I blog about free markets in medical care and transparent pricing.
A woman recently received treatment for a scorpion sting in the Chandler Regional Medical Center emergency room in Phoenix and was billed $83,000, $80,000 of which was for the new anti-venom serum, Anascorp. You can read the article about it here.
If you are distracted by what her insurance paid and what she still owes and the “out of network” comment at the end, you need to pay more attention to this blog. This is scandalous, but not because her “insurance” company didn’t pay enough on this claim. Actually, part of the scandal is that the insurance paid as much as they did on this claim! Let’s break it down.
Chandler Regional Medical Center (if you guessed that they are “not for profit” you get a gold star) refused to disclose how much they paid for this new drug, prior to marking it up to $40,000 per dose. Would it surprise you to find out that they paid $3750 for the drug? Actually, the patient received two doses, so they have $7500 in drug cost to recover. So they marked the cost of the drug up 10 times. Insurance paid a little over $50,000 and the hospital, needing another $25000 from the patient to not make a profit, is aggressively billing the patient.
Making sure that everyone has insurance is the answer? So shake-down artists like this hospital can be guaranteed a great haul on every heist? If you aren’t angry yet, read this link about what the drug costs in Mexico where it was developed and how Uncle Sam’s bringing the FDA to the table has driven up the cost.
Cui bono? You know the drill by now. Hospitals make a haul from patients who pay them. Hospitals make a haul from patients who don’t pay them, too, through the uncompensated care scam. They benefit the extent to which they claim they lost. Like a reverse-Enron. Their uncompensated care rebate is maximized to the extent that they claim they didn’t collect on bills. Now you see why they price this drug so aggressively. The hospitals also are raking in such huge profits that they need to claim ridiculous losses (gotta have ridiculous bills for this) to maintain the fiction of their “not for profit” status.
Insurance companies? Bills like this represent their excuse for driving up premiums every year. Brokerages that sell insurance products receive commissions based on the amount of the premiums, so you know they are fighting their tears when they tell you about your higher rates next year. Insurance companies will also “back charge” group insurance plans for “repricing” claims. In this woman’s case, the insurance company will get a percentage of the amount they “saved” the group plan by reducing the hospital payment from $83,000 to $57,000. Can you see now why the insurance company actually loves hospitals that charge like this? One insider has told me that the majority of the insurance company profits come from this “repricing” scam, not from premium collection.
The FDA granted the exclusive distribution rights for this drug to a Tennessee company called “Rare Disease Therapeutics.” Understand they don’t make this drug. They distribute it. Like beer. How do you think they got this gig? Thank you Uncle Sam!!
I have an idea. Since the drug can be profitably sold in Mexico for $100, why don’t we directly import it and pay them $200? That’s just not how we do things is it? Not nearly enough “cui bono’s” when you do it this way, I guess.
G. Keith Smith, M.D.