Up, up, away

Hospitals seem to use routine health tests as profit-generators.

December 23, 2012 

Now here’s a strange conundrum regarding America’s expensive and often confusing health care system: At a time when Republican lawmakers (and some Democrats) speak of the need to cut entitlement programs, including Medicare, in the name of cost savings and debt reduction, it turns out that there are some curious customs when it comes to paying for routine medical tests.

These customs also happen to be expensive, presumably driving up the costs of health care, including Medicare.

The News & Observer and The Charlotte Observer in April published a five-part series showing how non-profit hospitals in North Carolina have become tremendously profitable. Many of the hospitals pay executives over $1 million in annual compensation, have huge cash reserves, have used their power in the market to drive up payments from insurers and have shown little tolerance for patients who don’t pay, going after them with collection agencies and lawsuits.

Then, in September, the newspapers published stories demonstrating that the larger hospitals are inflating prices of cancer drugs (two to 10 times over cost), which puts patients in a jam because those hospitals provide a lion’s share of cancer care. There’s not much room, in other words, for comparison shopping.

Testing “cows”

In a story published Sunday, the newspapers brought to light another source of revenue that’s helped pad those big profits even more, and in this case, it’s a similar melody with different lyrics.

It seems that hospitals in this state and in others are, more and more, buying up physicians’ practices. The advantage for doctors is that they are relieved of paperwork and also of some bad hours. They can draw from more sources to cover them when they’re out of pocket, and they can be directly connected to modern facilities.

And for the hospitals? It turns out the practices can help grow a cash cow: expensive diagnostic tests such as heart screenings (echocardiograms, for example) were shown by the newspapers to be far more expensive through a hospital-owned practice than they are through a private doctor’s office. So it follows that as the hospitals buy more practices, they’ll get more money from the tests.

These tests, of course, are the same, regardless of whether they’re done through a private doctor or a hospital practice. And yet, consider that Medicare pays hospitals about 80 percent -- 80 percent -- more for some routine tests that it does for those performed in private offices. The excuse or rationalization is that hospitals have more overhead, basically, which is true. But that doesn’t justify the magnitude of the difference.

Helping the indigent

And another reason from hospitals, for the higher payments to them, is that they have to cover care for those who cannot pay at all.

Interesting, except the hospitals’ high profits would seem to indicate their higher charges are not exactly about survival. They seem to be about making a buck, lots of bucks, through an insurance system that rewards big institutions more than it rewards private practices the same exact test. On what planet does this differential make any sense?

Medicare, that health program for the elderly that politicians say may have to be cut to reduce the deficit, is a lifeline for millions of older Americans. Too expensive, say the pols. And yet it’s OK for hospitals to collect inflated fees (remember those cancer drugs?) from Medicare because...because they can.

It appears the program itself perhaps should not be on the budget-cutting block. Perhaps there is savings to be had in reducing fees that appear to be excessive...and increasing.

Oh, yes, increasing. Because this story is yet another reminder that America’s health care system is driven by the pursuit of profits, and any such system is by definition going to continue to get more and more expensive.

So let’s ask the question one more time: How exactly is this good for patients?

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