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Hospital Systems’ Abuses Of The Healthcare System

Posted Feb 28 2013 9:06am

Stanley Feld M.D.,FACP, MACE

I n my very first blogs in 2006 I made the point that all the stakeholders are to blame for the dysfunctional healthcare syste m.

Most of the incentives that created a technology driven healthcare system have been perverse. All the major stakeholders’ incentives are misaligned.

The major stakeholders are consumers, physicians, government, healthcare insurance companies, pharmaceutical companies and employers.

The primary stakeholders are consumers and physicians. The government, healthcare insurance companies, pharmaceutical companies and employers are secondary stakeholders. Some secondary stakeholders provide administrative services and some reimbursement. None provide medical care.

None of the actions of any of the stakeholders are transparent. All the stakeholders are trying to take advantage of the payers (consumers, employers and the government).

The government should be the neutralizing force. It should level the paying field for all the stakeholders. Government should not permit one stakeholder take advantage another stakeholder.

Everyone except the primary stakeholders “patients and physicians” figured out the money game in the healthcare system early on.

Government and employers were next to last in figuring out the game of money gouging.  This happened in the early 1980’s when both said they cannot pay any higher price for healthcare services.

At that point the hospital systems and the healthcare insurance industry figured out another way to continue the money gouging. The result was HMOs and managed care. They did not work.

The opacity of pricing continued, cost shifting flourished, and the price of medical care continued to rise.

Physicians are not blameless. However, they are the easiest to blame. Physicians are the least organized and least aggressive stakeholders in the healthcare system.

In the past, I have pointed out the real problems that have resulted in the dysfunctions of the healthcare system. Health policy wonks seem to ignore the real problems.

Consumers and physicians are mere pawns in this money game.

Without consumers or physicians there would be no healthcare system. They generate the engine that provides the need for medical care and administrative services.

I have covered much of the abuse of the healthcare system by most of the stakeholders.

I have been relatively easy on hospital systems and pharmaceutical companies until now.

However, the basic problems in the healthcare system must be to be recognized and then fixed. All of the problems have to be recognized at the same time and fixed simultaneously.

A patch on one problem simply intensifies the overall problems.

Obamacare does not solve any of the real problems. It is an attempt at patching a problem. It will only make the problems worse and will not reduce the cost of care.

“Bitter Pill Why Medical Bills are Killing Us” presents examples of the abuses of large and small hospital systems.

The basic philosophy that hospital systems should operate by should be “Patients First.”  It is not. It is how much money can I make from each patient.

Steven Brill asked the major question. “ Why are hospital bills so high?”

He presented the answer:,32068,2178453595001_2136781,00.html

The answer is obvious to all physicians.

One fellow physician wrote.


Although we know much of this, this is an excellent overview of healthcare costs.


All Americans ought to understand the distortions hospital system pricing creates. The government ought to make hospital pricing transparent to everyone..

The government should include the hospital system’s retail price, wholesale price and actual cost for an item or service.

Then, consumers can choose the hospital system to go to.

Policy makers continually criticize this ideal saying that illnesses are sudden and patients are not in a position to choose a hospital system or negotiate price.

If the hospital system is compelled to compete on price the price will be the same as the competitive price when the patient gets sick. If one hospital is much higher than the next hospital the patient will know this before hand.

Hospital system charges are actually higher than they appear. Most hospital systems are non-profit organizations. The hospital systems do not pay taxes.

Hospital charges are opaque to everyone, including physicians. Physicians generate the services hospitals charge for.

As seen in Steven Brill’s article oncology charges are extremely high.

One oncologist wrote to me and said he could administer the same therapy in his office for one-tenth the hospital cost.

However, neither the government nor the healthcare insurance industry would reimburse him for the office procedure. It is the same procedure he performs in the hospital.

Doesn’t that seem strange? What is going on?

Steven Brill discovered that it is almost impossible to find out what hospital systems are charging.

The same opacity is true for pharmaceutical charges.  The pharmaceutical charges are further inflated by multiple middlemen involved in drug distribution.

This has been less true for drugs since Internet Drug stores publish drug prices.

However, since the patients’ physicians prescribed the drug patients are hesitate to use substitute drugs. The patients’ attitude is that the healthcare insurance company will pay for the drug less the copay.

Therefore the patients are not interested in looking up the difference in price or the options for substitution.

This is the reason consumers need skin in the game.

The result of consumer apathy is an increase in healthcare insurance premiums.

Steven Brill covers the grotesqueness of retail hospital system charges. He also points out the amount Medicare reimburses for the grossly inflated charge.

The consumers without insurance are the consumers that get stuck with the retail charges. Insurer consumers recieve a large discount.  The uninsured consumers are least likely to be able to afford these charges.

In some cases Medicare reimbursement is less than 20% of the hospital retail charge. Steven Brill points out that at this time Medicare reimbursement to hospitals is still 10 times its actual costs.

The article “Bitter Pill” is excellent. It covers many categories of hospital system abuse by the use of case studies.

The facts are overwhelming.  I am going to try to categorize these facts in my next blogs. The abuses will be easier to remember.

Consumers must be educated. The hope is consumers can be activated by education. Only a consumer driven healthcare system can drive the abuse out of the healthcare system. 

Then, Americans will have an affordable healthcare system.

 The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

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