Study says "For Profit" hospitals cost more than non-profits

[Aeson]

Originally posted by Asher

It's a bit more complicated than that.

CostOfProduction is a variable, one of the things it depends on is the condition of the market.

Bah... It's a mathmatical equation that encompasses everything.

My labeling of CostOfProduction obviously was just labeling a variable, not actually defining it's value. All I'm saying is all else equal, you add in a profit margin and... end cost will be more.

[KrazyHorse]

Originally posted by Harry Tuttle


KrazyHorse, the funding pays the bills for the hospital supplies and the procedures. The funding pays the bills! The funding doesn't count as revenue, it's in the form of reimbursements!

That's why I told you they don't measure cost efficiency from the revenue standpoint but from an expenditures standpoint.

They add up all the money that is spent in accounts payable, wages etc. and then put this on the bottom. They add up all the services the hospital provides and put this on the top. They carry out the division and get cost efficiency.

They don't care whether that money comes from revenue, from government grants, from donations of equipments etc.

All money spent on carrying out the hospital's work will be counted as an expenditure. It doesn't matter whether the government spent 1000000$ and bought an MRI machine to give to the hospital or the hospital spent 1000000$ of its own revenues and bought an MRI machine. They both go in as 1000000$ in the cost efficiency analysis.

This is elementary stuff, friend. No economist worth his salt would forget to include all sources of expenditures, and no journal worth its salt would accept a paper which forgot to.

[Kuciwalker]

Originally posted by chegitz guevara
Canada has state paid health care. I'm not positive, but my guess would be that the hospitals in Canada are government owned. I could be wrong though.

Isn't the article misleading, then? The hospitals aren't just non-profit but in fact government subsidized.

[KrazyHorse]

Again, it doesn't matter how much they're subsidized.

Efficiency is a measure of output over input.

What's delivered over what's spent in delivering it.

[Harry Tuttle]

Originally posted by KrazyHorse


That's why I told you they don't measure cost efficiency from the revenue standpoint but from an expenditures standpoint.

They add up all the money that is spent in accounts payable, wages etc. and then put this on the bottom. They add up all the services the hospital provides and put this on the top. They carry out the division and get cost efficiency.

They don't care whether that money comes from revenue, from government grants, from donations of equipments etc.

All money spent on carrying out the hospital's work will be counted as an expenditure. It doesn't matter whether the government spent 1000000$ and bought an MRI machine to give to the hospital or the hospital spent 1000000$ of its own revenues and bought an MRI machine. They both go in as 1000000$ in the cost efficiency analysis.

This is elementary stuff, friend. No economist worth his salt would forget to include all sources of expenditures, and no journal worth its salt would accept a paper which forgot to.

... Sigh... You know, those few years working as an accountant in a For-Profit hospital and intermediary between the CEO, CFO, and staff I must have just totally forgot what I am talking about...

[Asher]

Originally posted by Aeson
Bah... It's a mathmatical equation that encompasses everything.

My labeling of CostOfProduction obviously was just labeling a variable, not actually defining it's value. All I'm saying is all else equal, you add in a profit margin and... end cost will be more.

But they'll never be equal, so it's pointless to make the statement...

[KrazyHorse]

No, you just never knew it.

That's why you're an accountant and not an economist. I challenge you to find in the study where they have not included (say) a government grant of material as a cost in order to calculate cost efficiency.

[KrazyHorse]

Come on, you made the accusation that the comparison was so fundamentally flawed, now back it up...

[Harry Tuttle]

Originally posted by KrazyHorse
No, you just never knew it.

That's why you're an accountant and not an economist. I challenge you to find in the study where they have not included (say) a government grant of material as a cost in order to calculate cost efficiency.

Ok, have you ever stopped to think of how a hospital spends money and where the cash goes to? How hospital systems have increased buying power? How non-profits can lure more doctors in at lower salaries because those doctors can perform grant research as well practice? Or how non-profits don't have to pay sales tax?

My whole point is that with more money to go around services cost less.

So cmon Mr. Big Picture, tell me all about cash flow.

[Aeson]

Originally posted by Asher

But they'll never be equal, so it's pointless to make the statement...

You're just mad because you called my variable a variable without realizing it actual was a variable... If my statement didn't have a point in and of itself, that's point enough for me.

[Asher]

Originally posted by Aeson
You're just mad because you called my variable a variable without realizing it actual was a variable... If my statement didn't have a point in and of itself, that's point enough for me.

You're just backpedalling. Your comment would only make sense if the numbers were constant between the two formulas, which it's not...

[KrazyHorse]

Originally posted by Harry Tuttle


Ok, have you ever stopped to think of how a hospital spends money and where the cash goes to? How hospital systems have increased buying power?

I'm assuming that you're claiming that hospital systems are more likely to be nonprofit and thus benefit from economies of scale more that for-profit hospitals. Possibly. I'd have to see their methodology to see if this was controlled for. I'm assuming you haven't checked it out either.

How non-profits can lure more doctors in at lower salaries because those doctors can perform grant research as well practice?

Again, see above.

Or how non-profits don't have to pay sales tax?

Given that this comparison was done across tax jurisdictions I truly doubt that something as simple as tax expenditures wasn't controlled for (i.e. buy not including taxes in expenditures).

My whole point is that with more money to go around services cost less.

Again, the same economies of scale argument. Possibly a valid point. Too bad this wasn't what you were arguing in your original post where you claimed that they'd simply forgotten to include a whole bunch of expenditures in their cost analysis.

It's also too bad that I had to insult you to bring out the more thoughtful objections instead of the ones that made you sound like Kucinich...

[Berzerker]

"It should be driven by evidence, not people's ideology."

Woolhandler and Himmelstein, both prominent in a group called Physicians for a National Health Program, have long argued for comprehensive, nonprofitmaking health insurance for all Americans.

They don't measure cost efficiency from the revenue side; they measure it from the expenditure side, so this argument is irrelevant.

Revenue and expenditures are unrelated? Tuttle's point was not irrelevant, if a non-profit gets a bunch of money from the state and a for-profit doesn't, obviously comparing the two is problematic.

Devereaux and colleagues earlier showed that for-profit hospitals had higher death rates.

Which is a meaningless statement without an in depth analysis of the types of patients in both systems and given other statements in the article.

"The reality is that for-profits face significant economic challenges. The first is they have to generate revenues that will satisfy shareholders," Devereaux said.

Shareholders are why hospitals can invest in better care. If the state is throwing money at the "non-profit" that is not a level playing field.

"Second, they have high executive bonuses.

Making the assumption for profit hospitals can attract better employees by offering higher salaries, this is not a negative unless you believe all people are equally qualified for every job.

Thirdly, they are very top-heavy and have high administrative costs. Also, they have to pay taxes. That is a lot of extra money that they have to come up with," Devereaux added.

Ah! Taxes...taxes non-profits don't have to pay? Yes, let us compare two "businesses", one doesn't pay taxes but instead gets money from the very government that taxes the other business, i.e., the state transfers wealth from one business to the other and we're supposed to compare the two?

"Instead of finding new efficiencies, folks were cutting corners in quality health care, and also people were having to pay more for care."

Finding a new efficiency and cutting a corner is ideologically biased doublespeak. When is cutting a corner not a new efficiency and when is a new efficiency not cutting a corner?

In a commentary published in the journal, Dr. Steffie Woolhandler and Dr. David Himmelstein of Harvard Medical School commented that 13 percent of all U.S. hospitals are for-profit, and said converting them to nonprofit status could have saved $6 billion of the $37 billion spent on care at investor-owned hospitals in 2001.

I.e., socialism is more cost efficient than capitalism. The history of third party payment systems shows this to be bogus, health care costs began dramatically increasing in the US after government got involved... Anyway, the authors are being dis-ingenuous by trying a bait and switch - non-profits do not constitute national health care but they use non-profits to make the leap to socialised medicine.

"Investor-owned hospitals charge outrageous prices for inferior care," Woolhandler said in a statement.

Then how do they even exist?

Himmelstein pointed to fraud cases involving for-profit health care companies including Columbia/HCA Healthcare Corp. , which was hit by a Medicare scandal in 1997; Tenet Healthcare Corp., which is being investigated for allegedly overbilling Medicare; and HealthSouth , where 15 former executives have pleaded guilty to criminal fraud charges.

There's irony, Medicare and Medicaid are government programs. Tell me, how do non-profits make up for the revenues lost because of price controls resulting from Medicare? By charging paying patients more?

"In health care, crime pays handsomely," Himmelstein commented.

Not as much as the politicians. Why do left wingers constantly point to the failings of government programs to justify more government programs?

"Look at the fraud in Medicare, we need to expand Medicare to solve the problem!"

[KrazyHorse]

Originally posted by Berzerker

Revenue and expenditures are unrelated?

Depends on how you count revenues and how you count expenditures. If you're doing a cost efficiency analysis you count certain things as expenditures which may be funded by a source not generally counted as revenue (his example was grants of equipment and private donations, IIRC)

Tuttle's point was not irrelevant, if a non-profit gets a bunch of money from the state and a for-profit doesn't, obviously comparing the two is problematic.

Why? It doesn't matter where the money's coming from, it just matters how much money they each spend (including all sources of expenditures).

Too lazy to even read the rest of the standard 10 page Berzerker reply.

[Aeson]

Originally posted by Asher

You're just backpedalling. Your comment would only make sense if the numbers were constant between the two formulas, which it's not...

CostOfProduction, while a variable, is the same across both equations. As such, obviously I'm not comparing one hospital to another, but rather a hospital with CostOfProduction to itself with a different profit margin. That profit comes from somewhere, and as the CostOfProduction remains static between both (since we are comparing the same hospital to itself), the end result is that the profit margin is related to the price.

Tax status (among other things) has been left out of the equation. I've noted it isn't an equation designed to simulate the universe. It's just to point out a simple factor involved. Increasing profit margin, while cost of production remains the same, increases price. How doesn't that make sense to you?