Prices and Reality

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It seems sometimes that the medical system is a collection of people telling whoppers to each other.

Health-care providers tell the insurance company that a procedure or a thing costs a bunch of money. The insurance company tells the consumer that the price is something completely different. The doctor tells the patient that she doesn’t really discuss money, that the money discussion has to take place with the business person in the office, or the insurance company, or the employer who agreed to the stipulations of the insurance plan….and on and on and on.

David Lazarus of The Los Angeles Times wrote an article citing such a case, about a $65,514.97 hospital bill for a hysterectomy that was then reduced by “$34,526.39 as a ‘hospital discount to patient.’ ” He added: “The total cost billed to Blue Shield was thus $30,988.58.”

Prices and Reality

So how much did the procedure cost? Lazarus wondered, too.

“If Cedars can still make a profit billing about $31,000 for a laparoscopic hysterectomy, what’s that $65,000 initial charge about? Why is the hospital inflating its bills by more than 50%? What’s the actual cost of the procedure?

“I spoke with several gynecologists to find out. Not one said they knew the true cost of performing a laparoscopic hysterectomy. Each hospital sets its own price, they said.”

What’s wrong with this picture?

Blue Cross, the patient’s insurer, covered the entire bill, except for $400 on her deductible. Which is probably part of the reason that the patient didn’t complain: if the out-of-pocket costs to the consumer are just $400 out of a $65,000-plus bill, should she not be happy?

Or should she be unhappy? To me, it’s not clear if that $30,988.58 charge is real, either. Especially the part of the bill that constituted a $509.60 charge for “administration, processing.”