Hospitals lift curtain on prices, revealing giant swings in pricing by procedure • Hacker News Board

Re: Hospitals lift curtain on prices, revealing giant swings in pricing by procedure

#351

Post by mwerd » Wed, Sep 22, 2021, 8:32 PM UTC

danShumway wrote: post #148

jonathan-adly wrote: post #123

Earlier quoted context omitted.

The cost of the aspirin depends on these things lol. Look up 340B. There is a drug called Oncaspar. It's >$16,000 for one patient, and 5 cents for another (acquisition cost). Same drug, widely different acquisition cost.

When two pills coming from the same company are being made at the same time on the same machines, then they both cost the same. It's pretty obvious that the patient status changes nothing about that. However, the hospital's acquisition cost is variable because you're further down the supply chain and you're seeing the exact same kinds of arbitrary behind-the-scenes price swings that this article is talking about. It…

Not trying to be rude but he already told you the answer. You really should look up 340b. It's a federal program to rebate drug costs for certain types of patients and is a legal form of price discrimination. When you provide a drug in a healthcare setting, it can be a very different price depending on who receives it, because the federal government has the 340b program.

Your argument about cost to manufacture isn't relevant in the same way that the marginal cost of a flying one more passenger on an airline isn't relevant. We all pay different prices for airline seats. Hospitals pay different prices for the same pharmaceuticals.

There are a lot of smart people working in healthcare. A lot of people go into the industry thinking they know better and wash out. See the latest Berkshire Hathaway + JPM + Amazon failure.

Re: Hospitals lift curtain on prices, revealing giant swings in pricing by procedure

#352

Post by Thlom » Wed, Sep 22, 2021, 8:32 PM UTC

peterangular wrote: post #72

mabub24 wrote: post #59

Earlier quoted context omitted.

> Best insurance here is "don't get sick" Recent New Yorker article looking at the "Costa Rica model"[0] raised this point as well. America, by contrast to Costa Rica, has a very weak public health sector and infrastructure, and this leads to a real weakness when focusing on preventable illnesses and issues. [0]: https://www.newyorker.com/magazine/2021/08/30/costa-ricans-l...

Yeah I read that too - just cherry picking here: > All adults have tests and follow-up visits to prevent and treat everything from iron deficiency to H.I.V. It’s all free. If people don’t show up for their appointments, she makes sure their team finds out why and figures out what can be done. It's common sense why they have better results and outcomes than we do here... Our system is optimized for capitalistic profit…

In a well functioning health care system screenings like that is actually of debatable value as it generates a lot of false positives and un-necessary procedures.

Re: Hospitals lift curtain on prices, revealing giant swings in pricing by procedure

#353

Post by alex_smart » Wed, Sep 22, 2021, 8:34 PM UTC

rsj_hn wrote: post #312

alex_smart wrote: post #261

Earlier quoted context omitted.

>the only way to do it sustainably is to increase the numbers of doctors and nurses, so as to drive down their salaries Getting the hospitals to accept a price ceiling which forces the issue is another way to do it.

Yes, but supposedly the author was referring to a way to lower prices while maintaining an equilibrium of supply versus demand. You can always lower prices by fiat proclamation, but then you have shortages and wait lines as hospitals go bankrupt and shut down, which will hit rural areas particularly hard. If you want to lower prices and make sure that everyone gets served , you need to be a bit more sophisticated tha…

>supposedly the author was referring to a way to lower prices while maintaining an equilibrium of supply versus demand

They were trying to solve the problem by increasing the supply of doctors into the system. The other proposed solution was taking the approach of reducing the supply of money into the system. Neither are contradictory to "maintaining an equilibrium of supply versus demand" but both are trying to move where that equilibrium is by adjusting the supply of two different things. So however you define "while maintaining an equilibrium of supply versus demand" either they were both doing it, or both weren't.

>then you have shortages and wait lines as hospitals go bankrupt and shut down, which will hit rural areas particularly hard

Sure, that is what happens if you only fix the prices in certain states and not others, which incentivizes the doctors to move from states that have such price ceilings into states that don't. That is why the only possible way to implement that solution is nation-wide.

>If you want to lower prices and make sure that everyone gets served

I don't see why lowering the price nation-wide would reduce the supply of doctors. What are the doctors going to do? Migrate? But no other large economy has doctor compensation as high as the US. So as a country, you are only competing against yourselves.

Re: Hospitals lift curtain on prices, revealing giant swings in pricing by procedure

#354

Post by danShumway » Wed, Sep 22, 2021, 8:35 PM UTC

sarchertech wrote: post #329

danShumway wrote: post #321

Earlier quoted context omitted.

Eh, technically yes, but that's not really what I'm talking about. The way we use the word "cost" varies depending on the context, and I'm responding to a specific usage of that word. I'm not making a broad claim that drugs need to be sold at cost, I'm making a claim that drug costs are not so highly variable that coming up with a consumer price needs to take days of research after a procedure. jonathan-adly is makin…

>But I would also point out that under Capitalism, signing a contract usually involves the terms of that contract being made upfront. There's nothing inherent to Capitalism that prevents variable priced contracts. >Pretty much every other industry in America has figured out how to put a price tag on the products they sell, Maybe for mass produced products they have, but certainly not for custom work. You aren't payin…

> There's nothing inherent to Capitalism that prevents variable priced contracts.

Definitely not the norm though, and it is inherent to Capitalism that price transparency is an important part of creating an efficient market.

But sure, it's not a rule. A lot of common things in Capitalism aren't rules, but they're still often signals of a healthy market.

> You won't even get an upfront price for something as simple remodeling your kitchen. A contractor estimates that it will cost $20k and then finds that a leak in your attic completely rotted some of the framing.

A contractor will not however replace the framing and then charge me after the fact. They'll discover the rotten framing, inform me of the new conditions and the new price, and then let me decide. A good contractor will walk me through that process.

> but there is an inherent complexity

Not in the places that we're talking about. The kind of complexity and guesswork and change in procedure you're talking about is not present in the situations that jonathan-adly discusses above. The inherent complexity of fixing someone's body and the inherent variability of what drugs/procedures will be necessary to do so is a good explanation of why pricing a surgery or an entire hospital visit is very difficult. But it is not a good explanation for why hospitals have claimed that the price of a single x-ray is "unknowable".

Re: Hospitals lift curtain on prices, revealing giant swings in pricing by procedure

#355

Post by mwerd » Wed, Sep 22, 2021, 8:38 PM UTC

callmeal wrote: post #255

throwthere wrote: post #143

Earlier quoted context omitted.

You're making the reasonable-sounding (but incorrect) assumption that the cost to the hospital of a drugs is the same for every patient. It's telling how people on the outside have no idea how complex the system is, as if there's one simple way to cost an item (hell, there's not even one simple way to cost an item with GAAP accounting for a widget). These lists are kind of worthless in the current iteration, but they…

>You're making the reasonable-sounding (but incorrect) assumption that the cost to the hospital of a drugs is the same for every patient. Why shouldn't it be? How hard is it for a hospital to project their annual aspirin/paracetamol/? usage and budget for it?

Easy.

Now try it at a rural critical access hospital for rattlesnake antivenom with a short shelf life, so it usually expires unused. They are required by law to stock it or they cannot have their emergency room open. Estimate the revenue generated from treating the one patient who needs it every other year, and by the way, you have 9 contracted payers with different rates and you don't know which one, if any, the patient will have. Rinse and repeat for every other drug required to provide "critical care". Maybe layer on infusion of exotic chemotherapy drugs or monoclonal antibodies to treat a new pandemic virus.

It's not easy.

Re: Hospitals lift curtain on prices, revealing giant swings in pricing by procedure

#356

Post by Retric » Wed, Sep 22, 2021, 8:38 PM UTC

dllthomas wrote: post #276

Retric wrote: post #138

Earlier quoted context omitted.

Only up to a point, they still accept or recheck claims arbitrarily to get closer to their targets. Worse they have incentives to decrease efficiency by increasing paperwork etc. Private medical insurance in the US is a horridly inefficient system. Separating the claims process from insurance companies hands might help, but their incentives are never going to line up with consumers.

> Worse they have incentives to decrease efficiency by increasing paperwork etc. Money spent on paperwork comes out of the same pile as profit. The MLR cap preserves incentive to reduce paperwork, wherever premiums and payouts sit.

Not internal paperwork. Think in terms of industry wide collusion not a single insurance company. If lobbing or an industry group can drive up healthcare costs via say paperwork or regulations then every health insurance company is “forced” to raise premiums and as the maximum profit per premium ratio is fixed that also increases the total possible industry wide profit.

Of course insurance companies are also in competition so they have individual incentives to keep premiums cost competitive.

Re: Hospitals lift curtain on prices, revealing giant swings in pricing by procedure

#357

Post by gfodor » Wed, Sep 22, 2021, 8:39 PM UTC

mullingitover wrote: post #344

gfodor wrote: post #333

Earlier quoted context omitted.

No system is perfect. If the US had a universal healthcare system, it would suck in many ways. People do, after all, travel to the US for medical care. My point is that there is likely a better local optimum out there than the one you suggest, and coming off as if the problem of healthcare is “solved” is news to people under any system who are suffering due to its inefficiencies or inequities. For example, I live in…

There may be edge cases, but on the whole if people in the US had the health care systems of the UK, France, Germany, Japan, or pretty much any other developed country, they would riot in the streets if the US system were suddenly forced on them.

lol dead people as “edge cases” - frame this one up - own it.

Re: Hospitals lift curtain on prices, revealing giant swings in pricing by procedure

#358

Post by joshAg » Wed, Sep 22, 2021, 8:40 PM UTC

TeMPOraL wrote: post #281

joshAg wrote: post #141

Earlier quoted context omitted.

Payouts and premiums aren't where the money is in insurance. It's in the return on investments the insurer makes with the money they hold in trust. From an insurer's point of view, the best market isn't one with no payouts, but one where there is a highly predictable amount of payouts, because the better they can predict how much they need to payout, the more aggressive they can be with their investments. Yeah, there…

> From an insurer's point of view, the best market isn't one with no payouts, but one where there is a highly predictable amount of payouts, because the better they can predict how much they need to payout, the more aggressive they can be with their investments. Isn't the latter a strict superset of the former? No payouts is an easily predictable number. And for nonzero amount of payouts, the less those payouts sum t…

No, they're not a superset. You can have events with a very low probability and very little variance, events with very low probability and very high probability, higher probability with low variance, and high probability with very high variance.

Here's some random numbers,say for a hypothetical 100,000 hypothetical year long policies low probability, low variance: E(total claims) := 20, V(total claims) := 1 low probability, high variance: E(total claims) := 20, V(total claims) := 20 higher probability, low variance: E(total claims) := 20,000, V(total claims) := 10 higer probability, high variance: E(total claims):= 20,000, V(total claims): 10,000

Premiums don't usually make their way into investing for a bit. They're used to cover claims and then business overheads and then even dividends first. First they go to claims, because there's usually regulations to prevent price gouging that require insurers to refund premium if the ratio of aggregate premium : aggregate claims gets too high (the regulation is on a state by state basis in the US). Then any remainder goes to any other outlay first, so that the invested money can be/stay invested into longer term investments. Only if those outlays can be completely covered by the premium (and i'm skipping over a few things like regulations regarding various levels of liquidity for different risk levels and other stuff) then yeah it can make its way over to the actual investment fund. But in general the business model for insurers is that underwriting profit, limited as it is by regulations, is primarily used for actually running day to day operations and isn't a reliable source for being turned over to the investing side. The investing side is primarily using the initial capitalization of the insurer and the returns from earlier investments.

One way of looking at insurance is that the insured is actually buying an option against the insured's capitalization with very limited exercise clauses, but the the insurer pays out exercised options with the money from other purchased options contracts.

Re: Hospitals lift curtain on prices, revealing giant swings in pricing by procedure

#359

Post by nybble41 » Wed, Sep 22, 2021, 8:40 PM UTC

fragmede wrote: post #233

danShumway wrote: post #148

Earlier quoted context omitted.

When two pills coming from the same company are being made at the same time on the same machines, then they both cost the same. It's pretty obvious that the patient status changes nothing about that. However, the hospital's acquisition cost is variable because you're further down the supply chain and you're seeing the exact same kinds of arbitrary behind-the-scenes price swings that this article is talking about. It…

Under capitalism, a thing's cost to manufacture has nothing to do with the price of that something. Read that again and work through your objections. Ideally something's price is higher than its cost so the company can make a profit, but there are so many obvious exceptions that its nice, but not necessary. Thus, who cares how much the pill coming down line costs to manufacture, unless you start hacking into the free…

Under capitalism, with that kind of price difference, someone else would move in and start manufacturing the same drug and selling it for less to gain market share. That's competition for you. Or if no one else wants to do the job you could just make it yourself. Cost and price are indeed two different things, but competition keeps the prices of goods down to a relatively low multiple of their manufacturing cost.

Unfortunately what we actually have, between patents and other monopolies the government has instituted on drug manufacturing and distribution, is nothing like capitalism.

Re: Hospitals lift curtain on prices, revealing giant swings in pricing by procedure

#360

Post by DaveExeter » Wed, Sep 22, 2021, 8:41 PM UTC

eganist wrote: post #218

nickff wrote: post #208

Earlier quoted context omitted.

> "This change alone would remove 25+% of unnecessary bloat from the US system." Where do you think the money is going? Insurance companies are not as profitable as you might think, drugs are not a massive burden on healthcare expenditures, and many hospitals are non-profits. The truth is that most of the money is going to staff wages; if you want to reduce healthcare spending, the only way to do it sustainably is to…

> increase the numbers of doctors and nurses and tort reform to manage the lawsuits to enable lower malpractice insurance costs. and a scheme to drive down med school pricing. Maybe more competition? Enabling more MD and DO schools? There are <200 medical schools (both MD and DO schools) in the US.

>and tort reform to manage the lawsuits to enable lower malpractice insurance costs.

A great insurance company talking point! The purpose of 'tort reform' is to increase insurer profits.

We need more medical malpractice lawsuits, not less!