On profits and patient care

The tension that exists between providing good care for patients and making a profit in the healthcare business is one of my signal preoccupations.  In our current fee-for-service model, there exists a seemingly intractable conflict between prioritizing the needs of one’s patients and maximizing one’s profits.  When this conflict can be mitigated, both healthcare providers and patients come out well.  But when patients become just another kind of customer and healthcare just another kind of business, problems arise.  It’s a subject I return to over and over.

This conflict rises right to the surface in this article about HCA, the largest for-profit hospital chain in the country.  I should note that I’ve had my qualms with how the New York Times reports on hospitals, so I ought to be as skeptical about articles that confirm my suspicions as I am about those who biases I don’t share.  It’s a long article, and it seems thorough and balanced to me, but I will also freely admit that I might be reading it approvingly because I am inclined to based upon my preexisting beliefs.  For those of you who read the whole thing and find flaws in the reporting, I request that you share your opinions.

It begins:

During the Great Recession, when many hospitals across the country were nearly brought to their knees by growing numbers of uninsured patients, one hospital system not only survived — it thrived.

In fact, profits at the health care industry giant HCA, which controls 163 hospitals from New Hampshire to California, have soared, far outpacing those of most of its competitors.

The big winners have been three private equity firms — including Bain Capital, co-founded by Mitt Romney, the Republican presidential candidate — that bought HCA in late 2006.

[Aside: Can I just grouse briefly about an unrelated point?  What an unfortunate failure of our creative minds that we couldn’t come up with a better name for our current economic woes than “the Great Recession.”  It has all of the rhetorical oomph of Malt-O-Meal.]

Right off the bat I see one of the major barriers to true reform, which is the deeply enmeshed relationship between the executives in the for-profit hospital industry and powerful lawmakers.  In addition to Bain, and thus Mitt Romney, the article goes on to discuss the various relationships between HCA and former Senate Majority Leader Bill Frist (for whom I have no respect for completely different reasons), Florida Governor Rick Scott and the acting head of Medicare Marilyn B. Tavenner.  I realize the problematically entwined relationships between major industries and the people whose job it is to regulate them is nothing new, and that healthcare is hardly unique in this regard, and also (as that last link makes clear) it’s not just Republicans who do it.  But it sure does make me uneasy to see how freely these executives can stroll through the corridors of power and find familiar faces.

Moving on:

Among the secrets to HCA’s success: It figured out how to get more revenue from private insurance companies, patients and Medicare by billing much more aggressively for its services than ever before; it found ways to reduce emergency room overcrowding and expenses; and it experimented with new ways to reduce the cost of its medical staff, a move that sometimes led to conflicts with doctors and nurses over concerns about patient care.

I’ve written about how medical billing works before, so I’m not going to go into much detail now.  Suffice it to say that, for savvy providers, it is possible to manipulate the system by which patient encounters are coded to make straightforward, simple encounters seem more complex and thus more costly.  Is that what HCA has encouraged its providers to do?

All hospitals use a system of codes to bill services to Medicare, Medicaid and private insurers. The codes, which require some subjective evaluation, are supposed to reflect how much care is being delivered. Hospitals can differ over which treatments require which codes. A patient who walks into the emergency room with a simple case of indigestionwould be classified by the hospital as using very little of its resources. The hospital would be reimbursed just $50 by Medicare for its evaluation.

A patient who might be suffering a heart attack might require oxygen, be placed on a cardiac monitor and transported for a CT scan. The hospital would classify those services at the highest level, earning it a $323 reimbursement from Medicare.

At HCA in 2006, slightly more than a quarter of the payments it received from Medicare were for patients classified in the two highest-paying categories, far behind the 58 percent reported at other hospitals, according to an analysis of Medicare payments by The Times, using data provided by the American Hospital Directory.


Nearly overnight, HCA’s patients appeared to be much, much sicker. By 2010, HCA had surpassed other hospitals, with 76 percent of its payments coming from the two most expensive classifications, versus 74 percent for other hospitals.


Medicare has not provided hospitals with clear guidance about what kind of coding system they should use, and Mr. Yuspeh said HCA had alerted the agency to its use of the new system. No one has accused HCA of up-coding, or billing for more expensive services that were not needed — one of the complaints made against it a decade ago.

Vicki Bryan at the research firm GimmeCredit began warning HCA’s bondholders who subscribe to her reports in the spring of 2009 that HCA’s model was bolstering short-term returns, but that the system could have potentially negative long-term consequences if Medicare balked and demanded reimbursements.

So far there is no indication Medicare has done so, and a spokeswoman declined to comment. The acting head of Medicare is Marilyn B. Tavenner, a former HCA executive who left there in 2005 to become the secretary of Health and Human Resources in Virginia.

I’m not in a position to audit HCA’s charts, so I’m left to guess.  But that certainly seems like an eyebrow-raising jump in the illness and complexity of its patients in an awfully short period of time.

This post is already plenty long, and I’ve already lifted enough from the article as it is.  It goes on to detail further profit-maximizing measures HCA hospitals took with regard to access and payment for emergency room care, and with regard to staffing.  I’ve also already written about HCA coming under investigation in Florida (which is somewhat reassuring, actually, vis-à-vis Gov. Scott’s connection to the chain) for allegations that some of its providers had ordered unnecessary tests and procedures for certain patients in order to boost revenues.  When viewed as a whole, these articles paint a none-too-pretty picture of what can happen when patients’ interests and shareholders’ collide.

All of this makes my lips curl into an unpleasantly grim smile when I consider the ramifications of the cuts to Medicare in the Affordable Care Act.  While the lower reimbursement rates are meant to be balanced out in the long term by increased numbers of insured patients under the new law, it’s hard to know how any given hospital’s balance sheet is going to look after the rates go down.  Call me cynical, but I can’t really picture executives at a for-profit hospital whose patient enrollment hasn’t kept up with the loss sustained by the lower reimbursements saying “Well, chums, we had a good run.  I guess it’s time to pull the kids out of Choate and scout out the public schools!”  The profits may well decrease, but does anyone really doubt that the hospitals won’t wring every bit of revenue out of their patient-care models on the way, by methods ethical and otherwise?

None of this is to say that cuts to Medicare aren’t necessary.  They may well be, and this may be the best way to do it.  I pretend to be no healthcare economist.  But what real cuts to Medicare won’t be are painless.  They won’t be limited to big rich ol’ hospitals and insurance companies.  Real patients with real problems will feel them in some real way, be it their pocketbooks or because they’re not getting turned enough in bed when their nurses are short-staffed again.  Claims that any meaningful cuts to Medicare won’t be perceptible to the people covered under it strain credulity.  Anyone who says otherwise is selling something.

Russell Saunders

Russell Saunders is the ridiculously flimsy pseudonym of a pediatrician in New England. He has a husband, three sons, daughter, cat and dog, though not in that order. He enjoys reading, running and cooking. He can be contacted at blindeddoc using his Gmail account. Twitter types can follow him @russellsaunder1.


  1. “At HCA in 2006, slightly more than a quarter of the payments it received from Medicare were for patients classified in the two highest-paying categories, far behind the 58 percent reported at other hospitals, according to an analysis of Medicare payments by The Times, using data provided by the American Hospital Directory.


    Nearly overnight, HCA’s patients appeared to be much, much sicker. By 2010, HCA had surpassed other hospitals, with 76 percent of its payments coming from the two most expensive classifications, versus 74 percent for other hospitals.”

    If I’m reading this correctly, it seems that there were big across the board jumps… 25 to 76 for HCA but 58 to 74 for others is still pretty big itself.

    Fwiw, on the FoxNews crawl: Ryan to save $750B for Medicare, Obama to cut $716B. Huh?

    • Good catch. I missed that. While it makes HCA look comparatively less suspicious, it certainly heightens my concerns that hospitals in general will simply use the vagaries of the coding system to their best advantage, maximizing profits and minimizing the savings of the proposed cuts.

      Oh, and as far as the FoxNews crawl is concerned, let me know when they announce 2 + 2 = 5. It’s sure to be any minute now.

      • And I think the continued separation between customer and cost remains a problem. Recently I had to request detailed invoices for services from two different providers for my HSA. Before looking at these pieces of paper, I thought thusly:

        “Hm, $20 copay for each PT visit. Not bad.”

        When I looked at the document, I thought, “Holy crap! He listed “Stretching” as a medical service that he charges $75 for?!?! Thank goodness I don’t have to pay for that!” Now, if I understand insurance, I know he doesn’t actually get $75 for that from the provider. And this particular PT guy does sometimes seem a bit too profit-motivated (or, more specifically, he often seems to have conversations about payment and insurance with his staff in front of patients, which seems a bit unseemly at the very least); but he also seems highly effective and he explains the work we do in great detail, so it is hard to know if he is unduly trying to maximize profits or just trying to make sure he gets paid properly in a somewhat tactless way.

        But, yea, $75 for stretching me out?!?!?!

        • Look, I don’t know about you, but I have never thought “Hey, I’ve got some spare cash, let’s go down to the hospital for a procedure”.

          Laying aside the mentally ill, most people AVOID the doctor’s office. It’s unpleasant, there’s needles, the news is often bad, and it’s full of sick people. They only go when they, you know, feel too sick to avoid it. Not because it’s cheap entertainment.

          Now maybe you can make a case for nervous parents jumping on every sniffle because it’s ‘only 20 dollars to get it checked out”, but even that’s a pretty hard case.

          Medicine isn’t FUN. It’s not entertainment. It’s not pleasant. Therefore people aren’t, in general, consuming it because they can — they’re consuming it because they’re ill.

          I have a hard time squaring “We’d use less medicine if sick people were more aware of the costs” with “white coat hypertension”. People don’t habitually over-consume things they dislike and get stressed about using.

          • While most people behave the way you describe, Morat20, I definitely observe a certain kind of patient (or, more accurately in my case, parent) who will come in for very minor ailments “just to be sure.” A good example is a kid with a few days of minimal cold-like symptoms whose parents want to make sure it’s not an ear infection, or who comes for a recheck the day after being seen because the symptoms haven’t resolved yet. I do think the kind of disincentive Kazzy describes would have a deterrent effect on that kind of needless medical expense.

          • Morat20-

            My point is that I go to the physical therapist and I pay $20, get my work in, and go home. He turns around and bills the insurance company over $500 per session. I don’t know what he actually collects, or how legitimate his pricing structure is, but the lack of transparency is an issue. Especially the person best equipped to verify his services, me, has no idea what he is saying he did.

          • @Kazzy: If you only knew just how long and how much trouble it took to get paid for that PT, you’d be appalled. As Dr. Saunders observes, some push-back against the worrywarts who clog up his lobby might be a salutary force, but for every minute he spends making Educated Grunts, looking down his otoscope, his hapless clerical minions will spend at least four minutes rolling the Boulder of Sisyphus up the slope of payment. And that, friends and neighbours, is why physicians have to charge so goddamn much for any petty procedure.

          • for every minute he spends making Educated Grunts

            I loooooooove that. Love it. The phrase I normally use for “go do pointless pantomime to entertain the patient” is “make Mystic Gestures,” but I’m adding “Educated Grunts” to my repertoire.

            And also your comment is totally right.

          • I cannot claim Educated Grunts as my own. My mother was an anaesthesiologist, one of her brothers, my uncle was an orthopaedic surgeon and the other brother was a ophthalmologist. All of them used the term Educated Grunts.

          • Educated grunts, eh? Are those like the “trying sounds” that kids generate to make it SEEM like they are trying to do something (e.g., put on their shoes) when they are really just sitting there, grunting, and waiting for you to do it?

            More to the point, perhaps I came off more critical of my doctor then I had intended. As I said, I have been very impressed with his work thus far and I was just sharing with my wife that about 75-80% of what I do there I cannot replicate at home. So much, if not all, of what he is doing is no doubt medically necessary. What I was trying to get at is that the inherent shadiness of coding opens the door for corruption and abuse. He treats me, but I have no idea what he bills to insurance or for how much (at least not until a few weeks down the road when my Confusion of Benefits comes). He bills the insurance provider, but they have no idea what actually happened while I was there. I pay ever increasing premiums, but I have no idea how much the doctor actually receives for his services. It is like a really shitty game of rock-paper-scissors… only everyone loses to everyone.

          • No, Kazzy. Here’s how the Educated Grunt works in practice. Let us commence with the ideal situation, where a reasonably well-informed patient or parent of a patient interacts with a physician. It would closely resemble the dialogue between a car mechanic and the owner of the car.

            “My car is making an odd noise and is overheating.”
            “Well, leave it here, we’ll call you back when we’ve got a better idea.”

            Let’s change the picture somewhat. Dr. Saunders, Mechanical Doctor opens the hood and the anxious car owner stands there, wringing his hands, making Stupid Noises. “I read on OldWivesTales.com this could be a Broken Motor. Do you think it’s a Broken Motor, Dr. Saunders?”

            There is nothing intelligent which can be said at this point. But a noise must be made, a Noise of Concern. The Educated Grunt.

            Dr. Saunders continues to peer intently into the shadowy recesses of the engine compartment. The engine’s still hot, there’s no point in taking the radiator cap off. This could be anything from a stuck thermostat to a bad water pump. The head might be warped. This could be anything from a 50 dollar fix to a complete engine replacement. He does not know, nor could he, at this point.

            Why is it, with machinery and other inanimate problems, we’re willing to defer to the judgement of the specialist, but with physicians, we simply must get out there in the mechanic’s bay and make Stupid Noises? A competent mechanic wouldn’t allow the owner to intrude into his workspace. Insurance rules wouldn’t allow it. There’s a sign prominently placed at the door to the repair bays to that effect.

            There’s still a great deal of Witch Doctoring going on in medicine. Doctors must not complain overmuch about it, for they positively encourage it, parading about in their white smocks, acting as if they were God’s Great Gift to Human Suffering. They know better yet they persist in passing themselves off as Grand Panjandrums. The reason they get away with this is obvious enough: patients and their parents are Exceedingly Stupid Persons.

            Greek, o pharmakos, the wizard, from which we get pharmacy. There is power in illusion. But physician comes from a different etymology, physis, nature, from which we get the physical world. Doctors understand our natures rather better than we do ourselves, looking at our Wrinkly Bits, our pedestrian little problems, our misery and self-abuse. Kids stick stuff in their orifices north of their belly buttons, adults the holes below.

            There’s majesty in the human body, no matter how broken or ruined. But the mystery of the human heart, its fears and petty terrors, for these there are no Good Words. There is, however the Educated Grunt of Reassurance.

          • Interesting indeed, Blaise!

            I will hold out that teachers, far more than doctors, “win” the award for “customers” meddling in their professional affairs. A sample conversation:

            Parent: I want my 10-month-old reading by the end of today.
            Teacher: Well, that is a pretty unreasonable demand. Plus research indicates that formal reading instruction on children this young serves no benefit in reading development but can have detrimental effects in a number of other, related areas.
            Parent: Yea, but I think it’s better if we start now.
            Teacher: Here, let me show you this research by these highly respected and accredited experts, backed and funded by these highly reputable organizations. Also, I have a bachelors and masters in education and have been teaching for the better part of a decade. I’m pretty confident that what you are advocating is not in the best interests of the child.
            Parent: Yea? Well, I WAS a kid once! I was 1 once, and 2 once, and 3 once. All the ages!
            Teacher: Holy shit, why didn’t you say so! Whatever you say, maestro of all things education!

          • Just for the record:

            1) I do not wear a white coat in my office. It was fun playing dress-up in medical school, but I think that was the last time I cared.

            2) I tend to make Educated Grunts when parents share detailed reports of facts that have no impact on my clinical decision-making, eg “I know he’s just had that runny nose for a couple of days, but someone in his daycare has a cousin that was exposed to whooping cough two months ago.”

            3) My usual approach to clinical questions that will solve themselves with no intervention on my part or to diagnostic conundrums that don’t matter anyway (eg Cold Virus A [for which there is no cure but time] vs Cold Virus B [for which there is no cure but time]) is an only slightly more Educated-sounding version of “hell if I should know.”

          • But how much brow furrowing is involved? And/or chin rubbing? I tend to find that the general anxiety level of the parent is directly proportional to the amount of brow furrowing and chin rubbing necessary before finding a fancy way to tell them that everything is normal and whatever their child is doing is completely developmentally appropriate. It should be worth noting that a bearded chin requires roughly half as much rubbing to achieve the same impact as a non-bearded chin.

          • Ugh, I couldn’t teach kids for exactly that. If it isn’t “My Precious Angel Would Never”, it’s “Look, I’m a parent and I know just as much about education kids as you”.

            No, you don’t. But that won’t stop you from standing here and — incorrectly — telling me my job, assuming I’m basically a glorified babysitter.

          • +1 on Russell’s 3:50 comment. It’s something I hear about a lot and not just from poor-hating Republican doctors. “If they just had to pay $10 for a visit… (a lot of time and human capital would be recuperated)”

          • Morat-

            While most parents are genuinely a pleasure to work with, overall that is probably my least favorite aspect of the job. Some years I would say it is absolutely my least favorite aspect, but this past year I had a real quality group of parents so I’m a bit of a softie right now.

          • Kazzy,

            I think the lower the age level you work with, the more true that probably is. I don’t get too much of that. Although I did have a student a few years ago–frosh, early 20s, came to college just for athletics, who, when caught committing academic dishonesty, angrily told me I didn’t know how to do my job. It was hard to refrain from asking him to compare years of experience in higher education.

          • James-

            Oh, definitely. ANYONE can teach early childhood. It’s just playing, right?

            You even see this within schools. Our new science teacher didn’t have the experience to teach Pre-K and K. So what’d we do? Well, the upper school science teacher is teaching Pre-K and the Assistant Head of School (former middle and upper school science teacher) is teaching K. Because, ya know, it’s not like you need any experience or anything to teach those grades. I attempt to raise how insulting this is and suggest that maybe they should let me try my hand at teaching middle school math or upper school Latin and they look at me like I have two heads. It really baffles them that I might be bothered that they staff positions in my department with folks with zero experience with the age range.

          • I may have told you this before, but for a year we had one of our kids in a child-care co-op that was mostly age 1 through K. Each parent had to do one 4-hour shift per week working with the kiddies.

            It was hell. I came to seriously dread it…as in near panic-attack mode. And I actually like toddlers fairly well, in really sharply limited numbers. To actually try to teach a passel of 4, 5, 6 year olds? I don’t hesitate to admit it’s a skill I don’t possess, nor do I hesitate to emphasize that, yes, it is a real for sure skill. I can see why you’d be bothered and insulted, and why it’s not a good thing for the kids.

          • I do remember you talking about that. Experiments like the ones my school is undertaking (which are decidedly different than parent co-ops like the one you described) tend to blow up. The problem is compounded when it is simply written of because, well, it’s not like what they do in EC really matters anyway.

            Separately, it boggles my mind that people would hate to do what I do for a living. But I think that is just because I genuinely love it so much and arrogantly assume if I love it, everyone must at least LIKE it. Case in point, when Zazzy and I were planning our recent vacay, I didn’t see it a major necessity that we go to an adults-only resort. The only perk I saw was being able to act a fool without worrying about damaging an innocent child. But the notion of being bothered by the mere presence of children? Foreign to me. We ultimately settled on an adults-only resort for other reasons and I was flabbergasted by folks insisting that they wouldn’t travel any other way. They acted like kids were some sort of plague to be avoided at all costs. Also, they were all parents themselves.

        • When we were using hospital care for the delivery of our daughter, there was a particular item, offered by the hospital we were using, that was (probably) not covered by our insurance, but would have made a big difference in pain-management for the gestator. So we called up the hospital to find out how much it would cost to add it, ala carte, and pay for it out of pocket — we figured, if it were a couple of hundred bucks we could do that; multiple thousands, forget it.

          After twenty minutes on the phone to three separate people at the hospital (as we got kicked upstairs to different levels of phone people), the final verdict was that the hospital could not quote us a price, because there WASN’T a price unless they knew which insurance was paying for it, and since ours wasn’t, they weren’t sure if we were getting the our-insurance-price (and paying for it out of pocket) or how it might fall out … and that they claimed to have no cash-payment price for the item/service in question.

          Twenty minutes.

          Hospitals need to post frakking price lists on the wall, or at least have them available upon request, because anything else smells DEEPLY of a racket — no transparency, no accountability, and no sureness of anything for the patient except that they’re going to be told not to worry their pretty little heads about something that’s only for GROWNUPS to know.

  2. The answer to some of this is to quit thinking in terms of ICD-10 / HCPCS coding. We don’t think of a business this way. Some expenses are ongoing, others are one-time expenses.

    Consider what an accountaint calls an operational expense, such as Salaries. Then there’s capital expenses, plant and equipment. I’ll leave aside interest expense, it’s not germane to this debate but it’s there.

    The most profitable surgical operation is a quintuple heart bypass, far and away, nothing else even comes close. To perform such an operation, a hospital needs to construct a special, much-larger surgical theatre to contain the heart-lung machine and the surgical teams. There’s a huge surplus of these surgical theatres in the USA: they’re found in surprisingly small hospitals. To capture heart bypass profits, hospitals had to build them, huge capital outlays, but because it only takes a few such operations to recapture those expenses, they’re built anyway.

    Here’s how perverse it’s gotten. Often, you’ll hear the opponents of Gummint Health Care saying Canada sends patients to the USA. It’s true: Canada sees this surplus of open-heart surgical capacity and sends its citizens down here. Now Canada has fine cardiac surgeons and theatres, but why should Canada build more when the USA has a staggering surplus of (usually) physician-owned speciality hospitals?

    This phenomenon is also true of many other profitable surgical procedures: bariatric surgery, orthopaedic surgery. Got an arthritic knee? We’ll saw it off like an old u-joint in your car and put in a replacement. Won’t lose weight? Fine, we’ve got a surgical replacement for your lack of will power. Though it’s not always a surgical procedure, pain management has also become a hugely profitable speciality.

    Part of ACA is a ban on the building of new Speciality Hospitals.

    I’m not sure we’re ever going to fix health care in the USA: it’s a fallacy to think it’s the sort of thing we can fix through legislation. The market incentives are perverse, the market can’t fix this either. Since the invention of sulfa drugs and good anaesthesia, we’ve come to believe our physicians can Fix Us. Well, now they can, to a surprising degree. But we’re still mortal. We wear out. We don’t do the maintenance and upkeep we’d give our cars. Even if we do everything right, exercise, don’t smoke, get checked for this ‘n that, prostate cancer checks and the like, we’re still going to die of something.

    Physician heal thyself. This isn’t something we can fix from the outside. I’ve watched people get into medicine, the long years of education and residency, the nights of being on call, the ongoing struggle to stay current, it’s a truly noble profession. But somewhere along the line, every specialist in every profession runs the risk of losing sight of why they’re in that line of work. I know consultants to specialise to trouble. I did it for years, myself. I found a technology which always led to expensive trouble for those who bought it. It was almost criminal how much I charged these people to patch up these systems. It was work I hated but it paid so well I felt I had to do it: putting kids through college wasn’t cheap.

    Now I do what I want to, for half my former billing rates, because it’s easier on my conscience and I’m doing the right thing. I wonder what it will take for physicians to seize control of the financial reins of their own profession.

    • Thanks for this comment, Blaise, expressed in your inimitable manner. I have nothing to argue with, and didn’t know that bit about the ban on new specialty hospitals in the ACA.

      • You may find this of interest:

        Under the Affordable Care Act, Dec. 31, 2010 was the last date on which new specialty hospitals could be certified to participate in the Medicare program. Some recent developments in Dallas — where 10 percent of the nation’s specialty hospitals are located — suggest that the healthcare reform law intervened just in time to prevent an explosion of these cost-raising facilities across the land.

        Specialty hospitals increase healthcare costs because their physician investors have an incentive to refer patients to them. In contrast, federal regulations prohibit traditional hospitals from offering anything of value to physicians in return for referrals.

        Over the past decade, Congress has wrestled with this problem, while full-line hospitals have lobbied the lawmakers to prohibit construction of more specialty facilities. The hospitals have pled that the specialty competitors are draining off their most lucrative procedures while not having to provide ER or trauma services or charity care. After a 3-year Congressional moratorium on the specialty hospitals ended in 2006, the number of these facilities jumped from 100 to 260.

        Despite the opposition of many hospitals to facilities owned by physicians, some healthcare systems decided it made more sense to partner with doctors than to fight them. In Indianapolis, for example, St. Vincent’s, one of the four major Indy systems, partnered with a cardiology group to build a heart hospital. In Dallas, Baylor Health System and physician investors opened several specialty hospitals, and 20 percent of Baylor’s $3.5 billion in annual revenue now comes from these facilities.

      • I would complain of the premise that gastric bypass surgery is performed because patients are bad people of poor character.

  3. I haven’t had time to read the whole post or even the comments yet, but I’ll say I agree with this:

    “[Aside: Can I just grouse briefly about an unrelated point? What an unfortunate failure of our creative minds that we couldn’t come up with a better name for our current economic woes than “the Great Recession.” It has all of the rhetorical oomph of Malt-O-Meal.]”

  4. Quoting press releases written by the company itself? *eyeroll*
    HCA, the company that refuses to actually brand its hospitals because it has such a bad rep? That company?
    I’ll refrain from making further comments on its bribability (vendors, not patients), as one might legitimately claim I have a conflict of interest.

    Plenty of other hospitals are doing fabulously well. But they aren’t publically traded, so nobody writes press releases for them, that subsequently get published as “reporting.”

    (note: I have no way of knowing whether actual reporting was done in this instance.)

  5. Great post. I am highly doubtful of PPACA to be able to tame this beast. (how many times have we’ve had the ‘doc fix’ already, even without it?).

    (oh, and one of my signal preoccupations is the pair of traffic light within a few hundred feet on Penn Ave by the US Capitol between 3rd street and Constitution that are anti-synchronized so you have to stop at both of them.)

  6. Task-based billing is fine when we’re talking about professional services which lend themselves to a high degree of predictability of what time and other resources are necessary. Something that cannot be identified with clarity at the outset is not something that lends itself well to standardized task pricing.

    Contractors and doctors both use task-based billing paradigms. The difference between hiring a doctor and hiring a contractor, though, is that when a contractor encounters an unexpected problem that will need extra materials and labor to solve, work stops until contractor and customer agree on terms. (Well, in theory, anyway.) Doctors render the service needed, and typically will settle up with a third party like Medicare or an insurer after the fact. The cost to the patient is invisible, and indeed as Dr. Saunders has pointed out on these pages before, it’s often invisible to the doctor rendering the care as well.

    The alternative is time-based billing. Lawyers and CPAs use time-based billing a lot, but that’s becasue they can never really be sure what kind of animal just walked in their doors. If I ask the Doc to burn warts off my hand, he can know in advance how much time it will take and how much liquid nitrogen and swabs are needed to get the job done. So I get billed per wart rather than per minute.

    Obviously a time-based billing paradigm would be a huge shift in the way the medical profession is set up, but it can be imagined. I suspect that there would be two strategies: one having doctors spend much more time with patients to ring the bell up, and the other having doctors spend even less time with patients to cram more visits in a particular amount of time, and seeking margins of economy with delegating work to lower-billed but higher-margin treatment rendered by nurses, aides, and techs much the same way lawyers shift work to paralegals.

    The second model is the one that I suspect would wind up prevailing at the end of the day. The hypothetical law firm of Arrogant, Expensive, and Condescending LLP bills its lawyers at $400 an hour and pays them a compensation package equivalent to $150 an hour for their work. 62.5% is a good margin, of course. But, AEC bills its paralegals at $95 an hour and pays them $20 an hour. A margin of 79% is better than a margin of 62.5%. So AEC’s incentive is to maximize the amount of work done by paralegals rather than attorneys — keep enough attorneys around to adequately supervise the work done by paralegals and to do the work that only attorneys can do, but the ideal is an attorney who spends all day supervising (and billing to supervise) a squadron of paralegals.

    Given that under the task-based billing regime presently prevailing in the medical profession, the incentives are to delegate taking vitals and history to support staff, I’d expect that after a shift to a time-based billing system, the logic of delegation to lower-paid, higher-margin subordinate workers would quickly win out. It’s far from obvious if analogizing this to medicine would render healthcare better or worse. Depends on the quality of the support staff in question, I suppose.

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