Wednesday, May 20, 2009

Parsing Health Care Costs

I read Judith Graham's blog Triage in the Chicago Tribune this morning. It describes "three little stitches" that cost $900 for a patient that cut her finger using a kitchen knife and went to Sherman Hospital's "Urgent Care Clinic," rather than the emergency room:
When the bill came, the amount initially seemed reasonable. The medical center charged her $383.40, and Blue Cross and Blue Shield of Illinois paid $228.10. Rutke was left with a bill of $155.30.

But when a second bill arrived from Greater Elgin Emergency Specialists, Rutke blew a fuse. The doctor’s group that had attended to her at the immediate care center charged an additional $545.
And now, doctors are seen as the bad guys.

But when we itemize the costs for for those stitches, where's the money going? Here's just a portion of the "costs" inherent to our current health care system:
  • Facility costs
    • Rent/mortgage/lights/security/phone/soap dispensers/restroom supplies, website, electronic medical record, etc.)
    • State regulatory requirements
    • Federal regulatory requirements
  • Staffing costs:
    • Front desk clerk (to assure proper demographics are entered to assure payment and perform initial triage)
    • Nurse (to fill/refill prescriptions, evaluate post-operative wounds, dressing changes, etc.)
    • Billing/collections staff (Assure proper billing/forms completion/credentialling of staff/manage accounts receivable/contact insurers/work denials)
    • Doctor (ultimate responsibilty for care delivery - covers nights/weekends - must carry malpractice insurance)
  • Insurers
    • People to answer phone
    • People to assure primary insurer pays their part (often Medicare) before the secondary insurer (them) pays theirs
    • Managers to hire/fire workers, negotiate with hospitals/employers
    • Senior managers and board members (who else will talk to the share-holders?)
  • Suppliers
    • Supplier of sutures, sterile supplies, pharmaceuticals (like local anesthetics), tetanus toxoid, and possibly antibiotics.
  • Legal/Regulatory Fees
    • Lawyers to draw up employment contracts, HR rules, Quality and Safety guidelines, defend litigation, etc.)
    • Malpractice insurance
    • Liability insurance

All this for three little sutures at $300 dollars a piece.

Yes, this is what all this costs. In fact, it might be relatively cheap, given all the overhead that some insist continue with our current broken system.

Now, imagine another scenario (not that it will ever happen, especially now). But make no mistake, this is a time of disruptive change in health care. The real question is, which portions of the above costs will patients be willing to scrap in the interest of obtaining affordable health care?



Keith Sarpolis said...


I understand what you are trying to say, but not so sure I agree totally. Aside from the costs asociated with insurance billing, most of these are called the costs of doing buisiness. They are not too different from any other buisinesses list of items they would list in their overhead other than the fact malpractice insurance takes a significant chunk of the total cost.

I would take some offense at a 900 bill for three sutures as well. Why is this facility allowed to bill for "emergent care" if it is not a 24 hour facility? Hospitals justify their high ER charges by citing the fact they stay open continuously and cater to alot of non paying customers walking through their doors. None of this likey applies to this urgent care center. Thus, a lot of the personel that need to be at the ready are not required for such an operation and the costs will be much lower.

Frankly, this is what drives me nuts about our health care reimbursement system is that it will pay a hospital an exorbitant amount of money for a procedure or service that could be handled in a primary care office at a fraction of the cost. If insurance would pay me half the cost that it paid the insurance company, I would keep suture material in my office and take care of these situations or start an urgent care center with my colleugues. But we cannot charge the huge facility fees (the first part of this ladies big bill) that a "hospital" can.

Until insurance levels the field and stops paying big medical centers for this type of non hospital type procedure and paying everyone else a much lower price, we will ocntinue to get the profligation of hospital offered services in the outpatient realm that only serve to drive up the cost of care. Insurance and goverment claims it wants to control cost, but turns around day after day and pays 2-3 times the cost of the same service to a hospital owned enterprise simply because the hospital owns it! Does this make any sense? Do you care, if you are footing the bill, if a hospital derived clinic or a privately owned urgent care center sews up you finger? You want the best value for your money! Insurance companies muck the whole situation up by paying the larger organizations higher reimbursement regardless of whether they do a better job or not, but simply because they can leverage their size. The end result of such a policy will eventually be extremely expensive hospitals that charge more than your basic community hospitals, gobbling up these community hospitals (how can they compete when they are getting paid less for their services) into their networks, effectively eliminating the competition and further driving up the cost of medical care. Witness what has happened in Boston where it was discovered that the pedominant insurer was paying Partners Health Care (better known as Mass General and Beth Israel hospital) more than competing hospitals and with less favorable quality indicators to boot. What did Partners do with all the extra loot? They opened clinics and bought community hospitals to further extend their tentacles. And each time they do so, they turn the old hospital over to their new and more expensive cost structure. In time, Partners could totally contol the Boston health care market; just see what happens to costs then!! You might be able to think of a similar situation in your own helath care market if you think really hard as well.

So 900 dollars for three sutures IS outrageous for just this reason.

ShrinkingDoc said...

It is sort of messed up. I work in urgent care. I can suture a tiny lac for $5-600 or more, which, if my nurses are good and have everything ready, takes me 5 minutes. I can spend 30 minutes or more with complicated medical patients and maybe bill half that. Procedures definitely pay. Good for guys like you!

DrWes said...


Don't forget the 90-day global period after surgery. All care related to the laceration, whether complicated or not, is included in the original doctor's fee. Bizarre if you ask me, but that's the way it's done.

I agree that third party payers add disporportionately large costs (for the service rendered) to care delivery, be they private or government-run. But as long as we constantly cloak the discussion in terms of co-pays to the patient rather than actual costs, the real costs of doing health care today will remain clouded and we'll never reach a fiscally-sustainable health care delivery model.

Norco said...

These programs really help to understand much of the medical problems that occur daily, it is important that we know the importance of this series because they really spread important knowledge that helps us understand much of medicine, of course we should not believe doctors prescribe and what we need and which can be harmful to our health, then remember that it is very important to visit the doctor regularly.

Anonymous said...

I would open my office and do the same thing for 250 $ (total cost) on a sunday evening, But would the insurance pay me ? No. OK, then to ER they go !