March 22, 2009

Hospital Oligopoly

In a NY Times article, How do Hospitals get Paid?, author, Princeton Professor, Reinhardt, speaks candidly about the different associated fees that hospitals charge.

1st fee- Is that of Medicare where the government pays based on the condition of the elderly under a flat fee- which can change through levels of persuasion from hospital administration about how much of a percentage of risky (expensive hip replacements) patients that come in with Medicare(especially if based on govt. payments per dollars a day).

2ND fee- Fees that accrue from private insurers which Reinhardt assures readers that "On average these payments exceed the hospital’s cost of providing the underlying services and that these profits cover the losses hospitals book on serving Medicare and Medicaid patients, who are billed high prices but often do not pay their bills in full".

Through these different fees each hospital has a different range of fees and therefore each has its own unique charge master. Strangely, the author points out three discoveries: that these varying cost of medical services have nothing to do with the quality that one receives at their hospital, Medicare is considered a price setter and that charge masters are not visable for the public.

Why are medical services so expensive? Well according to those that believe in free market rather than government help, who do you think?

Correct me if I'm wrong...
Hospitals aren't really a monopoly in this case, but are being given monopoly power through funding of medicare & medicaid fees. The ammount of funding comes from the approach of persuasion that the hospital has when government & hospital staff negotiate. The thing is negotiation power for govt. funding may be considered a weak argument f hospitals incur more costs with these elderly programs and assistance to lower income than they would without them. Perhaps its the regulations that government puts toward private insurers such as the required ammounts that insurers must pay to certain hospitals. So it may still be negotiation power, but from this article that suggests higher profits from private insurers perhaps the most profitable negotiation is cohersion of a third party.To clarify( hopefully), I just mean that insurers are the ones that fund more money towards hospitals because hospital negiators lobby for more government regulations to increase their profit margin and that because ( I wonder if price discrimination applies here) government is using force in this situation rather than finding funds through taxpayer revenues private insurers are increasing their costs as well to transfer some of their revenues to hospitals at inflated prices.

The last point that Reinhardt introduces in this article is that the charge masters are not visable to the public. This I would say would be more speculative than my own take on this situation b/c its so generalized but what is a blog for I guess. Perhaps because if people did see the prices perhaps there would be government blame for medicare and medicaid than what exists presently since prices seem to change much more rapidly or perhaps the fear of removing this oligopoly power for the various hospitals' sake.

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