How outrageous hospital practices drive health care costs (5×8 – 2/22/13)

What’s behind the medical device provider tax, it’s OK to love the Metrodome, the 14 year old and the things she thinks she can do, when bullying was a story, and kite skiing in Minnesota.


1) THE BITTER PILL

Time Magazine asks an important — if simple — question about the spiraling cost of health care in America this week: Why? It found, as most do, that hospitals are good at hiding behind privacy laws when it comes to discussing the bills that people get, even if the people who get them are more than willing to talk. They’re also good at driving up charges, the report says.

Minnesota’s Medtronic and its local political allies get some attention in the piece because of a profile of a man in Oklahoma City whose doctor thought he needed a RestoreUltra neurostimulator to fix an aching back. It was an outpatient procedure. It cost $89,000.


The big-ticket item for Steve H.’s day at Mercy was the Medtronic stimulator, and that’s where most of Mercy’s profit was collected during his brief visit. The bill for that was $49,237.

According to the chief financial officer of another hospital, the wholesale list price of the Medtronic stimulator is “about $19,000.” Because Mercy is part of a major hospital chain, it might pay 5% to 15% less than that. Even assuming Mercy paid $19,000, it would make more than $30,000 selling it to Steve H., a profit margin of more than 150%. To the extent that I found any consistency among hospital chargemaster practices, this is one of them: hospitals routinely seem to charge 21⁄2 times what these expensive implantable devices cost them, which produces that 150% profit margin.

As Steve H. found out when he got his bill, he had exceeded the $45,000 that was left on his insurance policy’s annual payout limit just with the neurostimulator. And his total bill was $86,951. After his insurance paid that first $45,000, he still owed more than $40,000, not counting doctors’ bills. (I did not see Steve H.’s doctors’ bills.)

The hospital wouldn’t talk, citing “privacy concerns.” It has 18 people in its “communications department.”

This situation, Steven Brill writes, is why the Obama administration wants a “device” tax on companies like Medtronic, a device tax the local pols are trying to get overturned.


The question of how sensitive patients will be to increased prices for medical devices recently came up in a different context. Aware of the huge profits being accumulated by devicemakers, Obama Administration officials decided to recapture some of the money by imposing a 2.39% federal excise tax on the sales of these devices as well as other medical technology such as CT-scan equipment. The rationale was that getting back some of these generous profits was a fair way to cover some of the cost of the subsidized, broader insurance coverage provided by Obamacare — insurance that in some cases will pay for more of the devices. The industry has since geared up in Washington and is pushing legislation that would repeal the tax. Its main argument is that a 2.39% increase in prices would so reduce sales that it would wipe out a substantial portion of what the industry claims are the 422,000 jobs it supports in a $136 billion industry.

That prediction of doom brought on by this small tax contradicts the reams of studies documenting consumer price insensitivity in the health care marketplace. It also ignores profit-margin data collected by McKinsey that demonstrates that devicemakers have an open field in the current medical ecosystem. A 2011 McKinsey survey for medical-industry clients reported that devicemakers are superstar performers in a booming medical economy. Medtronic, which performed in the middle of the group, delivered an amazing compounded annual return of 14.95% to shareholders from 1990 to 2010. That means $100 invested in the company in 1990 was worth $1,622 20 years later. So if the extra 2.39% would be so disruptive to the market for products like Medtronic’s that it would kill sales, why would the industry pass it along as a price increase to consumers? It hardly has to, given its profit margins.

It’s a very long article. Read it top to bottom. It’s one of the best pieces we’ve read in years about why health care is so expensive.

2) LOVE FOR THE DOME

No matter how big a jerk a person is in life, when his/her funeral is held, we talk not of the reality, but of the good person underneath. And so it is with domed stadiums. It has been decreed that the Metrodome will be razed after the 2013-14 Vikings stadium, to make way for the new stadium, which will cost $1 billion.

It’s OK. Go ahead and say something nice about the ‘dome. It’s acceptable now and nobody will notice that you didn’t like it when it was alive. You won’t be able to tell the next generation that right over there is where the ball went over the plexiglas (really, who has an outfield wall of plexiglas?) that allowed someone to say, “we’ll see you…tomorrow night”? Right over there is where a football went wide….well, you know.

Right here is where your son/daughter pounded his/her baseball glove waiting for a foul, and looked at you like you were the hero you were for bringing him/her to a real baseball game.

Flying into the area, you spied it from miles up and away, and knew you were home.

“Everybody hated the place, but I loved it,” former Twin Kent Hrbek tells the Star Tribune (Watch the video).

And so did you. Come on. Admit it.

More sports: Matt Birk to retire from the NFL.

The least creative Kevin Garnett heckler in the history of the NBA. (BuzzFeed)

3) THE THINGS YOU CAN DO WHEN YOU THINK YOU CAN DO SOMETHING

Kathryn DiMaria can’t get her driver’s license for another two years, but that hasn’t stopped her from building the car of her dreams. She’s rebuilding a 1986 Pontiac Fiero that she bought with $450 in babysitting money.

4) MINNESOTA NICE?

Alec Fischer of Edina was bullied since he was in elementary school. He finally made the film, “Minnesota Nice,” when a friend died by suicide. Now a college freshman, he’ll show the film to any group willing to watch it. The West Central Tribune says he showed it at Ridgewater College in Willmar yesterday.


Fischer urged his audience to think about all kinds of bullying. Much attention is on the bullying of gay, lesbian, bisexual and transgender students, and that’s good, he said, but people are bullied for many other reasons, which his film points out.

He pointed to the huge fight at Minneapolis South High School a week ago, which was attributed to growing racial tensions.

Fischer said he hasn’t presented to elementary students yet, and sometimes has trouble going into middle schools because of some of the foul language in the cell phone videos that open his film.

“Kids are not new to the language,” he said.

5) EMBRACING WINTER: KITE SKIING

Let’s see you do this in July.

Kite Island Snowkite Session, Feb 2013 from End of Session on Vimeo.

Bonus I: The bat ladies of 5th Avenue. (Rochester Post Bulletin)

Bonus II: We learned two things from the snowstorm that hit the Kansas City area yesterday. (1) Snowplower drivers wear short-sleeve shirts and (2) they’re a lot nicer than they could be when a newspaper reporter sticks a camera in their face and asks why they got their snowplow stuck.

TODAY’S QUESTION

The Academy Awards will air on Sunday. Today’s Question: What’s your pick for best picture of 2012?

WHAT WE’RE DOING

Daily Circuit (9-12 p.m.) – First hour: Roundtable on the state of education in Minnesota.

Second hour: The brain activity map.

Third hour: Same-sex marriage.

MPR News Presents (12-1 pm): Grammy Award-winning composer Libby Larsen, speaking at the Westminster Town Hall Forum.

Science Friday (1-2 p.m.) – A look at air quality in Fairbanks, Alaska.

All Things Considered (3-6:30 p.m.) - – Minnesota keeps more than 675 people behind bars even though they’ve served their time because there’s the possibility they’ll commit another sex offense. That raises constitutional rights questions that, over the past year, led to the appointment of two high-profile committees charged with recommending reforms to the Minnesota Sex Offender Program. But a report to the legislature released to MPR News last week shows that the program grew unchecked in 2012. Courts committed people at the same rate and the state completed two major expansions at sex offender facilities, while also stepping up security with location-tracking bracelets for offenders at a cost of $1.2 million. State consultants raised concerns about high turnover rates among MSOP staff and the slow pace of offenders through treatment and toward discharge. And Gov. Dayton has asked the legislature for $7.8 million to fund the sex offender program’s growth. MPR’s Rupa Shenoy will have the story.

  • Matt

    Time’s piece on health care is the best piece – regardless of topic – I’ve read in a very, very, very long time.

  • Kassie

    I loved the Metrodome because it was cheap and convenient. When I was in grad school I’d got to Twins games after class. I could get in for a couple bucks, buy a cheap dinner of a beer and a hot dog, watch the game while I spread out my books and laptop and do homework. It was fantastic.

  • BJ

    2) LOVE FOR THE DOME

    It’s warm inside. Going to monster truck show in January you can leave your jacket in the car, run into the building and be comfortable watching the show.

  • BJ

    3) THE THINGS YOU CAN DO WHEN YOU THINK YOU CAN DO SOMETHING

    What no face mask while sanding. Bad deal.

  • I.M.A. Flack

    My experience has been that the amount of actual communication a particular organization engeges in is roughly inversely proportional to the number of individuals in its communications department.

  • Drae

    I believe Time has only struck the tip of the iceberg. There are a number of different factors that intertwine that have created this mess, not the least of which is the willingness of doctors and patients alike in not searching for the root cause of health problems or simple remedies – mainly food allergens (I’m looking at you, gluten). What we eat could be causing a flood of health problems for millions of Americans.

    But I’m a massive sceptic on this issue, as Mr. Collins is all too aware. I question how much doctors and hospitals want us to enjoy good health because they would make a lot less money if we weren’t sick. But there is hope in that some European countries, like Italy, now screen all their children for gluten sensitivity as well as other food allergies. Perhaps this practice will come to America sooner rather than later and the reward will be reduced healthcare costs.

  • Drae

    We won the World Series not just once but twice in that Dome… That alone is reason enough for MN sports fans to have some love for the ol’ Dome. But I’m with Kent Hrbek.

  • Kat S

    The Dome is where I saw my first baseball game, my first playoff game, my first world series game. Yeah, dingy and bad sightlines and indoor in June and astroturf and the baggie– whatever. I still loved it, because it was my baseball home.

    And baseball home or not, I always loved the summer nights at the Dome when there was storm raging outside. You could catch a tiny flicker of the lightning through the roof, a bit of thunder and you knew you were warm and dry under a bubble watching baseball. And being blown through the doors outside was like exiting an airlock from a space station– or that’s what I thought at 9, anyway.

  • tboom

    Kathryn DiMaria

    THE THINGS YOU CAN DO WHEN YOU THINK YOU CAN DO SOMETHING –

    Great parenting (and uncleing).

    Too bad GM can’t do that for every interested 14 year old, regardless of skill or ability.