Originally Posted by orlmiata
why medical bills are killing us
I finally got around to reading the paper you linked to.
It contains much which is emotionally-charged, but when you dig through that into the data, it's quite telling.
The first two pages of the paper tell the story of a guy who received cancer treatment, and spends a lot of time implying that the facility in question was imposing outrageous markups on the medications and supplies which it furnished. But then, buried at the end of the first paragraph on the third page, is this:
Although it is officially a nonprofit unit of the University of Texas, MD Anderson has revenue that exceeds the cost of the world-class care it provides by so much that its operating profit for the fiscal year 2010, the most recent annual report it filed with the U.S. Department of Health and Human Services, was $531 million. That’s a profit margin of 26% on revenue of $2.05 billion, an astounding result for such a service-intensive enterprise.
Actually, 26% profit margin isn't very much at all, even in a service-intensive enterprise, especially since they're defining profit margin as Revenue - Expenses (gross) margin, rather than the more meaningful net margin.
Back when I worked for Harris in the studio systems division, our target was 50% gross margin on all products and services, and those departments that knew what was good for them figured out how to exceed that. Shortly after I left, in fact, my old department was shut down and the whole office closed because we routinely failed to meet margin targets (we tended to average around 35-40%.) Now, that was an abnormally high target for a service business, but then we were coming from a manufacturing mentality run by former software execs who are more accustomed to 90% gross margins.
All in all, it's a pretty ordinary number. Most businesses would be content with a 26% gross margin, but it would certainly not set them apart in the annals of Wall St.
The rest of the article continues in much the same way, giving a very superficial overview of various hospital bills without actually providing any context for them, nor addressing anything resembling a root cause as to why, in point of fact, the cost of administering healthcare in the US is in fact rather higher than in most other western nations.