Thank-you for attempting to educate this old hermit on the subject of the drug pricing program. As I am slow at digesting complex subjects, I will read your work again over my morning coffee. Hopefully, I will comprehend the subject to a great degree.
The goal of the healthcare system is to provide full employment to spreadsheet jockeys and lobbyists.
I ‘m personally in the 1% doing a fake email job in this industry and that’s my observation working both the private and government side of this for 15 years.
Providers, suppliers, and insurers dance their dance. Sometimes one wins and sometimes one loses (we get paid to try and make sure our clients win more often, but people just like us at the other entities are paid to do the same).
States try to rip off the Feds. The feds occasionally do something back to the states. Shit always tends to end up in the federal balance sheet because it’s the entity that cares the least about its own debt. CBO scores are total garbage and I’d be embarrassed to publish that nonsense.
I worked in a hospital business office for almost 22 years. My reimbursement analyst job was to confirm inpatient payments for accuracy. I never had to drill down far enough to get to this BS. Good. God.
Excellent commentary! To partially answer a question you asked in your piece, one way hospitals know your income is by applying for financial assistance. Non-profit hospitals are required to have a certain amount of financial assistance, based on the size of the hospital. The application requires quite a bit of personal financial disclosure.
Thank you for introducing us to Dan Snow and his Price Points blog. Dan provides a good picture of the impact of outpatient drug and 340B pricing on revenue, but he stops short of discussing their impact on hospital margins, probably because data are not readily available. Since CMS implemented their inpatient and outpatient prospective payment systems many years ago and commercial payers, piggy-backing on CMS reimbursement structures, have pushed hard for years to reduce these rates, hospital margins for these services have decreased significantly.
In contrast, outpatient drugs have become major profit centers for hospitals. Dan's example of a $7K gross margin on Keytruda from commercial payers, augmented to $10K with 340B pricing, is a good example. It doesn't cost anywhere near $7K for hospitals to acquire, store, and dispense the drug; it probably costs less than $700, their gross margin on Medicare patients without 340B pricing. As a result, outpatient infusion therapy has become one of the most profitable clinical services hospitals offer. For cancer hospitals, outpatient infusion therapy can account for the bulk of their net income.
Furthermore, as Dan points out, the margin hospitals earn is directly related to the cost of the drug, giving them an incentive to dispense higher cost drugs and go slow in substituting lower cost drugs like biosimilars.
There was a time when oncologists could administer chemotherapeutic drugs in the private outpatient setting. Hospitals lobbied this out of exitance. And costs soared. The solution is to further complicate, mandate, legislate and and obligate physicians to ever lower reimbursements. This is sure to improve physician quality and morale. (Sarcasm of course.)
Hospitals are about as far from their commitment to the stakeholders as not-for-profits as they can maneuver. No hospital administrators with their growing bureaucracies are suffering from crashing compensation.
The present government run, entitlement driven healthcare system spends as spendthrifts do with ever decreasing amounts of these precious healthcare dollars ever reaching the the very basis of care, a doctor and an individual patient.
Medicare is on its way to insolvency, Medicaid is on its way to insolvency and the ship that will sink first is the most important one, that of the patient and doctor.
Thanks for the description of this program. Obviously, this is yet another market failure that can be resolved only by implementing another government program.
Very insightful into a purposefully complex system of rules.
How about, when one goes into hospital, one submits not only one's insurance documents, but also a FAFSA? :-)
That day is coming. More and more programs are based on income, as if income were stamped on our foreheads at birth.
New literature - "The Riomet Letter", "Of Price And Men", "A Tale of Two Pharmacies", "The Call Of The Bilked".
Thank-you for attempting to educate this old hermit on the subject of the drug pricing program. As I am slow at digesting complex subjects, I will read your work again over my morning coffee. Hopefully, I will comprehend the subject to a great degree.
The goal of the healthcare system is to provide full employment to spreadsheet jockeys and lobbyists.
I ‘m personally in the 1% doing a fake email job in this industry and that’s my observation working both the private and government side of this for 15 years.
Providers, suppliers, and insurers dance their dance. Sometimes one wins and sometimes one loses (we get paid to try and make sure our clients win more often, but people just like us at the other entities are paid to do the same).
States try to rip off the Feds. The feds occasionally do something back to the states. Shit always tends to end up in the federal balance sheet because it’s the entity that cares the least about its own debt. CBO scores are total garbage and I’d be embarrassed to publish that nonsense.
I worked in a hospital business office for almost 22 years. My reimbursement analyst job was to confirm inpatient payments for accuracy. I never had to drill down far enough to get to this BS. Good. God.
Excellent commentary! To partially answer a question you asked in your piece, one way hospitals know your income is by applying for financial assistance. Non-profit hospitals are required to have a certain amount of financial assistance, based on the size of the hospital. The application requires quite a bit of personal financial disclosure.
Thank you for introducing us to Dan Snow and his Price Points blog. Dan provides a good picture of the impact of outpatient drug and 340B pricing on revenue, but he stops short of discussing their impact on hospital margins, probably because data are not readily available. Since CMS implemented their inpatient and outpatient prospective payment systems many years ago and commercial payers, piggy-backing on CMS reimbursement structures, have pushed hard for years to reduce these rates, hospital margins for these services have decreased significantly.
In contrast, outpatient drugs have become major profit centers for hospitals. Dan's example of a $7K gross margin on Keytruda from commercial payers, augmented to $10K with 340B pricing, is a good example. It doesn't cost anywhere near $7K for hospitals to acquire, store, and dispense the drug; it probably costs less than $700, their gross margin on Medicare patients without 340B pricing. As a result, outpatient infusion therapy has become one of the most profitable clinical services hospitals offer. For cancer hospitals, outpatient infusion therapy can account for the bulk of their net income.
Furthermore, as Dan points out, the margin hospitals earn is directly related to the cost of the drug, giving them an incentive to dispense higher cost drugs and go slow in substituting lower cost drugs like biosimilars.
There was a time when oncologists could administer chemotherapeutic drugs in the private outpatient setting. Hospitals lobbied this out of exitance. And costs soared. The solution is to further complicate, mandate, legislate and and obligate physicians to ever lower reimbursements. This is sure to improve physician quality and morale. (Sarcasm of course.)
Hospitals are about as far from their commitment to the stakeholders as not-for-profits as they can maneuver. No hospital administrators with their growing bureaucracies are suffering from crashing compensation.
The present government run, entitlement driven healthcare system spends as spendthrifts do with ever decreasing amounts of these precious healthcare dollars ever reaching the the very basis of care, a doctor and an individual patient.
Medicare is on its way to insolvency, Medicaid is on its way to insolvency and the ship that will sink first is the most important one, that of the patient and doctor.
Very sad indeed.
What do nonprofits do with all that extra revenue?
Thanks for the description of this program. Obviously, this is yet another market failure that can be resolved only by implementing another government program.