# 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:** 14
**Page:** 3
### Author:  [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)
#### Post date: [March 5, 2020, 7:37pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/42 "2020-03-05T19:37:03Z")
> [@Whack-a-Mole](#):
>
> 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)
Civil contracts are very different from your tax bill with the local and federal governments.
> [@Whack-a-Mole](#):
>
> 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).
Not what I said. What I said is there is no difference in your taxable income whether you inflate the price and take the bad debt, or if you just book the revenue at the true realizable amount. So the claim that people inflate the price to take the write-off makes no sense.
> [@Whack-a-Mole](#):
>
> 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?
I’m sure that there is a lot of overhead costs that get allocated to delivering that aspirin to the patient, such as, the in house pharmacist cost, the nursing costs, the indirect overhead costs, etc. etc. If they bill the full $30 and it goes uncollected then they write off the $30.
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### Author:  [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)
#### Post date: [March 5, 2020, 7:44pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/43 "2020-03-05T19:44:42Z")
> [@Omar\_Little](#):
>
> Civil contracts are very different from your tax bill with the local and federal governments.
Seems to me their tax returns would be great evidence in discovery for a civil suit. “You say the movie made no money but your 2015 tax return says you made lots.”
> [@](#):
>
> I’m sure that there is a lot of overhead costs that get allocated to delivering that aspirin to the patient, such as, the in house pharmacist cost, the nursing costs, the indirect overhead costs, etc. etc. If they bill the full $30 and it goes uncollected then they write off the $30.
So can you take a tax write off if you really suck at business?
Hospital-A can deliver an aspirin to a patient for $0.10/pill. Hospital-B costs $30/pill.
Can the IRS tell Hospital-B they can only write-off $0.10?
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### Author:  [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)
#### Post date: [March 5, 2020, 8:03pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/44 "2020-03-05T20:03:29Z")
> [@Whack-a-Mole](#):
>
> Seems to me their tax returns would be great evidence in discovery for a civil suit. “You say the movie made no money but your 2015 tax return says you made lots.”
Sure you might be able to get the tax returns, but generally the movie deals around paying different parties a share of the profits have very explicit details on how the term profit is defined within the contract, which has nothing to do with how the government defines taxable income.
> [@Whack-a-Mole](#):
>
> So can you take a tax write off if you really suck at business?
>
> Hospital-A can deliver an aspirin to a patient for $0.10/pill. Hospital-B costs $30/pill.
>
> Can the IRS tell Hospital-B they can only write-off $0.10?
Yes, you do not have to pay taxes in the US if you make no money. Look at Amazon. For the first 15 years they made no profits and racked up losses, which for tax purposes you can carry forward for a certain period of years. So recently when they became profitable, they were able to offset that years profits with the past years loss carryforwards and did not pay any taxes. This not just some special perk just for Amazon. All US businesses can do this. It’s written into the tax code.
In your Hospital-A versus Hospital-B examples why should you limit B from writing off the whole $30?
For the sake of your examples lets assume that hospitals are not intending to make a profit on the aspirin, that their charges equal their costs. And that neither hospital can collect their bill from the patient.
Hospital A
Revenue - $0.10
Write-off - (0.10)
Costs - (0.10)
Net loss of hospital A - (0.10)
Hospital B
Revenue - $30.00
Write-off - ($30.00)
Costs - (30.00)
Net loss of Hospital B - (30.00)
If you limit the write-off of Hospital B to (0.10) then their loss is reduced to (0.10) when they are a shitty business manager and they actually lost (30.00). This would introduce the concept of the taxing authorities essentially taxing companies based on the best in class. _Yeah, you had an okay year, but GE had a much better year than you, so we’re going to tax you what we taxed them_. Never work.
Hospital A:
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### Author:  [@Melbourne](https://boards.straightdope.com/u/Melbourne)
#### Post date: [March 5, 2020, 8:45pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/45 "2020-03-05T20:45:01Z")
> [@Omar\_Little](#):
>
> This would introduce the concept of the taxing authorities essentially taxing companies based on the best in class. _Yeah, you had an okay year, but GE had a much better year than you, so we’re going to tax you what we taxed them_. Never work.
It is done, to a limted extent, by the tax authorities here in Aus, for income tax, and for cash-economy areas, and for building/construction work (which is no longer mostly cash). Just part of the normal enforcement: “you are obviously lying, so we we aren’t going to accept those elements of your tax report”.
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### Author:  [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)
#### Post date: [March 5, 2020, 8:51pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/46 "2020-03-05T20:51:08Z")
> [@Melbourne](#):
>
> It is done, to a limted extent, by the tax authorities here in Aus, for income tax, and for cash-economy areas, and for building/construction work (which is no longer mostly cash). Just part of the normal enforcement: “you are obviously lying, so we we aren’t going to accept those elements of your tax report”.
That’s not what we’re talking about. In the US if you get audited and the amounts your reported are shown to be fraudulent or even by mistake, you can be assessed taxes on the difference and even fined.
But what we’re talking about is just being a poor business owner. If you lose money, and others are more profitable. You can’t be taxed because you are bad at running a business.
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### Author:  [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)
#### Post date: [March 5, 2020, 10:13pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/47 "2020-03-05T22:13:33Z")
> [@Omar\_Little](#):
>
> Sure you might be able to get the tax returns, but generally the movie deals around paying different parties a share of the profits have very explicit details on how the term profit is defined within the contract, which has nothing to do with how the government defines taxable income.
Forrest Gump was one of the most profitable movies ever made and the [person who wrote it got nothing](https://konvexity.wordpress.com/2013/01/12/what-accounting-lesson-winston-groom-learned-from-the-movie-forrest-gump/) because he was to get a share of the profits and the movie company told him they made no profit. Some time later they settled in court.
> [@](#):
>
> In your Hospital-A versus Hospital-B examples why should you limit B from writing off the whole $30?
This is dancing around the point. Doubtless companies love this level of obfuscation. They can always spin it like you are to make things seem perfectly normal.
Bottom line $30/pill for aspirin is ridiculous. Why do hospitals charge that if insurance pays a fraction of it? So they can sue Joe No-Insurance? For tax purposes? Maybe charitable purposes (some write-offs are bad debt…people who will not/can not pay and some is deemed “charitable”…think homeless).
They are not doing this by accident or on a whim. They are charging that because, somehow, it makes sense for them to do so.
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### Author:  [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)
#### Post date: [March 5, 2020, 11:49pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/48 "2020-03-05T23:49:46Z")
> [@Whack-a-Mole](#):
>
> They are charging that because, somehow, it makes sense for them to do so.
Because as it seems, some portion of their payor mix will pay the $30. For another portion of the payor mix, they’ll pay a discounted amount of the $30. While another portion of their payor mix will pay nothing.
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### Author:  [@Melbourne](https://boards.straightdope.com/u/Melbourne)
#### Post date: [March 6, 2020, 2:43am UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/49 "2020-03-06T02:43:55Z")
> [@Omar\_Little](#):
>
> That’s not what we’re talking about. In the US if you get audited and the amounts your reported are shown to be fraudulent or even by mistake, you can be assessed taxes on the difference and even fined.
>
> But what we’re talking about is just being a poor business owner. If you lose money, and others are more profitable. You can’t be taxed because you are bad at running a business.
Let’s say one hospital delivers at $0.10, and another delivers at $30.00. What does the IRS know? Do they know so much about your business that they know you are bad at business? Or do they just see that you are cheating on taxes? My point, which is mine, is that sometimes my tax department just makes the determination that the $29.90 is because you are cheating on taxes. It’s often on a sector wide-basis, or in response to a certain kind of tax fraud. And yes, it does burn.
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### Author:  [@dauerbach](https://boards.straightdope.com/u/dauerbach)
#### Post date: [March 7, 2020, 8:19pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/50 "2020-03-07T20:19:10Z")
[quote=“Little\_Nemo, post:38, topic:848753”]
I don’t think a hospital can arbitrarily declare any price for its services.
No, actually they pretty much can: [How much does gall bladder surgery cost? $5,865 or $94,897? - ClearHealthCosts](https://clearhealthcosts.com/blog/2014/04/much-gall-bladder-surgery-cost-5865-94897/)
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### Author:  [@Sdowiat](https://boards.straightdope.com/u/Sdowiat)
#### Post date: [April 7, 2020, 12:41pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/51 "2020-04-07T12:41:16Z")
Tell me if you think I’m wrong here but doesn’t the fact that not every patient is a paying patient but the cost HAVE to be recouped SOMEWHERE if the hospital is to stay in business. So the bills gets inflated on the patients who ARE paying.
Then we all scrutinize our bills wondering why they claim aspirins cost $5 each, or they charge us for a whole box of rubber gloves instead of just the ones they wore when we really shouldn’t be surprised… The cost for unpaid for services has to be paid from somewhere.
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### Author:  [@naita](https://boards.straightdope.com/u/naita)
#### Post date: [April 7, 2020, 1:29pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/52 "2020-04-07T13:29:35Z")
> [@Whack-a-Mole](#):
>
> Forrest Gump was one of the most profitable movies ever made and the [person who wrote it got nothing](https://konvexity.wordpress.com/2013/01/12/what-accounting-lesson-winston-groom-learned-from-the-movie-forrest-gump/) because he was to get a share of the profits and the movie company told him they made no profit. Some time later they settled in court.
Hollywood uses completely different tricks than what is hypothesized here for hospitals. Check out the Wikipedia on [Hollywood accounting](https://en.wikipedia.org/wiki/Hollywood_accounting) for details, but billing fictional amounts and deducting losses is not one of them. The closest you get is making up costs, but that’s about how profits are defined in the contract, not what it is for tax purposes. Another method is billing fictional amounts and paying them to entities you own. It’s the same or similar to how international companies shift profits between countries. Or how you can run a non-profit and profit. (Own the services they use and overcharge/overpay.) But again, it’s not what is suggested here for medical services.
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### Author:  [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)
#### Post date: [April 7, 2020, 5:28pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/53 "2020-04-07T17:28:04Z")
> [@RioRico](#):
>
> 1. Because they can.
> 2. Because all that fancy equipment didn’t come cheap.
> 3. Because rates are probably still set by a private committee of AMA members.
> 4. Because they know the total won’t be paid, so a huge loss can be posted for tax purposes.
You’re wrong about the taxes
> [@DinoR](#):
>
> Your neighbor was subsidizing their care as well even if they weren’t in a room near his.
This is pretty much it. They charge some ridiculous amount for two reasons. Insurance companies want to get a discount so hospitals have to give them one.
Some people subsidize those that can’t pay.
> [@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?
If you never included the receivable into income, you don’t get to reverse it out when it doesn’t get paid.
> [@Whack-a-Mole](#):
>
> So, you are telling me that we can discern the actual cost of medical services from their tax returns?
Yes, it is usually referred to as expenses.
> [@](#):
>
> 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?
The accounting department in every company has to be able to substantiate every expense. If they are deducting the cost of purchasing aspirin, they have to keep track of that. They do NOT take the $30 charge applied for an aspirin, deduct $0.01 and declare a $29.99 profit. There are too many other expenses associated with delivering that aspirin to the patient.
> [@](#):
>
> 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?
Unless the insurance company wants to show up at the hospital and figure out that the patient needs an aspirin, go get the aspirin, bring it to the patient, and monitor him for any adverse reaction that the aspirin might have, they have to pay for it.
> [@Whack-a-Mole](#):
>
> 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).
Yeah it doesn’t work that way.
> [@](#):
>
> 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?
The hospital simply doesn’t include it in revenue. Their expenses are already baked in.
> [@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.
>
> 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.
The IRS doesn’t care what they charge. Why would they?
> [@Whack-a-Mole](#):
>
> Seems to me their tax returns would be great evidence in discovery for a civil suit. “You say the movie made no money but your 2015 tax return says you made lots.”
>
> So can you take a tax write off if you really suck at business?
>
> Hospital-A can deliver an aspirin to a patient for $0.10/pill. Hospital-B costs $30/pill.
>
> Can the IRS tell Hospital-B they can only write-off $0.10?
Yes. You can only expense actual expenses.
> [@Sdowiat](#):
>
> Tell me if you think I’m wrong here but doesn’t the fact that not every patient is a paying patient but the cost HAVE to be recouped SOMEWHERE if the hospital is to stay in business. So the bills gets inflated on the patients who ARE paying.
>
> Then we all scrutinize our bills wondering why they claim aspirins cost $5 each, or they charge us for a whole box of rubber gloves instead of just the ones they wore when we really shouldn’t be surprised… The cost for unpaid for services has to be paid from somewhere.
This is a big part of it.
But a lot of it is driven by insurance companies. You ever try to buy drugs from CVS without insurance? The retail price of something that costs $300 might be $10 with insurance. Insurance companies insist on a discount and in order for it to really be a discount some poor schmuck without insurance has to actually be charged that amount.
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### Author:  [@md2000](https://boards.straightdope.com/u/md2000)
#### Post date: [April 7, 2020, 10:02pm UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/54 "2020-04-07T22:02:14Z")
The cost of the aspirin in a hospital is like the cost of a steak at a restaurant. Someone has to take the order, someone has to cook the steak, someone has to deliver it to the table, someone has to run the cash register, and clean the tables, wash the dishes, pay for the building rental. Hence that $10 of meat translates into a $50 steak bill. Same with the aspirin. Someone has to approve it (doctor) to be sure it is not going to aggravate he patient’s situation. Usually that’s a no-brainer, but no medication is complication-free. Someone has to get it from the dispensary, someone has to deliver it to the patient, and add the notation to the chart. Then there’s the whole book-keeping to add it to the bill of items consumed by the patient. Then, as others mentioned, not only did yo consume 10 minutes total of medical professionals’ time with this, but there’s the share of the building itself, the administration staff, etc.
That does not mean it isn’t highway robbery, just that what should have been $5 or $10 for aspirin dispensing turned into $100.
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### Author:  [@Mama\_Zappa](https://boards.straightdope.com/u/Mama_Zappa)
#### Post date: [April 8, 2020, 5:12am UTC](https://boards.straightdope.com/t/why-is-the-icu-so-expensive/848753/55 "2020-04-08T05:12:28Z")
> [@enipla](#):
>
> $90,000 for one night? I suspect more like $9000. Still expensive, but I think an extra zero was involved here.
Oh no - I don’t doubt at all that the “rack rate” for that was actually 90,000.
I also strongly doubt that the hospital will collect anywhere near that much. 9,000 sounds about right to me, though I admit I know nothing of ICU pricing.
Billed amounts bear very, very little resemblance to what the hospital (and doctors) actually get from insurance, and the discrepancy is widening.
When my daughter spent 17 days in the NICU, her bill was something like 40,000 23 years ago. I don’t recall what fraction insurance paid - most, I think.
When I had my gallbladder out 10 years ago, the bill was about 40,000. They collected less than a tenth of that from insurance, and I paid a copay of about 1,200 dollars.
I have frequent colonoscopies. The doctor, the anesthesiologist and the facility all bill something like 1,500 apiece. They each get about 250 apiece. A friend’s daughter had one - and the anesthesiologist was **out of network** (which is another rant). The bill was 4,000 dollars for the anesthesiologist. Yes, **triple** the “rack rate” my provider billed for the same work. My friends were panicking. They paid 3 or 4 hundred dollars while trying to sort it out, then finally called the anesthesiologist and were told that the difference had been written off.
I have no clue whether the difference is a writeoff for tax purposes. But I can definitely see a hospital attempting to bill an uninsured patient for that full 90K.
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