I don’t know - I don’t have access to the study referred to in Medscape quote ( or even to the Medscape article) and therefore don’t know how that study defined profit or cost of care. I was responding to this
They can pay people as much as they want/as is necessary and still be a non-profit. They can spend it on employee benefits or building renovations or invest it or make grants to other non-profits and still be an non-profit. One of the few things they can’t do is distribute profits to owners/shareholders because they don’t have any. BTW until 2015, the NFL ( the league itself, not the teams) was a non-profit organization.
Thanks for providing data. It’s important to note that operating margin is very different from total margin. Operating margin includes only operating revenue and not other forms of revenue, such as subsidies for indigent care write-offs. Nevertheless, while stand-alone hospitals, particularly those in rural area soften do struggle, it’s not because the cost of providing care is so high. Occupancy rates have plummeted, due in part to competition from hospital networks in bigger cities.* A whopping 75% of hospitals now belong to such a network, and those numbers are growing.
And the CEO’s of these networks are getting rewarded handsomely.
I sympathize with the smaller, independent hospitals that are truly struggling, but their struggles are not the reason you’re paying exorbitant prices for labs and medicines.
*Case in point: the independent hospital in the small rural town where I used to live. Most people drove to The City 100 miles away for surgeries and planned hospital stays because few specialists practiced in our town. So my friend with diabetes that damaged his kidneys was admitted to the hospital in The City because there were endocrinologists and nephrologists there, and our town had none. Both major hospitals in The City belonged to mega-networks.
Generally CEOs get paid what they do because they’re worth it to the organization. What if Banner Health found someone willing to lead the company $100,000 a year and because of inexperience they wound up making a mistake that cost the company $100 million?
Also, how many patients visits to spread that out? I couldn’t find that information immediately but did find that they pay out $4 billion in salaries a year. $21.6 million isn’t significant looking at it those ways.
FWIW, the CEO of a Canadian hospital gets paid around $300-800k CDN. It’s a fair chunk of change but is more than an order of magnitude below The US. It’s a tough job, and in some bigger hospitals might have an MD and an MBA. Many of them seem competent enough, but one doesn’t have access to the data to really judge.
Companies like Banner Health or Kaiser Permanente operate multiple hospitals (sometimes dozens), along with primary care clinics, nursing homes, rehab clinics and so forth. Not really the same as being the CEO of one hospital.
The CEO’s of many corporations make millions, too. And that’s my point: hospitals–even non-profit hospitals: HAVE the money to pay those salaries. And where does that money come from? (Hint; it’s not Medicare or Medicaid payments.) It won’t be long until almost all hospitals belong to a network–essentially, a large corporation. Corporate health care is the future: it’s profit-driven (even when non-profit, in which case the profit goes to yet more expansion, new building construction, etc.), cost-efficient, and very, very profitable.
That’s true, but it’s besides the point. Hospitals, as I said above, are increasingly part of networks, which essentially function as large corporations. Nobody bats an eye that the CEO of Citigroup earns $28 million a year. Citigroup makes a lot of money from its credit cards, banks, etc. Hospital networks make a lot of money, too–enough to shell out salaries like the Banner CEO’s and still turn a very, very handsome profit.
Hey, if you feel good about the money your local hospital /network is charging because you think the money’s going to a worthy cause, I won’t crush your dream. Just recognize that insurance companies are also a business, and those cost increases ultimately make their way back to you.
I was just reminded of something that applies to hospitals but not outpatient services - hospitals generally cannot discharge people without appropriate aftercare arrangements. This article is from 2012, and although it either wasn’t entirely clear about homeless shelters or things have changed*, it is still true that people remain in hospitals although they need a lower level of care because for whatever reason, the hospital has been unable to arrange for the needed care.
I know of people who have been discharged to shelters- but they didn’t need follow-up care beyond prescriptions and a follow-up appointment in a few weeks.
What I said may be beside the point you were attempting to make, but it was directly on point in response to Dr_Paprika’s comment about what Canadian hospital CEOs are paid.
Is the rise in value of assets because the networks are getting bigger or because the value of the assets are rising?
My understanding is that hospital networks have been getting much bigger recently because insurance companies were trying to play hardball by excluding hospitals from their networks who were too expensive.
We may be talking about two different networks here; there’s the hospitals that are in-network for insurance coverage purposes and there’s the network of hospitals under one ownership or operational umbrella.
This. Swedish, here in Denver, will charge you $5,000 for a CT of your neck, but only if you tell them you were hurt in a car wreck. Otherwise it’s maybe $1,200 (because they are a Level 1 trauma center and they do have some overhead). Oh, what’s a car wreck got to do with anything? Well a few years ago our state supreme court ruled the value of a medical bill, for injury claim litigation purposes, is the face value of the original bill. The other side of that argument, which has been adopted by other states, is the value of the bill is the amount the provider accepts in payment. So what this means is that Swedish noticed, “Hey, we can charge whatever we want for the service and we’ll have a good chance of getting it if it’s a car wreck, because the car insurance people can only look at the bills when they are calculating a settlement.” Prior to that supreme court ruling the cost of that CT scan was generally the same sort of number regardless of why you were getting it. They puffed the number only because they could. And Swedish wasn’t the only hospital in town to pull this, they all did. Swedish was just more adventurous in investigating how much they could charge for a CT while keeping a straight face.
And I don’t buy for one second that they’re trying to make up for deadbeats. I haven’t seen too many metropolitan hospitals that looked like they were hurting for cash. They’re just lying predators who gouge people who are in no position to shop around for the services they need.
My impression is median operating margin is the same as net profits, so a 1-2% operating margin isn’t that high. THat implies the expenses to keep a hospital running are eating up 98% of the revenue they gather each quarter.
Also people say things like ‘hospitals are open 24/7’. Yes, but how much does that affect the prices? I’ve seen urgent care clinics open 12-16 hours a day. The 24 hr grocery and 24 hr pharmacy don’t seem more expensive than the ones that close for the night. Granted, labor costs in a hospital are higher.
It’s a matter of who has to be there. A lot of times in large stores, it costs almost nothing to be open overnight - they have an overnight crew stocking the shelves and cleaning etc, so they add a cashier to stay open and pick up sales. That single, slightly above minimum wage cashier isn’t going to have a noticeable effect on prices. The 24 hour pharmacy is paying a pharmacist and a cashier or two overnight . I took my husband to an urgent care on a Sunday morning. They decided he needed an X-ray - except their X-ray dept was closed Sunday morning. Off to the hospital for an X-ray, because the hospital has an ER which means they have to be able to do X-rays, CT scans, MRIs, angiograms, laboratory tests, surgery, etc 24 hours a day. That’s what costs money- keeping all of those departments staffed, just in case. And it’s not much of an ER if you have to call in people to do these things- at that point, it’s more an urgent care located on a hospital campus.
When my son got home from a ski trip at 1:30 a.m. having fallen down a mountain, we took him to the E.R. where he had a preliminary exam, X-rays, a blood panel drawn (and analyzed), a consultation with an orthopedist, his wrist set and a cast fitted, and a prescription written and called into his pharmacy - all in about 3.5 hours.
And he wasn’t even a high-priority case.
BTW, does the 24 hour grocery have someone behind the butcher counter? In the floral department? Serving up fresh sushi? Not around here they don’t. You get limited service. That’s better than no service at all, but it ain’t fresh sushi at 3:00 a.m.
The OP stated that stand-alone medical clinics are 5X-10X cheaper than hospitals. In my state (at least, may be true elsewhere) the stand-alone ER pretty much charge on par with hospitals. This is a different animal than stand-alone clinics and the consumer was not always aware of the difference. The only difference is that “ER” is stuck somewhere on the sign and, in theory, the patient has to be advised of the fact. They are popping up everywhere. (link pops up a video news report but has text description as well)