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Hospitals, like physicians, get paid by seeing lots of patients and doing lots of procedures.  They can either be for profit, in which case they are obliged to maximize shareholder returns (ie profits).  Or they can be non-profit.  Over the past several decades, both for profit and not for profit hospitals have generated very high gross operating margins.  Non-profits use these high margins to open new facilities, buy new equipment, or pay high salaries to their staffs.

Hospitals serve patients, but there are several distinct areas where their interests are not aligned with the patients they serve.  Most patients (my definition here is more than half) have decent, quality experiences.  But many do not.  Where we’ve come to assume predictable quality and a clear, transparent quality to price relationship in every other service we consume, this is virtually absent in hospital services.  Worse, because patients are often unaware when an error adversely impacted them, and because very little data on errors or other meaningful quality measures is reported to the public, hospitals have little external pressure to optimize quality.

So few do.


“The evolution of the hospital has reflected a clear and consistently understood vision.  That vision looked inward toward the needs and priorities of the medical profession.  Inward toward the administrative and financial needs of the individual hospital. Inward toward the body as mechanism opaque to all but those with medical training.  And away from that of patient as a social being and family member.”

Charles E. Rosenburg, Harvard historian, from The Care of Strangers; The Rise of America’s Hospital System

Hospitals generally bill insurers, and have the same win/lose struggle with them as specialty physicians.  Every dollar paid to a hospital is one less dollar in profit for the insurance companies, and vice versa.  Depending on the local market conditions, size of the hospital, the hospital’s brand strength, and the presence of other insurers in that market, the leverage could favor either the hospital or the insurer, and the insurer’s fee schedule for that hospital will reflect accordingly.

Even though hospitals generally bill insurers, almost all patients pay some portion of the hospital bill in deductibles and co-pays – often a large portion.  Unfortunately, hospitals don’t feel an obligation to bill using descriptions of the services and products provided that a normal adult can understand, which often leaves patients very confused and often questioning whether or not they received all the services billed for.  Error rates on hospital bills have been estimated as high as 90% and the errors are rarely in favor of the patient.  And the situation is far, far worse when a hospital bills the patient directly (instead of through the insurance company) if they are out of network for that insurance plan, or deliver what the plan considers an excluded benefit, since they then submit their charge master rates, which are almost always absurdly inflated and no reflection of the usual and customary rates the hospital actually expects to be paid.  Ill prepared patients end up overpaying by 70% or more and often remain ignorant that they’d done so.

Perhaps the most clear example of where hospitals and patient’s interests clash is the ‘informed consent’ document.  Originally designed to objectively and clearly lay out your treatment options, too often the Informed Consent process has morphed into something much darker.  Not all hospitals use the Informed Consent process to tip the scales decisively in their own favor, but some do.

At it’s worst, this is a document that hospitals (and in some cases specialty physicians) give to a patient that says, in essence;

  • Really bad things could happen to you. We’ll try our best, but we’re ultimately not responsible for a bad outcome.
  • While we think we know the procedure we’re about to do, we’re not sure we won’t need to do something else once we get started, so you’re agreeing now that we can do whatever we think is best without seeking further approval from you or your Proxy.
  • We’re going to get paid for everything we do. If your insurance doesn’t cover it, you’re agreeing to pay the balance.

That, my friends, is the ultimate CYA document.


“Another thing we could do is scrap the legalese and make it an accessible document (or video) that has legitimate comparisons of the multiple approaches.  Imagine an informed consent before a stent in a patient with stable coronary artery diseases that made it clear that the stent did not prevent heart attack or death, and, at three years, there would be no difference in chest pain.  Don’t get mad.  This is the evidence.  And evidence belongs on the informed consent.”

John Mandrola, MD in Right Care Action Week – Un-informed Consent

And what makes this even worse is that many hospitals and specialty physicians don’t tender an Informed Consent document in advance.  They wait until the last possible moment (immediately before or even after admission, or well into a pre-procedure prep process) when the patient is both emotionally compromised and extremely hesitant to ‘disrupt’ the process by reading, let alone questioning, the unbalanced and hospital-favored nature of the language.  This last element is compounded when the hospital or specialty provider has designed a process that includes having a relatively low-level staff member, such as a nurse’s assistant or an admissions clerk, tender the document to the patient.  Under those circumstances, the only immediate answer to any patient question or challenge of the terms is ‘Oh, this is just a standard procedure’, or ‘I can’t answer your question, but we can’t proceed if you don’t want to sign the document’.  So what happens if you suffer the result of a preventable error?  Or the provider decides, mid procedure, to do another procedure that happens to be an excluded benefit under your insurance plan?  Or, mid procedure, another physician is asked to consult, and that physician isn’t in your insurance network?  The hospital and specialty physicians lawyers will be standing there with a copy of your signed ‘Informed Consent’ form, reminding you that they told you in advance that all of these things might happen, and you agreed to them.

The professional associations for hospitals are well organized and have fairly active lobbying efforts on capital hill. This was clear in PPACA legislation, which significantly decreased the number of ‘charity’ patients by insuring them. The income from these formerly uninsured patients essentially dropped straight to the hospital’s bottom line, since the expenses were already being incurred.   Legislation to require a ‘give back’ in the form of lower reimbursements was severely hampered by the hospital associations’ lobbyists.


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