Friday, March 12, 2010

Wasteful Healthcare Spending: Let's Stick With The Real Issues

Yet another report on wasteful healthcare spending was recently referenced on The reference was to a 2008 report by Pricewaterhouse Cooper's Research Institute. This report claims that unnecessary price gouging makes up $1.2 trillion of the $2.2 trillion spent on healthcare nationwide. That's over 50%! If we started adding up all the percentages of cost savings available to us according to these various reports, we can save well over 100% of healthcare costs in this country. Reports like this get our attention but where are the real savings to be had by addressing the issues?

In reference to the Pricewaterhouse report, Cindy Holtzman with Medical Billing Advocates of America cites some specific examples of waste: a $140 charge for a Tylenol pill; a $1,000 charge for a toothbrush; and a patient who used one bag of IV saline but was charged for 41. While these examples clearly show how ridiculous the current discounted fee for service payment system has become, they don't make a valid argument that healthcare costs can really be cut in half. The first two examples just show how meaningless hospital charges have become. Most payers don't even use them as a basis of reimbursement, and those that do, pay a heavily discounted amount from the charges referenced. Still the $1,000 toothbrush on its own is an embarrassment just like the $1,000 toilet seat the the Pentagon supposedly bought. As for the 41 IV bags that were billed in error, this points out another flaw in the fee for service system. What the report does not reference is all the lost charges hospitals endure on IV bags and other supplies because the caregiver was too busy giving care to properly enter the charge into the system.

The real issue here is that we have come up with a charging system and separate reimbursement system that are far too complex to execute. The waste here is the cost of the armies of people that hospitals engage to maximize appropriate reimbursement combined with the armies of people that insurance companies hire to delay, discount and deny claims. And each of the many insurance companies must be approached separately. Its time for some consolidation and standardization to deal with this issue.

The current healthcare reform bill being debated is really a lot more about healthcare payment reform. If we want to really address all the issues there will have to be a lot more work done. But payment reform is a good start. Let's get rid of the $1,000 toothbrushes. But while we do it let's not kid ourselves that the real savings will be of this magnitude.

More on this later.

Mark Brodeur

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