# Why is the ICU so expensive?
**URL:** https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753
**Category:** Factual Questions
**Created:** [March 1, 2020, 7:04pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753 "2020-03-01T19:04:09Z")
**Posts on this page:** 20
**Page:** 2
### Author:  [@Tired\_and\_Cranky](https://boards.straightdope.com/u/Tired_and_Cranky)
#### Post date: [March 2, 2020, 4:50pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/22 "2020-03-02T16:50:52Z")
> [@Omar\_Little](#):
>
> I don’t think you understand how tax accounting works.
Every time I hear a comment like Rio Rico’s about tax write-offs, I think of [Kramer explaining write-offs to Jerry on Seinfeld](https://www.youtube.com/watch?v=XEL65gywwHQ).
---
### Author:  [@Melbourne](https://boards.straightdope.com/u/Melbourne)
#### Post date: [March 2, 2020, 9:12pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/23 "2020-03-02T21:12:45Z")
Actual cost in Aus, about $4375 +/- $1157, AUD, so around $3000 USD, as compared to USA around $5000, but complicated by the fact that exchange rates have been changing, and data in different countries is from different years.
> **[The financial cost of intensive care in Australia: a multicentre registry study](https://www.mja.com.au/journal/2019/211/7/financial-cost-intensive-care-australia-multicentre-registry-study)**
>
> Increasing ICU size may have improved health care system efficiency
So the $9000 guess given above seems reasonable.
Interesting is that in Aus, the private payment price seems to be at the same level as the cost. So uninsured foreigners charged at around $4500 AUD (I didn’t look long enough to find a recent price list).
---
### Author:  [@EdelweissPirate](https://boards.straightdope.com/u/EdelweissPirate)
#### Post date: [March 3, 2020, 3:33am UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/24 "2020-03-03T03:33:41Z")
> [@Tired\_and\_Cranky](#):
>
> Every time I hear a comment like Rio Rico’s about tax write-offs, I think of [Kramer explaining write-offs to Jerry on Seinfeld](https://www.youtube.com/watch?v=XEL65gywwHQ).
Oh, that’s on the nose!
---
### Author:  [@RioRico](https://boards.straightdope.com/u/RioRico)
#### Post date: [March 3, 2020, 7:46am UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/25 "2020-03-03T07:46:19Z")
> [@Dewey\_Finn](#):
>
> Also I believe that most hospitals in the US are not-for-profit or publicly owned. So the whole “they can write that off” argument makes no sense to me.
Our local provider is north-central California’s biggest hospital chain, nominally non-profit. But they provide hospital services, not medical services, which are billed by the practice doing the work. Some of our surgeries have not been performed in the hospital but at a nearby “surgical center” owned by an affiliated doctor’s group, which is NOT a non-profit.
MrsRico too-recently suffered a nasty compound fracture. I called 911. Fire crew arrived and stabilized her; private ambulance crew transported her to ER. Wizard orthopedist pieced her together. Medicare and Blue Cross covered most costs but we still received co-pay bills from hospital, anesthesiologist, orthopedist, and I forget who all else. Our coverages didn’t pay everything. What happens to the difference between billed and paid amounts? If not written-off as losses, how do accountants handle it?
Would a lossy hospital be a good place to launder illegal money?
---
### Author:  [@Bear\_Nenno](https://boards.straightdope.com/u/Bear_Nenno)
#### Post date: [March 3, 2020, 8:10am UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/26 "2020-03-03T08:10:28Z")
> [@RioRico](#):
>
> Can anyone here point to how many Medicare beneficiaries don’t carry supplemental plans and so depend entirely on government programs?
[23%?](https://www.medicareresources.org/medicare-benefits/is-original-medicare-coverage-enough/)
---
### Author:  [@md2000](https://boards.straightdope.com/u/md2000)
#### Post date: [March 4, 2020, 6:38pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/27 "2020-03-04T18:38:31Z")
> [@RioRico](#):
>
> Our local provider is north-central California’s biggest hospital chain, nominally non-profit. But they provide hospital services, not medical services, which are billed by the practice doing the work. Some of our surgeries have not been performed in the hospital but at a nearby “surgical center” owned by an affiliated doctor’s group, which is NOT a non-profit.
>
> MrsRico too-recently suffered a nasty compound fracture. I called 911. Fire crew arrived and stabilized her; private ambulance crew transported her to ER. Wizard orthopedist pieced her together. Medicare and Blue Cross covered most costs but we still received co-pay bills from hospital, anesthesiologist, orthopedist, and I forget who all else. Our coverages didn’t pay everything. What happens to the difference between billed and paid amounts? If not written-off as losses, how do accountants handle it?
>
> Would a lossy hospital be a good place to launder illegal money?
IANAA but it wouls seem to me that it works like this:
Dr. Gassmee charges you $6,000 for an hour of keeping you under. Your insurance pays $4,000 and you are billed the extra $2,000 but since you never woke up, you don’t pay it. The doc declares $6000 of income and a loss of $2000 for net income of $4000 - which oddly enough, reflects reality. (I assume you thought it would be an income of $4000 and a declared loss of $2000 and only pay income on $2000 net. Nope.)
Reminds me of a fun fact in Canadian accounting. A service like a lawyer is subject to GST (VAT, basically a sales tax) currently 5%. This is due when the service is rendered under GAAP, even though often lawyers don’t get paid until the case is over which could be many many months down the road. So a lawyer has to pay on the billed amount whether they get paid yet or not. Not sure what provision there is for recouping the sales tax if they end up not getting paid - much like, what happens to the sales tax a merchant collected and owes if the customer’s cheque later bounces?
---
### Author:  [@dauerbach](https://boards.straightdope.com/u/dauerbach)
#### Post date: [March 4, 2020, 7:17pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/28 "2020-03-04T19:17:18Z")
The actual statistic is that 50% of all personal bankruptcies include medical debt, not are caused by medical debt. Big difference.
For the longest time (not sure if they still do) Medicare required that they pay no more than the lowest price accepted by the provider.
And hospital charge master prices are, for the most part, just totally made up. While no one is expected to pay them, they will try to get uninsured patients to pay it.
---
### Author:  [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)
#### Post date: [March 4, 2020, 10:36pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/29 "2020-03-04T22:36:49Z")
> [@Omar\_Little](#):
>
> I don’t think you understand how tax accounting works.
Why is this wrong? How are unpaid bills not considered a business expense? I thought business expenses could be deducted from total income thus lowering your tax bill. E.G. I had $100 in expenses and $90 in costs so I made $10. Does it matter if $5 of those costs were unpaid bills?
> [@](#):
>
> The aggregate amount for nearly 5,000 hospitals was $39.3 billion. But what about hospitals that spend the least? What about those that spend the most? Or how about hospitals at the median?
>
> The trade group reported unpaid medical bills, in aggregate, totaled 5.8% of hospital expenses. The association’s data included costs reported by 4,985 hospitals for the year 2010.
>
> SOURCE: [https://www.modernhealthcare.com/article/20120106/BLOGS01/301069983/a-closer-look-at-hospital-write-offs](https://www.modernhealthcare.com/article/20120106/BLOGS01/301069983/a-closer-look-at-hospital-write-offs)
---
### Author:  [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)
#### Post date: [March 4, 2020, 10:46pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/30 "2020-03-04T22:46:26Z")
> [@dauerbach](#):
>
> The actual statistic is that 50% of all personal bankruptcies include medical debt, not are caused by medical debt. Big difference.
Not true (well, not wrong but misleading):
> [@](#):
>
> To estimate the share of bankruptcies actually caused by medical factors, we therefore selected a sample of people who were admitted to the hospital in California and tracked information on their annual credit reports, including whether and when they filed for bankruptcy. Because we examined the relationship between when people go to the hospital and the timing of any bankruptcy, we were able to estimate the increase in bankruptcy filings caused by illness or injury, rather than the fraction of people filing for bankruptcy who happen to have substantial medical expenses.
>
> Our study was based on a random stratified sample of adults 25 to 64 years of age who, between 2003 and 2007, were admitted to the hospital (for a non–pregnancy-related stay) for the first time in at least 3 years. We linked more than half a million such people to their detailed credit-report records from the period between 2002 and 2011. The scatterplot shows the results of our analysis.
>
> The results show a clear effect of hospital admission on bankruptcy: the rate of bankruptcies rises sharply in the years after hospital admission, and this change is statistically significant (at conventional levels) both 1 and 4 years after the admission, after which bankruptcies appears to level off. This finding indicates that the expenses that result from the illness or injury that caused the hospital admission — for example, out-of-pocket medical costs and lost labor income — cause some people to file for bankruptcy. However, the magnitude of the bankruptcy effect is much smaller than previously thought: we estimate that hospitalizations cause only 4% of personal bankruptcies among nonelderly U.S. adults, which is an order of magnitude smaller than the previous estimates described above.
>
> SOURCE: [Myth and Measurement: The Case of Medical Bankruptcies](https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5865642/)
Also, there is a study cited in this article but the study is pay-to-view:
> [@](#):
>
> A new study has found that a horrifying 530,000 families turn to bankruptcy each year due to medical bills they can’t pay. In the end, it’s easier to declare bankruptcy than to allow oneself to drown in medical expenses.
>
> SOURCE: [https://www.nasdaq.com/articles/medical-bankruptcy-killing-american-middle-class-2019-02-14](https://www.nasdaq.com/articles/medical-bankruptcy-killing-american-middle-class-2019-02-14)
---
### Author:  [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)
#### Post date: [March 4, 2020, 11:01pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/31 "2020-03-04T23:01:29Z")
> [@Whack-a-Mole](#):
>
> Why is this wrong? How are unpaid bills not considered a business expense? I thought business expenses could be deducted from total income thus lowering your tax bill. E.G. I had $100 in expenses and $90 in costs so I made $10. Does it matter if $5 of those costs were unpaid bills?
Scenario 1 - I book an inflated revenue amount of $10 million, when the truly collectible amount is only $5 million. It costs me $3 million to provide these services.
Revenue - $10 M
Bad debts - ($5 M)
Net Revenue - $5 M
less costs - ($3 M)
Taxable income = $2 M
Scenario 2 - I bill and book revenue that I believe that I will collect of $5 million. It costs me $3 million to provide these services.
Revenue - $5 M
less costs - ($3 M)
Taxable income - $2 M
The tax I owe will be the same in either scenario.
**RioRico** asserted the reason that they book larger revenue amounts is so that they can get the tax write-off. You don’t get a\*\* larger \*\*tax write-off for booking inflated revenues and writing off the bad debt. So that’s not a reason for booking inflated revenue amounts.
---
### Author:  [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)
#### Post date: [March 5, 2020, 3:05am UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/32 "2020-03-05T03:05:12Z")
> [@Omar\_Little](#):
>
> Scenario 1 - I book an inflated revenue amount of $10 million, when the truly collectible amount is only $5 million. It costs me $3 million to provide these services.
>
> Revenue - $10 M
> Bad debts - ($5 M)
> Net Revenue - $5 M
> less costs - ($3 M)
> Taxable income = $2 M
>
> Scenario 2 - I bill and book revenue that I believe that I will collect of $5 million. It costs me $3 million to provide these services.
>
> Revenue - $5 M
> less costs - ($3 M)
> Taxable income - $2 M
>
> The tax I owe will be the same in either scenario.
>
> **RioRico** asserted the reason that they book larger revenue amounts is so that they can get the tax write-off. You don’t get a\*\* larger \*\*tax write-off for booking inflated revenues and writing off the bad debt. So that’s not a reason for booking inflated revenue amounts.
So, you are telling me that we can discern the actual cost of medical services from their tax returns?
How come no one ever does what you just did to tell us why aspirin can [cost $30/pill in the E.R.](https://www.foxbusiness.com/features/outrageous-e-r-hospital-charges-what-to-do)? I can buy aspirin for [$0.01/pill](https://www.amazon.com/Basic-Care-Aspirin-Regular-Strength/dp/B0779D4BTN/ref=sxin_4_ac_d_rm?ac_md=0-0-YXNwaXJpbg%3D%3D-ac_d_rm&cv_ct_cx=aspirin&keywords=aspirin&pd_rd_i=B0779D4BTN&pd_rd_r=635f3033-bb71-4960-8587-82461a476edf&pd_rd_w=AHDoy&pd_rd_wg=7Aaqm&pf_rd_p=de19e82a-2d83-4ae8-9f5c-212586b8b9a0&pf_rd_r=A26CP87NKDSGY2MS38R7&psc=1&qid=1583377169) and have it shipped to me for free. I am willing to bet a hospital can get a bulk discount but let’s say it costs them $0.01/pill.
You are telling me we can find where they get their 3000% markup in their tax returns? That they are only booking a loss of 3% on that pill and the other 2997% goes out the window?
It may be so. I would be shocked if that is what their books showed and if their books DID show that then why in the world would any insurance or the government put up with paying more than a nickle or dime per pill?
---
### Author:  [@dauerbach](https://boards.straightdope.com/u/dauerbach)
#### Post date: [March 5, 2020, 3:58pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/33 "2020-03-05T15:58:33Z")
So many things.
The government (medicare) is not allowed to negotiate drug prices.
The difference between the two scenarios is that hospitals will then widely say that they write off 5 million dollars a year as benevolence where in reality they have done absolutely nothing.
The massive problem with health care is that 30 or 40 years ago business people saw a system ripe for abuse. Hospitals used to be run by doctors, it was the rare CEO that was not an MD, and no, they did not make 7 figure salaries. It is not irrelevant that venture capital firms and hedge funds are buying both hospitals and medical practices. This is why it is so common to see a hospital that is in network, but the ER group is out of network and charges hallucinatory amounts for services. The ER network is out of network AND is owned by a hedge fund who insists on a 20% return on investment. And of course, at the point of origin is greedy physicians who found they could make millions of dollars selling their practice and still remain employed with the same income as pre-sale. Unfortunately, this greed has directly led to the kind of problems we have now.
---
### Author:  [@dauerbach](https://boards.straightdope.com/u/dauerbach)
#### Post date: [March 5, 2020, 4:02pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/34 "2020-03-05T16:02:13Z")
[quote=“Whack-a-Mole, post:30, topic:848753”]
Not true (well, not wrong but misleading):
I want to thank you. I have never been able to drill down to the original studies but you have done the work for me.
One thing I find very sad is that there are now a number of charities who are now purchasing and forgiving old medical debt that they purchase for at most pennies on the dollar. The sad part is that charity money is in my mind wasted to forgive debts that should not exist.
---
### Author:  [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)
#### Post date: [March 5, 2020, 4:50pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/35 "2020-03-05T16:50:07Z")
> [@Whack-a-Mole](#):
>
> So, you are telling me that we can discern the actual cost of medical services from their tax returns?
>
> How come no one ever does what you just did to tell us why aspirin can [cost $30/pill in the E.R.](https://www.foxbusiness.com/features/outrageous-e-r-hospital-charges-what-to-do)? I can buy aspirin for [$0.01/pill](https://www.amazon.com/Basic-Care-Aspirin-Regular-Strength/dp/B0779D4BTN/ref=sxin_4_ac_d_rm?ac_md=0-0-YXNwaXJpbg%3D%3D-ac_d_rm&cv_ct_cx=aspirin&keywords=aspirin&pd_rd_i=B0779D4BTN&pd_rd_r=635f3033-bb71-4960-8587-82461a476edf&pd_rd_w=AHDoy&pd_rd_wg=7Aaqm&pf_rd_p=de19e82a-2d83-4ae8-9f5c-212586b8b9a0&pf_rd_r=A26CP87NKDSGY2MS38R7&psc=1&qid=1583377169) and have it shipped to me for free. I am willing to bet a hospital can get a bulk discount but let’s say it costs them $0.01/pill.
>
> You are telling me we can find where they get their 3000% markup in their tax returns? That they are only booking a loss of 3% on that pill and the other 2997% goes out the window?
>
> It may be so. I would be shocked if that is what their books showed and if their books DID show that then why in the world would any insurance or the government put up with paying more than a nickle or dime per pill?
First you shifted the goal posts of your argument from talking about tax benefits and why certain companies may overinflate revenues so that they can book a tax loss…to the clarity of profit information in tax returns. Second, tax returns are not public information, so even if the tax returns did include detailed information as you suggest, you would not be able to gain access to such info. Third, any information that would be provided in the financials in a tax return or a publicly available financial statement, would be on a consolidated basis of all a hospital’s operations and not to the detail of how much they charge patients for aspirin and how much it costs them for such apsirin.
---
### Author:  [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)
#### Post date: [March 5, 2020, 4:55pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/36 "2020-03-05T16:55:04Z")
Most hospitals in the US are not-for-profit (Catholic, university, etc) or publicly owned. In that case, do tax benefits still factor into the decision making process? Do they even pay income taxes?
---
### Author:  [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)
#### Post date: [March 5, 2020, 6:23pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/37 "2020-03-05T18:23:08Z")
> [@Omar\_Little](#):
>
> First you shifted the goal posts of your argument from talking about tax benefits and why certain companies may overinflate revenues so that they can book a tax loss…to the clarity of profit information in tax returns. Second, tax returns are not public information, so even if the tax returns did include detailed information as you suggest, you would not be able to gain access to such info. Third, any information that would be provided in the financials in a tax return or a publicly available financial statement, would be on a consolidated basis of all a hospital’s operations and not to the detail of how much they charge patients for aspirin and how much it costs them for such apsirin.
I did not shift the goalposts. Many very profitable companies pay no taxes because they manage to make their accounting look like they made no money. Movie studios are notorious for stiffing people who would get a percentage of the profits by claiming a movie made no money…even if the movie was wildly successful. (Citations upon request)
You are here telling us hospitals can’t just inflate prices and then claim a write-off. At the simplest level I agree. I cannot sell you my pen for $1 million and then claim a loss of $999,999 because you only gave me $1 for it but that is because I am just some regular schmuck and the IRS would kick my ass. Clearly companies can and do get away with creative accounting (see above).
How does a hospital calculate their costs to bring one aspirin pill to a patient and get it to $30? If that patient cannot pay their bill does the hospital write it off as a loss of a penny? A nickle? A dime? Or $30?
---
### Author:  [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)
#### Post date: [March 5, 2020, 6:39pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/38 "2020-03-05T18:39:19Z")
I don’t think a hospital can arbitrarily declare any price for its services. But it can probably get away with claiming a market value.
So if one hospital claims the cost of a day’s care in an ICU is $90,000 for taxation purposes, they might get questioned by the IRS. But if they can then show that five other hospitals in the same region are also charging the same price, they can then say that their price is the market value and not just some price they made up.
---
### Author:  [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)
#### Post date: [March 5, 2020, 7:05pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/39 "2020-03-05T19:05:00Z")
> [@Little\_Nemo](#):
>
> I don’t think a hospital can arbitrarily declare any price for its services. But it can probably get away with claiming a market value.
I get what you are saying but health care costs for the same procedure can vary wildly suggesting something arbitrary about it. Certainly costs will vary some from place to place but health cost variations seem to get way outside the lines of geographic factors (e.g. more expensive in San Francisco than Butte) and local market fluctuations.
This suggests the hospitals are making shit up.
> [@](#):
>
> The cost of a vaginal delivery with insurance in Alaska is $10,681, whereas the costs without insurance total at $19,775, according to Fair Health data. The state with the lowest childbirth costs is Alabama. In Alabama, a vaginal delivery with insurance costs $4,884. A delivery without insurance, however, costs $9,013.
>
> SOURCE: [https://smartasset.com/financial-advisor/cost-of-having-a-baby](https://smartasset.com/financial-advisor/cost-of-having-a-baby)
---
### Author:  [@Jasmine](https://boards.straightdope.com/u/Jasmine)
#### Post date: [March 5, 2020, 7:11pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/40 "2020-03-05T19:11:02Z")
It’s more “mission critical”. It involves more equipment, more IVs, more nursing coverage, and more of pretty much everything else.
---
### Author:  [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)
#### Post date: [March 5, 2020, 7:17pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/41 "2020-03-05T19:17:02Z")
nm (posting went weird on me)
[Previous page](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753.md?page=1)
[Next page](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753.md?page=3)