Just be careful. While hospitals need to do better, a large part of what I want from a hospital is to be over prepared. Just in time is good, for a lot of things, but there needs to be a large buffer of things in inventory at a hospital just in case there is a large disaster. (this is hard - blood expires and people don't like to hear about their donation being wasted even though wasted blood means no doctor had to decide which person didn't get blood for lack of supply)
It's not even about inventory of individual items (like blood or enough scalpels) it's that they need to have every expensive machine. They need x-ray machines and MRI machines and proton beam cancer treatment and that stuff adds up very quickly. That's why a trip to the ER for stitches can cost five figures in the US, because a large amount of that bill is covering the hospital's cost to be ready not just for the stitches but also car crashes or mass shooting events or whatever
> they don’t know what a bill of materials is for a hip replacement. Rather than identifying the actual labor, supplies, implants, overhead and other expenses tied to an individual procedure...
How often is there a malpractice case for a hip replacement?
I'm willing to bet that the costs of a malpractice case can be one, two, three, or even more orders of magnitude higher than all of those other expenses. Dwarfing any of those enumerated costs. Even cases that they win.
Of course they're looking at the statistics rather than counting beans.
Another problem is that one hip replacement is not the same as another. Differences in patients, complications arise, it's really hard to say you're going to need exactly X syringes and Y feet of gauze and Z liters of blood and which and how much of certain drugs for anesthesia, not to mention with procedures that involve prosthetics you may need multiple on hand, the first one you pick may not fit so you need to go to the second one but you have burned that first one
Finance guys think you're going to turn hospitals into walmart and make it up on ruthless efficiency and volume but it's not that kind of business. There's so much unknown going into any one situation that it makes this "transparency" hard to do. Plus, people want the best and whatever they need to survive so the "consumer" doesn't want transparency
And then you layer on top the huge amount of uncompensated costs from uninsured and denied coverage. It's why a single national payer system actually makes sense, if you can keep the fraud from running amok. We really should just pay for outcomes and spread the actual cost over the entire system
There is a financial product known as malpractice insurance in which the outsized cost of a malpractice case is spread out over a risk pool of people with similar risk exposure.
In any case, this cost is not directly part of the "hospital's" cost of service since the surgeon is most often a semi-independent contractor who bills the patient "professional charges" that are separate from the hospital's "technical charges."
There is no one way of doing cost attribution. So, at scale, there is no such thing as one perfectly calculated cost per product. Hospitals are outliers compared to more regular firms in that they produce tens of thousands of procedures / products. In the Netherlands we’ve standardized products for billing and negotiation purposes but still most negotiation is on a higher level than price per product.
Tl;dr Mr Cuban is right, but I think hospital accounting nears P/NP-level complexity
There is a real problem. There is a lot of overhead. You can use accounting to hide it in various places, but it still exists. I want a hospital large enough to handle disasters (think tornado destroys a large area), but that means there will be a lot of rooms that the hospital is making payments on but are never used.
Reminds me of the Surgery Center of Oklahoma which cause such a huge news buzz back in 2009ish for publishing packaged pricing. Brilliant move. (And they still do it!)
Right, so if he's right then it would be great if he could do the same thing with actual healthcare right?
He'd make even more butt loads of money than he already does, people would get more sensibly priced healthcare, everyone wins. Except the crooked and apparently incompetent existing healthcare execs, who don't deserve to win anyway.
An ASCII-friendly way to spell ℞, an R with a crossed right leg, shorthand for the Latin singular imperative recipe! “take (the following)!”, which is the conventional start of a prescription; by extension, something necessitating a prescription to buy.
It's the odd North American English "abbreviation" for a "prescription medicine". Where a "prescription medicine" is one that cannot be bought directly by a consumer and instead requires a medical professional to prescribe it: https://en.wikipedia.org/wiki/Medical_prescription
he said that if he bought a hospital, he would operate it like a startup, strip out unnecessary overhead
And then he would charge whatever the market would bear in order to maximize return on his investment.
"Running it like a business" *is* part of the problem.
Health care is not just another business. Once you're in the hospital, it's a little late to go price shopping. And with your life on the line, do you really want to choose the low cost provider?
He didn't charge "whatever the market would bear" for prescription drugs. Also there is obviously a huge difference between urgent/emergency care vs more routine procedures. If you're getting a routine colonoscopy every few years, it may be feasible to shop around.
Just be careful. While hospitals need to do better, a large part of what I want from a hospital is to be over prepared. Just in time is good, for a lot of things, but there needs to be a large buffer of things in inventory at a hospital just in case there is a large disaster. (this is hard - blood expires and people don't like to hear about their donation being wasted even though wasted blood means no doctor had to decide which person didn't get blood for lack of supply)
It's not even about inventory of individual items (like blood or enough scalpels) it's that they need to have every expensive machine. They need x-ray machines and MRI machines and proton beam cancer treatment and that stuff adds up very quickly. That's why a trip to the ER for stitches can cost five figures in the US, because a large amount of that bill is covering the hospital's cost to be ready not just for the stitches but also car crashes or mass shooting events or whatever
> they don’t know what a bill of materials is for a hip replacement. Rather than identifying the actual labor, supplies, implants, overhead and other expenses tied to an individual procedure...
How often is there a malpractice case for a hip replacement?
I'm willing to bet that the costs of a malpractice case can be one, two, three, or even more orders of magnitude higher than all of those other expenses. Dwarfing any of those enumerated costs. Even cases that they win.
Of course they're looking at the statistics rather than counting beans.
Another problem is that one hip replacement is not the same as another. Differences in patients, complications arise, it's really hard to say you're going to need exactly X syringes and Y feet of gauze and Z liters of blood and which and how much of certain drugs for anesthesia, not to mention with procedures that involve prosthetics you may need multiple on hand, the first one you pick may not fit so you need to go to the second one but you have burned that first one
Finance guys think you're going to turn hospitals into walmart and make it up on ruthless efficiency and volume but it's not that kind of business. There's so much unknown going into any one situation that it makes this "transparency" hard to do. Plus, people want the best and whatever they need to survive so the "consumer" doesn't want transparency
And then you layer on top the huge amount of uncompensated costs from uninsured and denied coverage. It's why a single national payer system actually makes sense, if you can keep the fraud from running amok. We really should just pay for outcomes and spread the actual cost over the entire system
They are insured against such risks and with that the insurance costs will be another fixed post on the expense list.
Is that not already baked into the cost of malpractice insurance?
perhaps, but insurance companies are very good at figuring this out and in turn amortizing the costs out.
There is a financial product known as malpractice insurance in which the outsized cost of a malpractice case is spread out over a risk pool of people with similar risk exposure.
In any case, this cost is not directly part of the "hospital's" cost of service since the surgeon is most often a semi-independent contractor who bills the patient "professional charges" that are separate from the hospital's "technical charges."
You can do both!
There is no one way of doing cost attribution. So, at scale, there is no such thing as one perfectly calculated cost per product. Hospitals are outliers compared to more regular firms in that they produce tens of thousands of procedures / products. In the Netherlands we’ve standardized products for billing and negotiation purposes but still most negotiation is on a higher level than price per product.
Tl;dr Mr Cuban is right, but I think hospital accounting nears P/NP-level complexity
> Mr. Cuban argued hospitals often rely on broader accounting methodologies that spread costs across services.
Maybe they do this intentionally to avoid insurance refusing to pay for the most expensive but potentially necessary services.
There is a real problem. There is a lot of overhead. You can use accounting to hide it in various places, but it still exists. I want a hospital large enough to handle disasters (think tornado destroys a large area), but that means there will be a lot of rooms that the hospital is making payments on but are never used.
Reminds me of the Surgery Center of Oklahoma which cause such a huge news buzz back in 2009ish for publishing packaged pricing. Brilliant move. (And they still do it!)
I remember the Econtalk episode with the co-founder, "Keith Smith on Free Market Health Care" [0]
0. https://www.econtalk.org/keith-smith-on-free-market-health-c...
Maybe Mr. Cuban should put his money where his mouth is and buy a hospital
Well he has done that on Rx drugs which is equally a hot mess. So he has credibility in this space.
He’s not just some blowhard billionaire with an opinion. He’s really legit shaken things up in Rx and proven it’s a racket.
Right, so if he's right then it would be great if he could do the same thing with actual healthcare right?
He'd make even more butt loads of money than he already does, people would get more sensibly priced healthcare, everyone wins. Except the crooked and apparently incompetent existing healthcare execs, who don't deserve to win anyway.
What is Rx?
An ASCII-friendly way to spell ℞, an R with a crossed right leg, shorthand for the Latin singular imperative recipe! “take (the following)!”, which is the conventional start of a prescription; by extension, something necessitating a prescription to buy.
It's the odd North American English "abbreviation" for a "prescription medicine". Where a "prescription medicine" is one that cannot be bought directly by a consumer and instead requires a medical professional to prescribe it: https://en.wikipedia.org/wiki/Medical_prescription
It's a standin for "Prescription", but for more details check wikipedia: https://en.wikipedia.org/wiki/Medical_prescription
(used to be Latin for "Recipe", aka, here's how to make this medicine)
Prescriptions
Prescription drugs
That said... even though it reads like you're correcting him, you're simply reinforcing @sfn42's message...
beg your pardon?
He has done a lot for affordability with Cost Plus Drugs.
he said that if he bought a hospital, he would operate it like a startup, strip out unnecessary overhead
And then he would charge whatever the market would bear in order to maximize return on his investment.
"Running it like a business" *is* part of the problem.
Health care is not just another business. Once you're in the hospital, it's a little late to go price shopping. And with your life on the line, do you really want to choose the low cost provider?
He didn't charge "whatever the market would bear" for prescription drugs. Also there is obviously a huge difference between urgent/emergency care vs more routine procedures. If you're getting a routine colonoscopy every few years, it may be feasible to shop around.