Why do Non-Profit Hospital Organizations make Extremely Lucrative Profits?

In the article “Bitter Pill: Why Medical Bills are Killing Us”, the author Steven Brill compiles research and data on bills from hospitals all over the country. There is a trend where non-profit hospitals are turning around huge profits.

To quote Brill, “Its nearly half­billion dollars in revenue also makes Stamford Hospital (non-profit) by far the city’s largest business serving only local residents. In fact, the hospital’s revenue exceeded all money paid to the city of Stamford in taxes and fees. The hospital is a bigger business than its host city.” …. “There is nothing special about the hospital’s fortunes. Its operating profit margin is about the same as the average for all nonprofit hospitals, 11.7%, even when those that lose money are included. And Stamford’s 12.7% was tallied after the hospital paid a slew of high salaries to its management, including $744,000 to its chief financial officer and $1,860,000 to CEO Grissler.”

Meanwhile, taking a definition from google for a non-profit organization, “A nonprofit organization (NPO, also known as a non-business entity) is an organization that uses its surplus revenues to further achieve its purpose or mission, rather than distributing its surplus income to the organization’s directors (or equivalents) as profit or dividends.”


Is there some loophole in this system where these non-profit hospitals get around this stringent definition?

Pay No Attention to that Chargemaster Behind the Hospital Bill

As infuriating as the very existence of the chargemaster is, I believe we ought to focus on the bigger picture. That is, we ought to be questioning why medical bills are so high now rather than who should be paying them. What does it say about our health care system and our nation’s economic and social philosophy when we allow lobbyists and private groups with financial resources to single out those who are least able to pay and burden them with the highest rates? Our anger ought to be directed at addressing the issue of why there is a blatant and glaring lack of transparency in the world of medicine in America. At this very moment, hospitals are pulling the wool over our eyes and charging patients far more than what their care actually costs. Brill establishes that the gap between what hospitals charge for certain things (procedures, tests, etc.) and what Medicare would pay for the same things is mindbogglingly immense. How can we, as American citizens, feel comfortable about whatever care we are being given when we fear the associated costs and we are unaware of where these ridiculous bills are coming from? I posit that if the medical profession had more transparency, the public outrage alone would force radical reform to occur. This begs the following key questions: is total transparency in the medical field in America possible? Is this an attainable goal in the future or is our nation condemned to a future of rising arbitrary costs and exploitation of the less fortunate subset of our population? What, if anything, must FIRST happen/change in order for us to potentially achieve such radical reform? 

Drug Goes From $13.50 a Tablet to $750, Overnight

In this New York Times article, Andrew Pollack evaluates the unexpected rise in the HIV drug, Daraprim, overnight from $13.50 per pill to $700+ per pill; over a 5,000% increase. Daraprim was created in 1963, and was originally sold for $1 per pill. CorePharma then raised the price per pill to $13.50 in 2010. Nobody knows for sure what warranted this most recent price increase, but this isn’t the first time Turing Pharmaceuticals CEO Martin Shkreli has increased company prices purely for profit. Pollack writes that, “In 2011, Mr. Shkreli started Retrophin, which also acquired old neglected drugs and sharply raised their prices. Retrophin’s board fired Mr. Shkreli a year ago. Last month, it filed a complaint in Federal District Court in Manhattan, accusing him of using Retrophin as a personal piggy bank to pay back angry investors in his hedge fund.” This is not the first time a pharmaceutical company has raised the price of a drug, however, unlike many drug price increases, the Daraprim spike was not because of a shortage of the drug. Under Federal rules, Medicaid and certain hospitals will be able to get the drug inexpensively, but private insurers, Medicare, and hospitalized patients would have to pay an amount closer to the new list price of $700 per pill, which would make annual payments for Daraprim users upwards of $50,000. Continue reading “Drug Goes From $13.50 a Tablet to $750, Overnight”

No Control on Rising Costs?

Recently in the news, there has been a lot of conversation around an individual named Martin Shkreli who owns the pharmaceutical company Turing Pharmaceuticals, raising the price of Daraprim, a HIV drug,  overnight by $13.50 to $750 per pill overnight. I found this article to be really interesting as it touched on what we are currently learning about in class. Instead of focusing just on Shkreli, it focused on the general picture, being that this is a custom that is done by all pharmaceutical companies. As quoted by the article, “A 2014 House of Representatives investigation found 10 genetic drugs that ranged in price increases anywhere from 420% to over 8000% of their prices just a year before”, showing that this was already a common practice. The article then goes to talk about the monopoly effect that many pharmaceutical companies have over the drugs they sell. Lastly they go into the fact that raising the price is “not illegal, just immoral”, and because it’s not a legal case but rather one of morality, little is done to change it.

I feel like this article is greatly representative of how our healthcare system is like and why there has to be a dramatic change in action. With the pharmaceutical companies having almost total control over the drug costs, doctors don’t have much negotiating power and therefore charge the consumers for the same price. By keeping our healthcare system in this state, we allow business CEOs, focused on maximizing profits, to run the state of our healthcare. I also agree with the last point that we have to make it a legal issue. The government should be able to regulate these costs as well as the overall state of healthcare as it had with Medicare. If the government can make policies around these issues, as well as regulating prices of the healthcare system, the monopoly of drugs and treatment will be drastically reduced and many will have more access to treatment.


Healthcare as a Government Run Entity or Privately Owned Business?

In the video we recently watched “Money and Medicine, we were shown the conundrum of maintaining life for an expensive price and with many different methods. They essentially show the struggle between extending life and the price of extending life of such patients. The increasing price of healthcare is only going to increase as time goes on and mainly this is due to the unregulated costs of healthcare. I did further watching through YouTube videos and found two sources that proved quite informational. One video was of John Green talking about healthcare and it’s rising cost due to the lack of a government entity controlling the costs. The overall cost of healthcare would be run and regulated by the government in other countries and therefore decrease the price as healthcare businesses would have no control. In the U.S. however, healthcare businesses have almost total control of the cost and therefore can control it as they please due to their monopolistic control.

In a second video I found, Hank Green experienced such an event as the cost of his medicine rose 1200%, rising from $50 to $627 in a night. He originally thought that the cost would be cheaper than his previous medication, that being $300 before the drug company dramatically increased the price. This further illustrates that there is no real government regulation on the price and that a more efficient healthcare system would have this regulation.

The question then becomes whether healthcare should be regarded as a right or a benefit? Should we have the power to choose whether we want to be healthy or not and continue to let healthcare be privately run? Or should we let the government finally take the reins and be the more dominant power in healthcare, regulating the care for the U.S.?

Links are provided down below:

John Green’s View on Healthcare

Hank Green’s Experience with Rising Costs

Healthcare as Commericial Enterprise

Jill Quadagno claims in her journal article that the lack of national health insurance in the United States is because of the idea of “American exceptionalism” and that the question is not “why every proposal for national health insurance has failed but how commercial enterprise became the preferred alternative.” Who should medical professionals and sociologists be targeting to combat this issue and what should they be potentially proposing to make the main motivation for healthcare in the “heart of medicine.” (Timmermans) Is it necessarily wrong to think of medicine solely as a commercial enterprise?