Wow of the Week: Big-money nonprofit hospitals get roasted in Brill’s TIME piece

Time magazine cover 3/4/13

Initially, it might seem that Steven Brill’s expose’  in the March 4 issue of TIME is dredging up some of same issues we’re used to hearing about healthcare – that the U.S. spends more than any other nation but doesn’t deliver better outcomes, and that patients have no idea what they’re buying or how much it’s going to cost them.

But read beyond the headline and the first few paragraphs and you’ll find a real gem in  Brill’s overarching theme that even today’s connected and engaged patients are still relatively powerless in the framework of care that the healthcare industry has built. Technological advancements are making healthcare more expensive, he argues, and the industry has riled people up so much about who is and who should be footing the bill for medical care that it’s distracted people away from the real question we should be asking — Why are the bills so high?

Brill, a writer and the founder of CourtTV and American Lawyer magazine, undertook a seven-month investigation in which he went line-by-line through the medical bills of eight patients who had received various kinds of care, from cancer treatment to a visit to the emergency department, some with and some without insurance.


In the bills that patients received, Brill found that they were being charged ludicrous amounts for things that cost hospitals dollars and cents, like gauze pads, blankets used during surgery, and generic household drugs. Whereas Medicare would only reimburse MD Anderson Cancer Center around $20 for a chest X-ray, for example, the hospital billed an under-insured patient $283.

And apparently, there’s no standard process behind markups on hospital services. Brill points to the chargemaster as the culprit. It’s an internal list hospitals keep of the thousands of items they charge for, but after he asked several different hospitals’ administrators how they determined the prices on that list, he determined that “there seems to be no process, no rationale, behind the core document that is the basis for hundreds of billions of dollars in health care bills.”

The hospital’s hard-nosed approach pays off. Although it is officially a nonprofit unit of the University of Texas, MD Anderson has revenue that exceeds the cost of the world-class care it provides by so much that its operating profit for the fiscal year 2010, the most recent annual report it filed with the U.S. Department of Health and Human Services, was $531 million.

The profit margins of these huge nonprofit hospitals is feeding the problem by enabling them to gobble up physician practices and smaller hospitals in their areas, leaving patients with fewer choices and insurers with less power to negotiate prices. Not to mention the six- and seven-figure salaries top hospital executives are being paid.

Obamacare, he says, won’t fix these problems. Rather, Brill suggests lowering the age for Medicare eligibility.

As currently constituted, Obamacare is going to require people like Janice S. to get private insurance coverage and will subsidize those who can’t afford it. But the cost of that private insurance – and therefore those subsidies – will be much higher than if the same people were enrolled in Medicare at an earlier age. That’s because Medicare buys health care services at much lower rates than any insurance company. Thus the best way both to lower the deficit and to help save money for people like Janice S. would seem to be to bring her and other near seniors into the Medicare system before they reach 65. They could be required to pay premiums based on their incomes, with the poor paying low premiums and the better off paying what they might have paid a private insurer. Those who can afford it might also be required to pay a higher proportion of their bills – say, 25% or 30% – rather than the 20% they’re now required to pay for outpatient bills.

Meanwhile, adding younger people like Janice S. would lower the overall cost per beneficiary to Medicare and help cut its deficit still more, because younger members are likelier to be healthier.

He makes mention of a single-payer system but focuses his proposed solution instead on tightening anti-trust laws for hospitals, taxing the profits of so-called nonprofit hospitals, outlawing the chargemaster and pushing for tort reform, so that doctors don’t have to “order a CT scan whenever someone in the emergency room says the word head,” as one hospital administrator put it.

If you don’t have time to digest 11 pages of investigative reporting this weekend, at least watch the extended interview Brill did with Jon Steward on the Daily Show.