medicine, for prestige, for the challenge, and to do their best to keep people alive and healthy and then return them to their daily lives, in the best case hoping they don't see them again. They don't tend to add on charges for periodic office visits and physicals.
    • People go into insurance to run what's basically a subscription service to a regulated casino.

    Who of them do you think is most likely in it for the explicit purpose of making money?

  • although most hospitals, including Scripps, typically will offer discounts in such circumstances

    How generous - providing a "discount" of a predatory price-gouge. Many hospitals [npr.org] will resort to suing or wage garnishment to "recover" these outrageous costs.

  • What is the root cause? (Score:5, Insightful)

    by hjf ( 703092 ) on Saturday December 18, 2021 @02:01PM (#62094657) Homepage

    What is the root cause for this?
    It's most likely overbilling because of expected haggling from the insurance providers.
    They get a bill, and then they "negotiate" it for months and months at a time until the account exec gets the expected discount from the hospital (to meet his monthly quota) and look good in front of his other coworkers who are doing the same.
    They probably get a 50% discount of that $150 bill for a $20 item. If they charged $20, the account exec would most likely still demand a 50% discount, because he probably uses a software that won't let it approve a payment if he hasn't haggled enough.

    I heard that, in the US if you pay cash, no insurance, with most hospitals you'll get a crazy amount off, like 90% or so. But I have no idea if it's true. The article seems to suggest it.

    • Re:What is the root cause? (Score:4, Informative)

      by Fly Swatter ( 30498 ) on Saturday December 18, 2021 @02:15PM (#62094701) Homepage
      The hospital will give uninsured a significant discount. The problem is most of the time you have to beg for it. And that's just the hospital. There are also bills from the doctor, the staff, the if you got a scan of some type that is usually another bill, and if you used an ambulance you get that over inflated bill as well. For all of these you have to haggle the price down, that is if they care at all and don't tell you 'we don't negotiate'.

      The insurance system has become it's own little market, and anyone on the outside gets screwed in all aspects. If you have insurance great, otherwise you better be so poor that they can't collect their billings - otherwise you will be poor for the next time.

    • >What is the root cause for this?

      The US government. The government insists that it gets a discount on all services, so hospitals simply mark everything up so that they can get marked down. There's too many services in the health care market to negotiate each one, so it's typically just a certain percentage discount off the chargemaster price that gets negotiated each year. If the government catches you selling services at a lower price to the uninsured, then they will say that's the actual price and dema

  • Some will try to convince you this is crony capitalism, but in reality, this is capitalism working as intended. Our state/regulations are subject to Capitalistic incentives just as much as anything else.

    • Re: (Score:2)

      by KILNA ( 536949 ) *
      See sig.

  • The NHS in the UK, despite being desperately underfunded, on its knees during the pandemic etc., seems to be being eaten away by stealth.

    If it carries on like this, we will end up with a two-tier health system like the USA.
    Tier 1, no money: Start praying
    Tier 2, some money: Pray you don't need it

    I had a recent experience with private Health Care in the UK and it wasn't reassuring.

    I get medical aid as part of my company employment package.
    I'd been pestered for about a year with constant emails, to get my "360

  • Makes me glad to live in a Socialist hellhole... (Score:5, Insightful)

    by Serif ( 87265 ) on Saturday December 18, 2021 @02:23PM (#62094735)

    where at least healthcare is free and you don't have to worry about how much treatment costs. Or whether or not it's covered by insurance. Or whether you have insurance. Still, I believe health care can be quite good in the US, as long as you can afford it.

  • The government. For allowing hospitals to collect on these ridiculous prices without disclosing them beforehand.

  • In a sensible, regulated system... (Score:4, Insightful)

    by bradley13 ( 1118935 ) on Saturday December 18, 2021 @02:58PM (#62094841) Homepage
    In a sensible, regulated health care system, the tariffs are standardized.Blood pressure check, $10. Appendectomy, not burst, $700. EKG $100. Whatever. These tariffs are usually set by the government, in negotiation with the health care industry. Afterwards, there are no stupid games: this is what gets charged, period. It is almost certain that the US has such tariffs, because Medicare/Medicaid/VA don't play these games. The insurance industry should simply adopt them. And charging anything else should simply be prohibited. The US system allows other stupid games. I have a friend whose wife had charges from an "out of network" doctor she didn't recall seeing. Turns out, he had a habit of walking by patient rooms, making a "consult" entry, and walking on. That's simply fraud, and should result in prosecution.

  • That is the charge master price just like sicker price at the car dealer

  • Ever Worked for a Defense Contractor? (Score:5, Interesting)

    by BobC ( 101861 ) on Saturday December 18, 2021 @03:38PM (#62094987)

    That markup is actually called "Burdened Cost". The cost of the "thing" isn't just the cost of buying it, but also the costs of the time spent selecting and ordering it, transferring and auditing the payment for it, receiving and stocking it, distributing it to be close at hand, frequently checking the expiration date, and so on.

    When I worked as an engineer at a Major Defense Contractor, we were always astounded at how our project cost estimates got so many zeros tagged on in the process of becoming a bid and proposal. Then, by the end of the project, to see how close those huge estimates actually were, sometimes scarily close to having us lose money on the contract.

    One time, a project had a commercial spin-off we desperately wanted to pursue, so we did a round of cost estimates to cover development, marketing, initial production and roll-out. And then all those zeros appeared once again, and we thought the whole idea was dead. A few of us dug into everything that went into adding those zeros. A vast part of it was simply communication: Creating truck loads of documentation, preparing and presenting status updates, responding to feedback. Another part was the cost of meeting military standards for quality and testing. Yet another part was designing and building the system to last at least 20 years, often 40 or 50. So many sources of zeros!

    Then, of course, everyone billing their hours directly to the project had to cover 100% of the indirect costs: We had to support HR, the mortgage on the building, the service staff, the utility bills, and so on. You get the idea. Our project work estimates were given a "Burdened Rate" that generally exceeded my salary by a factor or 2 or 3.

    The "burden" was basically the result of the accounting process by which all the above were identified, estimated and included in the bid and proposal. To get our product to a commercial market, we'd need to operate under a commercial accounting process. We literally had to form a separate company as a "wholly-owned subsidiary" to get far enough away from the military work to be allowed to charge our time differently. We had to move to a separate building, a local rented space. We had to become a startup, with our parent company supplying seed capital.

    The world of commercial medicine is FAR WORSE than military contracting! In fact, military medicine can often provide similar services at substantially reduced costs, at least to active military members (families, reservists and retirees live in a weird blended system).

    Yes, a 600% medical product burden factor may seem extreme, but it should not be all that surprising (other than it being higher than military markups). Consider one major difference: Every single thing a patient will encounter, be it a suture, pills, nurses, doctors, lab testing, everything, needs to be covered by massive amounts of malpractice and product liability insurance. We're all human, everyone makes mistakes, but when it comes to medicine, those affected by such mistakes must be "made whole".

    Is the cost of addressing mistakes something that should be eliminated? So far, the universal answer is an emphatic "No!". In fact, most would say the present system doesn't do enough in this area. Meaning these costs seem set to continue to rise.

    Another surprisingly large cost is "coding", ensuring a treatment is precisely identified to ensure insurance and Medicare will correctly cover it. Last I heard, there are over 45,000 codes that have been defined. My own ongoing asthma treatment has over 1000 different codes associated with it. This coding data is critically important, as it is used not just to get paid, but is also used to review and determine the efficacy and use of every single product and treatment at both the level of the individual patient and at the level of decades of data for millions of patients.

    Thorough medical documentation is critically important, and every attempt to reduce its cost has also reduced its benefits. We're now at the p

    • Why does no other country seem to have this problem? If it were merely this matter of logistics that you make it out to be, surely this would be a universal problem. It would be impossible for anyone to achieve lower costs, not just a country burdened by a system whose very incentives are aligned against the best and most efficient treatment of patients.

      I don't think you're wrong, per se. I think there's a lot of very interesting stuff in here. Tort costs do seem to be a burden on the system, but certainly

  • It is common to hear, "Free Market is efficient". And often Free market is touted as the solution to everything from prisons or public schools (are they really different?) without fully understanding of the meaning of that word Efficiency in the context of free markets.

    Free market is efficient in maximizing profits. If informed consumers are voting with their dollars, and they could because there are multiple merchants hoping to sell, Free market will be efficient in delivering goods and services at the

  • Healthcare should be a human right. Developed countries can & easily do pay for it from taxes, the same way they pay for education, law enforcement, judiciary, research, defence, etc.. The last thing any parent, employee, or boss needs to worry about when someone gets sick or injured is, "OMG, are we/they going to go bankrupt?!" If you lack empathy then just think about the economic losses from bankrupting productive members of society & throwing them out onto the streets simply because they were un

  • Do people care about words anymore? (Score:3)

    by gTsiros ( 205624 ) on Saturday December 18, 2021 @05:14PM (#62095325)

    It is not even _an_ order of magnitude higher.

    Yes, of course it is still ridiculous, but times 7.65 is _not_ "orders of magnitude higher"

  • Just picking a random direct primary care physician off this map [dpcare.org], looks like stitching (the cost of both the stitches and the procedure) could have a marginal cost only $35 [wecaremedoffice.com] in the US.

    The difference? No insurance company in the middle, and no hospital overhead.

    In the US, "health insurance" isn't really insurance, but a membership into a weird negotiated payment plan.

  • Shouldn't be allowed. Needs to stop.
  • Earlier this year, before I qualified to be vaccinated, I got a "Moderate to Severe" case of COVID. I had to go to the emergency room twice. The second time, they treated me with monoclonal antibodies and sent me home. Two days later, the illness broke. A month and a half later, I was back at work and about 4 and a half months later, I was fully back to normal.

    Then the bill came.

    Ok, actually, it came in June. The original bill was > $12,000.00. It had been "negotiated" by insurance down to about

  • How many sutures they have to buy and how many they have to throw away due to expiration dates. This was a problem with N95 masks last year. Testing indicates that the straps decay and lose their elasticity making them useless for their purpose.

  • When my wife had surgery in Sept they charged $96 for an acetaminophen 90 count bottle. She only took about 6-10 of them while she was recovering, they didn't give her the rest of the bottle to keep and it cost $7 at target or walmart. I'm sure that wasn't the only thing massively overcharged for, but they don't care, insurance pays for it. Then when they have a loss from a non-insured patient who can't pay they can claim a huge loss to write off.

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