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How to Reduce Hospital Bills

A patient faced with high hospital bills that insurance won't cover might benefit from the information in this article. According to the Time magazine article referenced below, hospital billings throughout United States are charged at a marked-up retail price that is NEGOTIABLE and often over 10 times the actual direct cost to the hospital for a specific service. Non-profit as well as for-profit hospitals follow this practice.

The uninsured patient, or the patient whose billings exceed the limit of insurance, can negotiate, sometimes using a medical billing advocate. The appeals coordinator in the hospital billing department negotiates on behalf of the hospital.

From the hospital's point of view, the billings need to be high to allow the hospital to negotiate with powerful insurance companies that bargain down the cost more than 50%. Also the billings need to be high to allow for the costs of services provided to Medicare patients at the government's lower rates, and in rare instances to charge marked-up retail prices to wealthy foreigners who wish to use the services of US hospitals.

For comparisons to ordinary businesses, the 200% markup in a jewelry store over the direct cost of a jewel is considered to be high in comparison to the 100% markup before discounts in a clothing store. The direct profit, also called the gross profit, is then used for payment of indirect expenses like the rent and staff salaries. The remainder is the net profit that rewards the business owner for going to the trouble of running a business and for investing in it. Many retail chains make a net profit of only 3%.

Despite the more than 1000% markup of hospital billing that is often charged over the direct cost of a specific service, hospitals manage to clear overall net profits of 10% to 25% because of negotiations, failures to collect, fees charged by credit collection services, and Medicare, as well as because of indirect costs including well-paid administrative staff who sometimes make more than the MDs.

Paying the administrative staff more than MDs is controversial. It seems more reasonable to reward doctors for going to the trouble of investing years in rigorous education, then providing challenging services, than paying high salaries to administrators. Yet executives in other US industries are also paid highly.

After all expenses, hospitals’ overall bottom line net profit margins of 10% to 25% are higher than in most industries, however not out of the ballpark. The problem arises for the patients because of the distorted system for billing that has developed in the United States, driven not by doctors, instead driven by insurance companies and HMOs. Hospitals have simply responded to the severe pressures from those third-party businesses, by raising prices at hospitals so that they can be negotiated downward.

From the patient's point of view, the marked-up retail prices of hospital billings add insult to injury, crippling the patient's finances. To deal with this distorted system, the patient facing exorbitant hospital bills can negotiate, possibly using a professional advocate. Trade organizations are the Alliance of Claims Assistant Professionals at http://www.claims.org and the Medical Billing Advocates of America at http://www.billadvocates.com.

Within the next few years:

The Affordable Care Act known as Obamacare will spread costs among most Americans, with the government paying the premiums for those who cannot afford insurance. After payment of insurance premiums, victims of illness will be relieved of much of the expense of care.

However the act does not reduce the prices charged by hospitals and pharmaceutical companies. Even Medicare is not allowed to negotiate the cost of pharmaceuticals downward. Because there are no limits on insurance payouts under Obamacare and because it prohibits exclusions for pre-existing conditions, premiums will increase substantially.

Reference

A special report in the March 4th, 2013 edition of TIME Magazine named "Bitter Pill."

For remarkable graphics explaining the cost of care:

http://healthland.time.com/2013/02/20/what-makes-health-care-so-expensive/


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      How to Reduce Hospital Bills

     A patient faced with high hospital bills that insurance won't cover might benefit from the information in this article:

http://climatehealth.org/ReduceHospitalBills.html

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Further Information

      For a listing of the contents of this website:

      Site Map, for further articles, for slides taken from Sylvester’s donated presentations, and for his resumé.