[FoRK] Accidental theorist lost, wanted back

Stephen Williams sdw at lig.net
Thu Jul 16 14:35:21 PDT 2009

J. Andrew Rogers wrote:
> On Jul 16, 2009, at 10:12 AM, Stephen Williams wrote:
>> I'm personally aware of several very common medical situations that 
>> extract 3-20x as much money and services as is necessary.  This is in 
>> addition to inflated retail prices vs. negotiated insurance company 
>> prices.  The retail prices are, I'm sure, used to inflate costs of 
>> uninsured, medicare, etc.
> If these healthcare services are grossly over-priced by integer 
> factors, then why are the profits for most segments of that industry 
> unambiguously mediocre?  The only companies that make a decent profit 
> in the healthcare sector are pharmaceutical companies, and even there 
> the profit is not outrageous by any stretch of the imagination.
> Why is it so hard for companies to turn what is nominally an 
> outrageous markup into a decent operating profit?
> J. Andrew Rogers
First, it's not cool to have too much profit.  Managing not to have 
profit keeps people from insisting that you lower prices.  It is easy to 
soak up profit in salaries, bonuses, and other perks.  [1]  If you want 
to see how profitable business really are, count all pay above $200K/hr. 
or so as company profit, along with any perks or benefits over $500/mo.

I think because of bounding possible malpractice and potential profit, 
most doctors are in small companies.  There are inherent inefficiencies 
in renting, staffing, and operating an office.  And if it operates at 
less than capacity, profit goes way down.  And since most of these are 
privately owned, how can we even be sure how profitable the industry is 

That doesn't even address the issue of salary competitiveness, 
soundness, etc.  The main points I'm making are that many office visits 
are unnecessary, inefficient, too expensive, and often not very timely.  
(Yes, we're better than Canada et al, but still could be better.)

Hospitals have a whole different, and apparently worse dynamic.  Their 
costs are somehow crazy.  I heard recently that the average cost to stay 
in a hospital for a day in California is $12K.  The fact that an aspirin 
costs $12 or whatever reflects crazy burdening.  That kind of cost 
recovery points to something being out of whack.  Allowing hospitals to 
privatize does not seem to have worked out well at all.  Time for 
non-profit hospitals again?

Look at the costs to use an MRI machine: There is little labor involved, 
which isn't that particularly skilled.  A small bit of electricity.  And 
an expensive machine that is often underutilized.  The results are 
electronic and only require an Internet connection to deliver to the 
doctor.  Instead of $1500 per scan, I bet Costco or Walmart could do it 
for $200 and make a tidy profit, running the machine 24 hours.  They 
cost $3M [2], and $200/hr. x 24 x 365 is $1.752M per year.

[2] http://wiki.answers.com/Q/How_much_does_an_mri_machine_cost_a_hospital


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