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Comment by deathanatos | Hacker News Reader

I have a hard time believing and reconciling that against the cost of treatments.

E.g., I had my vocal cords looked at; took only ~1/2 hour of an ENTs time, and is a (somewhat) common and non-risky procedure. $4,000. I have no way to justify that price — I highly doubt the ENT is making $8k/hr! It was one of the big reasons that drove me away from PPOs in general: completely opaque, expensive, retroactive billing. Going to the doctors puts you on the hook for near unlimited liability.

Now, Kaiser was a nice contrast; I had the opportunity to get my wrist operated on for RSI. Somewhat invasive, would require weeks of healing, not guaranteed to be successful (it had a ~50% success rate!): $300, priced out before the operation.

(Sadly, I'm no longer with Kaiser, as they were west-coast and the rent was too high.)

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The Economist had an article about this last year [1, but paywalled, obviously]. A helpful quote though:

> As the drug industry has come back down to earth, the returns of the 46 middlemen on the list have soared. Fifteen years ago they accounted for a fifth of industry profits; now their share is 41%.

An example of a middleman firm is Express Scripts (a prescription management / negotiation firm) which had an operating income of $5B in 2017 on revenues of $100B. The parent company Cigna (NYSE:CI) handles a broader array of insurance things and had an operating income of almost $10B in the last twelve months but on revenue of $160B.

Medical billing in this country is insane and full of inefficiency. A little bit of each part gets collected along the way, and it adds up. I don’t even think ExpressScripts would have been counted in the methodology that The Economist was using (excess profits are considered a >10% return on capital) as part of Cigna.

[1] https://www.google.com/amp/s/amp.economist.com/business/2018...

Only 25% of hospitals in the US are for profit. 56% are non profits, and the rest are run by the government.

https://www.kff.org/other/state-indicator/hospitals-by-owner...

NYTimes article, so may be pay-walled; but it sorta seems like non-profit hospitals in many places really do make money: https://www.nytimes.com/2020/02/20/opinion/nonprofit-hospita...

I see this confusion come up in just about every discussion about non-profits.

“Profit” and “income” are two entirely different things. All businesses, whether for-profit or non-profit, aim to generate income (i.e make money) so they can further their goals.

Profit is when you take that income and distribute it to shareholders. The main difference between for-profit and non-profit companies is that non-profits cannot do this.

The distinction of “non-profit” means a lot less than most people assume it does.

But one of the ideas of being a non-profit (atleast in my mind) is that they are driven by idea of service to the community. It seems like a lot of hospitals are structured as non-profits, but really with a profit motive (not community service) with the profits being funneled to individuals and stake-holders (in manners that take advantage of the law!).

Basically it's hard to reconcile the fact that hospitals are "non-profit" while also charging what seems excessively for everything.

I haven't looked through financial statements of one of these hospitals, but does anyone else have any experience with doing so and do they actually see that hospitals do need to charge those enormous amounts for everything to run effectively or to survive?

Sure, hospitals have a mission of providing a service to the community. They treat patients.

Non-profit does not mean volunteer. It doesn't mean they don't make money. It never has. Non-profits are businesses. They operate like businesses. Any impression you had that they do anything differently is a misconception.

It is common for people to equate the word "profit" with "making money", and therefore mistakenly assume that "non-profit" must mean they don't make money. But the word here is specifically referring to the ownership of the organizations net-assets: all assets belong to the business itself, rather than it being the equity of shareholders.

Non-profit only means that the company must use it's property for its own organizational goals, and it does not have owners that the property can be distributed to.

> I haven't looked through financial statements of one of these hospitals, but does anyone else have any experience with doing so and do they actually see that hospitals do need to charge those enormous amounts for everything to run effectively or to survive?

From a link someone else posted elsewhere in the comments:

> Median operating margins reached 1.7% in 2018

https://www.modernhealthcare.com/providers/operating-margins...

in Madison, WI about 10 years ago, one of the local, non-profit hospitals plunked down $140M cash to build a new wing. didn't ask for donations, or take a loan. non-profit does not mean you don't make money...

Quite probably the physician got 10-20% of that supposedly charged amount, possibly less, and from what (s)he received was paying a variety of expenses including a billing person to deal with the insurance company.

If you have the procedure codes that were billed you can likely look up the Medicare reimbursement rates for them. Private insurance would pay more than that, but not orders of magnitude more.

You've explained the problem in healthcare well: 80-90% of the cost of seeing a physician is not seeing the physician.

Your ENT saw a tiny fraction of that.

He billed 4K. The contracted rate he got from an insurer is significantly below that. A huge chunk of that disappeared to malpractice insurance before he got to paying the rest of his overhead.

He saw, as another poster said, maybe 15% of that.

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