Fifty years ago, the Arizona Daily Star ran an article about the high cost of hospital care.
The problem at the time was that hospitals didn’t itemize their bills. They charged all patients the same price per day, which meant that patients who didn’t have many tests or surgery subsidized the cost for those who did.
Computers have changed all that and now each patient pays based on the services he or she uses. And it costs a small fortune.
Let’s look at 1968. From the Arizona Daily Star, Thursday, Sept. 5, 1968:
Hospital Official Agrees With Patients; Rising Costs Hurt
By MARILYN DRAGO
Does hospital care really have to cost so much? Where does all the money go? Aren’t hospitals non-profit institutions?
These questions, and many more, are likely to dart through the mind of a newly discharged patient as he faces, in all its grim reality, a bill for his total hospital expenses.
“I was in that operating room for only 20 minutes ─ but I’m charges $50, apparently just for walking in the door to get a boil lanced. I didn’t even lie down on the operating table ─ I sat on a chair,” complains one patient.
“I paid $40 a day for a semi-private room,” says another. “Just a year ago they charged my wife $35. Now, I hear the cost of a hospital room is going up again. In New York it’s nearing $200 a day. What’s going on here, anyway?”
What’s going on here, as hospital costs continue to climb, is a “squeeze” caused by soaring salaries, higher costs nationwide and expensive technical advances in medical science.
St. Joseph’s Hospital is a good example ─
“Our salary budget is now $2.4 million a year,” explains Michael J. Harris, director of community relations. That’s almost two-thirds of our total operating budget for a year, which is set at $3.6 million right now ─ for absolutely everything, including needed expansion and new equipment.”
Registered nurses, long underpaid, now receive salaries more suited to the life-preserving qualities of their profession, explained Harris, but the raises in salary have occurred for the most part in the last year or two ─ and the end is not in sight.
“Beginning RNs will make $7,900 in New York in October,” said Harris. “Our nurses start at about $563 a month ─ but just las year they were paid $470. These abrupt salary changes are reflected in every department of the hospital. In addition, we are required by law to pay time-and-a-half for overtime ─ hours that used to be donated. Now, even if a nurse wants to give some time we cannot permit it.”
All in all, said Harris, the budget at St. Joseph’s begins with a 65 to 70 per cent chunk pegged for salaries.
Although a patient pays $40 for a semi-private room now, the actual cost to the hospital is nearing $60 a day, just to keep the bed available and all hospital services functioning. Since the 241-bed hospital is filled to capacity most of the time, a patient with, for example, pneumonia, is bearing part of the costs for another patient who spends long hours in the operating room for major surgery.
How does the hospital make up the difference?
The $60-a-day actual cost for every bed takes into account one patient’s five-minute stay in X-ray (and one picture) or several hours and dozens of X-ray exposures for another patient. When the costs are divided evenly, the one-picture patient has paid more for his share than the patient who had many X-ray tests.
Then does the hospital make a profit?
“Hospitals don’t make a profit,” said Harris. “Ideally, we hope to have something left over for improvements ─ but so-called ‘profit’ must be put right back into the hospital and equipment.”
With the huge slice for salaries removed from its budget, St. Joseph’s had, this year, $1.2 million to pay for everything else ─ and almost every penny must be used for bills.
The hospital faces bills that would choke a large hotel bookkeeping department, and then some. Food costs were $116,000 last year (St. Joseph’s serves five meals a day ─ expensive, but considered better nutritionally) and paid $84,000 for laundry. Drugs cost nearly $133,000 and maintenance cost $59,000.
Hidden expenses are apparent in St. Joseph’s bookkeeping system ─ bills again. Some 6,000 reminder bills are mailed each month, costing $28,500 annually in supplies before any salaries are paid.
Who really pays for hospitals?
“The patient who pays in cash,” said Harris emphatically. “That poor guy pays through the nose ─ for he is paying, too, for the man who didn’t, or couldn’t pay, He’s paying more than his fair share, and no hospital has yet figured out what to do about it. The money has to come from someplace or the hospital can’t continue to operate, as you can see from our budget.”
The introduction of Medicare and, in the future, Medicaid, has been a mixed blessing to hospitals, Harris said. Since government payments are based strictly on actual cost of an individual patient, hospitals have been forced to adopt better accounting procedures ─ specifically the computer, which can break down huge figures to workable amounts. “Eventually,” Harris predicted, “these computers will help hospitals charge exactly what each patient has cost ─ but right now we cannot do that for every service.”
Ideally, he said, Medicare patients would be completely paid for, but actually, they are not. “The government pays about 89 cents on the dollar. They don’t agree with us about what actual costs are.”
Who pays the difference? Again, the private patient ─ this time paying his own bill, his taxes and the balance due after his taxes have paid a Medicare bill.
“You’ve got to remember,” said Harris, “that a hospital patient is really a captive. No one wants to go to a hospital, and when he gets there he has no standard of comparison to tell him the quality of his care ─ and the whole thing is extremely expensive.”
How can the prospective patient (and nearly everyone can expect to be hospitalized sometime) protect himself from the high cost?
“Don’t go to a hospital unless you have to,” is Harris’ surprising reply. “If your doctor gives you a choice ─ in-patient for diagnostic tests, say, or out-patient, take the out-patient route. It will be cheaper and insurance will cover the same amount.”
Secondly, Harris said, good insurance coverage is absolutely essential. “You can’t count on not being sick enough to go to a hospital. Nobody can. Protect yourself with a good policy and add to it when you can afford to.”
One thing you can be sure of, Harris said: “If you’re in the hospital nobody is going to throw you out. You’ll be asked to plan payments that you can afford, but our mission is to get you well ─ and that’s more than a mission, it’s a privilege.”
Of course, we probably wouldn’t complain about $40 a day for a semi-private room these days, but that’s before inflation.
We’ll put some of these amounts in 2018 dollars. Adjusted for inflation, that $40 a day for a semi-private room would be $289.61. However, hospital related services had a much higher rate of inflation and that $40 a day would now be $667.38, according to the Official Data Foundation. (The Official Data Foundation uses the Bureau of Labor Statistics Consumer Price Index to compare prices based on inflation.)
Why the rate of inflation for hospital services is so much higher than general inflation is a question for another day. The point about computers allowing hospitals to charge each patient for what they cost has come to pass.
In 1968, registered nurses started at $563 a month. Adjusted for (general) inflation that would be $4,077.02 today. We can only hope RN salaries have kept up with inflation.
Many hospitals are non-profit institutions these days, but many are not. Either way, they are expensive.