Originally posted at Columbia Journalism Review on March 5, 2013
Steven Brill's taboo-busting X-ray of the US medical system, "Bitter Pill," has a chance to reframe the way we think and talk--and report--about healthcare costs.
In a penetrating, systemic, and long (36 pages) look at medical care , US style, for Time magazine, with tale after tale of the financial miseries befalling the system's victims, with number after number bolstering his analysis, Brill zooms in on the nation's unrealistic and destructive healthcare costs--why they exist and persist.
Brill, a journalist and an entrepreneur, offers the media a rare chance to move beyond the fence that usually corrals this discussion. High healthcare costs are spawned by a powerful ethic in American medicine that is too often nurtured by the press, an ethic that dictates that the medicine men--doctors, hospitals, and drug companies--sit at the right hand of God and deserve all they can get. Brill's article crashes right through that fence, in fact, and provides the stuff for further productive reporting.
"When we debate health care policy," he writes, "we seem to jump right to the issue of who should pay the bills, blowing past what should be the first question: Why exactly are the bills so high?" Precisely. Brill gives us some answers, too, not based on quotes from the self-serving players we hear from so often in this dreary debate, but based on serious investigation .
The waste at nonprofit hospitals: Waste in the US system is the recurring theme throughout Brill's piece. The sacred cows he slaughters are the country's nonprofit hospitals, which he holds largely responsible for much of the overspending. When McKinsey, the consulting firm, examined hospital financial reports with the help of a Bank of America survey, it found, as Brill put it:
The 2,900 nonprofit hospitals across the country, which are exempt from income taxes, actually end up averaging higher operating profit margins than the 1,000 for-profit hospitals after the for-profits' income-tax obligations are deducted. In health care being nonprofit produces more profit.
Brill dissects some of these nonprofit places of healing--from the world-famous MD Anderson Cancer Center in Houston to less well known facilities, such as Stamford Hospital in Stamford CT--by showing, with real live bills from patients, the absurdity of some of their charges. For example: a $77 charge for one box of sterile gauze pads. Or consider this: $18 for a single diabetic test strip. Amazon sells a box of 50 for $27.85, about 55 cents a strip. In hundreds of small and midsize cities across the country--the American health care market has transformed tax-exempt "nonprofit' hospitals into the towns' most profitable business and largest employers, Brill reports. (Indeed, that latter point often makes it tough for local reporters to tackle these institutions.)
But Brill goes beyond the obviously absurd charges and examines where they come from--the chargemaster, an uber-list of prices each hospital keeps for every possible treatment and service. It governs what patients are actually charged and what payers actually pay. The chargemaster is phony and utterly flexible; it bends according to the negotiating leverage of hospitals and insurance companies when they joust for the final prices.
Brill describes the elaborate games that hospitals and payers play in determining who gets what discounts from the chargemaster, which result in an inequitable patchwork payment system. The leverage of the biggest of the big hospitals and insurers determines which patients are charged more or less depending on their carrier's negotiating skill. As Brill demonstrates, that leaves plenty of room for hugely inflated prices, which in turn make it possible to pay over-the-top salaries to hospital executives.
Few patients know about the chargemaster and its amazing flexibility. Even hospital execs profess ignorance. When Brill asked for a chat with the CEO of Stamford Hospital to find out more about a patient's bill, a spokesman replied that he doubted the CEO "has even seen the list in years. So I'm not sure why you care." Most top hospital execs refused to talk when Brill inquired about their charges. Instead he got blah-blah comments from communications operatives.
But supposedly nonprofit hospitals are accountable to the public. They get generous tax exemptions in return for giving community benefits that can range from health fairs to free care for the poor. Some reporters have tried to investigate these community benefits, and they often run in to the same stone wall as Brill did. It makes you wonder to whom these institutions are accountable.
Handcuffing Medicare: Perhaps the biggest public service Brill has done is give credit where credit is due--to Medicare, an efficient social insurance program that is the only thing that keeps the hospitals and doctors in check and deserves far better press than it has gotten. Brill's comprehensive reporting on Medicare could be a game changer, switching the conversation from cutting Medicare and cost-shifting (to beneficiaries), to helping Medicare do its job even better.
By carefully parsing so many hospital bills from non-Medicare patients and comparing them to how much less Medicare would have paid, Brill shows what happens when the government gets involved in the price of care. The price goes down. One hospital charged a patient $333 for a particular X-Ray. Medicare pays $23.83.
The government's involvement is what healthcare sellers fear, and that opposition has prevented a more rational discussion of alternatives to a bloated system.
Doctors and hospitals may grumble about Medicare's lower reimbursement, but as Brill notes, most still treat Medicare patients. "Hospitals don't lose money when they treat Medicare patients," says Jonathan Blum, Medicare's deputy administrator, whom Brill interviewed for his piece. (Take a look at all the billboard and TV advertising--often focused on the elderly--that hospitals spend a fortune on, partly to attract Medicare patients.)