The cost of health care and the impact of special interests: three stitches in a knee, $2229.11.

During much of November, 2013, Republicans in Michigan's Legislature were pushing for a bill that would grant virtually complete immunity to any medical provider involved in the treatment of any patient admitted through a Hospital ER or obstetrical unit.  We published an analysis of this continuing effort (this was the third year it has been pushed), documenting the wealth of medical, economic and legal opposition to the bill. We also documented the state of malpractice litigation in Michigan and the thoroughly documented fact that potential liability for mistakes does not drive up the cost of medical care in Michigan.  We also published yet again the statistics demonstrating that special interest legislation justified by false claims of "frivolous lawsuits" has already decimated the right of legitimate victims of professional negligence to seek reasonable redress.

The true cause for our burgeoning health care costs was partially illuminated in a recent article authored by Elisabeth Rosenthal.  She started by highlighting what it cost five patients for the simplest of Emergency Room interventions:  A 26 year-old who gashed a knee at a family barbecue was billed $2200 for three stitches; a toddler who suffered a very small gash on her forehead after diving from the couch to a coffee table incurred a bill for $1696--for skin glue with no stitches.   A young uninsured public relations guy was charged $3,355.96 for five stitches to sew up a finger he cut while peeling an apple.  A Florida resident was charged $2,000 for three stitches needed to treat a dogbite, while 22 year-old Chlesea Manning of Port Huron, was billed almost $3,000.00 for six stitches she needed after a trip and fall.

The long article published by Rosenthal documented the fact that because of reduced competition, consolidation of services in for-profit private systems,  lack of market competition, contractually enforced confidentiality, bloated administration and political influence, hospital billings have become extremely arbitrary, unregulated and exorbitant. The Journal of the American Medical Association concluded that hospital charges--now averaging more than $4,000.00 per day for an inpatient--are "the largest driver of medical inflation."

Most hospitals charge in accordance with a "chargemaster" or in-house price list which is confidential, except in California where public disclosure has been mandated.  Even in California, some systems manage to hide their charges by contractually requiring insurers to agree not to disclose negotiated discounts to insured employers.  Among the noteworthy documented expenses disclosed in California were California Pacific Medical Center's standard charges for simple vaginal delivery, $5510 (plus $731 for each hour of labor and $137 for each bag of IV fluids, among other "incidentals"); $20.00 for a codeine pill that costs 50 cents at Rite-Aid, $543 for a breast pump kit that costs $25 on-line; and $4495 for an abdominal CT scan that costs $400.00 at an outpatient facility three blocks away. The billing for a two-night stay to insert a cardiac catheter was $117,000.00...and didn't include fees for the cardiologist or radiologist.  No wonder two of three bankrupcies originate in a medical emergency.

Economists with health industry experience were quoted extensively on the reasons for the high cost of hospital medical care, which they explained are extremely variable, basically arbitrary and sometimes literally unfathomable.  The codeine that costs $20.00 and the bag of IV fluid for which Cal Pacific charges $137, are charged at $1.00 and $16.00 by the neighboring University of California San Francisco Medical Center.   Yet UCSF charges almost three times as much as Cal Pacific for an amniocentesis.  Compounding the mystery are billing entries like that appearing on the charges for the toddler's minor forehead wound:  $529 for "supplies and devices"--apparently the gauze with which the glued wound was wound, adorned by a pink cartoon sticker.

The young marketing man's finger wound cost $1800 for ER services, $628 for wound repair, $571 for "application of a finger splint," $97 for a tetanus shot and $311 for administration of the shot.  When a Lansing 2 year-old received six stitches at Sparrow, his charge included $145.20 for "pharmacy:"  a spoonful of ibuprofen and local anesthetic.  In an ER setting, simple blood count and electrolyte tests that are reimbursed to outside labs at less than $10.00, cost $259 and $293 on the Cal Pacific price list.

The article pointed out that ERs have actually become moneymakers for hospitals:  a group of Texas doctors is opening a free-standing "emergency room" not affiliated with any hospital, in order to reap the benefit of regulations and insurance agreements that sanction higher payment in ER settings than is allowed in urgent care facilities.  Nor are these charges essential to pay for care provided to uninsured, indigent patients.  It was noted that in California (the only place where these numbers are systematically gathered and published) the average hospital spends only 2.07 percent of its revenue on indigent or uninsured patients. The hospital with the highest percentage of indigent patients spent 5% of its income on those patients--but charged paying customers less than its competitors charged.    At Cal Pacific with the highest charges, only 1.27 percent of revenues were spent on indigent or uninsured patients.  On the other hand, the parent corporation of Cal Pacific, Sutter Health, employs 28 officials who "earn" more than a million dollars per year.  The CEO earns $5 million dollars per year.  As one wag explains, "Non-profit means that the profit goes to administrators instead of the owners."

Does higher cost mean better outcomes?  Not according to an article in the respected Annals of Surgery.  The authors found that hospitals with higher prices tend to have more complications, not fewer.  Rosenthal's article noted that UCSF, a nationally-ranked academic institution that treats illnesses of relatively higher severity, actually charges less than its suburban neighbor, Cal Pacific.  One economist quoted in Ms. Rosenthal's article explained that if hospitals are paid more, they simply find not treatment-related ways to spend the money and that core treatment doesn't change:  The Institute of Medicine calculated that "excess administrative costs accounted for about $190 billion of the $2.5 trillion medical bill of the United States in 2009."

Perhaps the only good thing about the special-interest "reforms" that are denying fair compensation for victims of negligent health care is that with this "red herring" removed from the discussion, we can have thoughtful public discourse about the genuine causes of bloated medical care.