Chargemaster: Hospitals’ Killer App for Sucking Your Financial Blood Dry – Part 4

Hospital care in the US has morphed into a multi-headed monster in which every advance in medical technology ups the cost of medical care. What Matt Taibbi said about Goldman Sachs in a Rolling Stone article applies to hospitals as well: “[They are] a great vampire squid wrapped around the face of humanity, relentlessly jamming [their] blood funnel[s] into anything that smells like money.”

More expensive technologies like cat scans are used when less expensive ones would be adequate to do the job. In addition to the economic incentives to use more expensive technology and equipment, there’s the legal incentive that doctors are less likely to be sued if they administer every test under the sun and use the most expensive equipment. Drugs that are administered to cancer patients can cost tens of thousands of dollars a shot.

The Chargemaster is a humungus computer file which details every charge that a hospital can add to a patient’s bill from a lowly aspirin to heart surgery. A recent perusal of a Chargemaster for San Diego’s Scripps Memorial Hospital revealed over 54,000 items.

These charges are so far removed from actual costs to the hospitals (most of which are non-profits) that the US spends twice as much on health care as most other advanced nations – 20% of GDP compared to 10%. The non-profit hospitals take in more than they spend which is perfectly legal. They just can’t distribute the profits to shareholders, but no problem with giving executives and administrators huge salaries. The US spent $2.7 trillion on health care in 2011.

For these reasons, Dr. Andrew Weil, Professor of Medicine and Public Health at the University of Arizona says, “We don’t have a health care system in this country. We have a disease management system.” 75% of healthcare costs go to treating chronic diseases that are largely preventable. Of course there’s no money in helping patients prevent disease.

The fee for service model guarantees that the money comes from treating and retreating and retreating disease, not from preventing it in the first place. Physicians routinely receive substantial compensation from medical-device companies through stock options, royalty agreements, consulting agreements, research grants and fellowships.

According to Gregory Demske, assistant inspector general at the Department of Health and Human Services, “We found that during the years 2002 through 2006, four manufacturers, which controlled almost 75% of the hip-and-knee-replacement market, paid physician consultants over $800 million under the terms of roughly 6500 consulting agreements.”

And as we showed in Part 2, having medical insurance is no panacea. 69% of those who’ve experienced medically related bankruptcy were insured at the time of their filing. 62% of all bankruptcies are related to illness or medical bills. 44% of low wage workers at small firms were uninsured in 2010.

Pharmaceutical corporations are some of the biggest profit makers in the health care system. The Medicare Prescription Drug Act (Medicare Part D) passed by President George W Bush was a huge giveaway to the drug companies. It forced Medicare to purchase drugs for seniors at full retail prices. It denied Medicare the power to negotiate drug prices which the Veterans’ Administration can do.

Instead Medicare simply has to determine the average sales price and add 6% to it. As a result Medicare’s spending on cancer drugs ballooned from $3 billion in 1997 to $11 billion in 2004. Today the price for these drugs is more than $20 billion. Even though some drugs on the market may be cheaper and more effective, Medicare is required to pay retail for any drug a doctor orders providing that it has been approved by the FDA.

Dr. Peter Bach of Sloan-Kettering, frustrated by the rising cost of cancer drugs, declared in an op-ed in the New York Times that he would no longer administer a colorectal-cancer drug called Zaltrap which cost an average of $11,063.00 a month for treatment. His research showed that another drug, Avastin, which cost $5000.00 a month was just as effective.

Typical new cancer drugs coming on the market have jumped in price from $4500.00 a decade ago to around $10,000.00 today. Two of the new cancer drugs cost more than $35,000.00 each per month of treatment. More and more the cost of these drugs is borne by the patients themselves. In such cases the rich will live and the poor will die.

Glaxo Smith Kline developed a diabetes drug called Avandia. By 2006 Avandia, which had been massively marketed, became the largest selling diabetes drug in the world. It was a $3 or $4 billion a year drug. Dr. Steven Nissen found in checking the literature for clinical trials that there was about a 30% greater risk of a heart attack for those patients using Avandia.

It made him physically ill. He said that “when medicine became a business, we lost our moral compass.” After pointing this out, the company did nothing. Avandia was too much of a moneymaker. They told no one. They did not tell physicians. They did not tell the FDA.

“Having a diabetes drug that increases the risk of heart attack by nearly one third is a public health catastrophe, and the company didn’t tell anybody,” Dr. Nissen said. Finally, the FDA put severe restrictions on the drug. The company set aside $6 billion to settle lawsuits. The FDA estimated that somewhere between 50,000 and 200,000 deaths were attributable to Avandia. In July 2012 GSK agreed to plead guilty for failing to disclose safety data on Avandia as part of a $3 billion settlement.

Add Celebrex and Vioxx to the list of highly advertised drugs like Avandia that cause increased risk of heart attack and stroke. These drugs are used by arthritis sufferers to relieve pain. But Merck continued to market Vioxx even after they knew the drug was not safe.

Today Merck faces not only Congressional and Justice Department investigations, but also potentially thousands of personal-injury lawsuits that could tie the company up in litigation for years and possibly cost it billions. In addition to heart attack and stroke these drugs cause serious gastrointestinal bleeding.

The importance of Celebrex to Pfizer is indisputable. It is one of the company’s best-selling drugs, racking up more than $2.5 billion in sales, and was prescribed to 2.4 million patients in the United States last year alone. Although Vioxx was taken off the market in 2004, Celebrex is still being marketed even though Pfizer withheld crucial data regarding the drug’s safety. They wagered that profit concerns overrode liability concerns.

First, they compute the product’s profit potential and weigh that against the projected liabilities. If the former exceed the latter, they continue to sell. Their corporate duty after all is to maximize profits to shareholders, not to protect the well being of customers.

Flebogamma is a cancer drug, made from human plasma, that is intended to boost the immune system. Sloan-Kettering buys it from a Spanish company called Grifols. A typical dose was bought from Grifols for about $1500.00 but they charged Medicare $2135.00. In most of the developed world there are tight controls on profit margins that drug companies can make. Not so in the US.

In fact prescription drug prices in the US are 50% higher for comparable products than in the rest of the developed world. More than $280 billion will be spent this year in the US on prescription drugs. If we paid what other countries pay, we would save $94 billion a year.

Republicans want to reduce the cost of entitlements like Medicare. But they totally ignore the fact that they themselves made it illegal for Medicare to negotiate drug prices which would save Medicare tons of money.

Here’s where they need to start in reforming Medicare. They could pass legislation overnight to do it, but they won’t because the truth is that they are not so much interested in reducing the cost of Medicare as they are in increasing the profits of the drug industry and using the high cost of Medicare as an excuse for cutting benefits or getting rid of Medicare altogether.

Their idea of “reform” is to cut benefits rather than cutting corporate profits. They intend to cash in and make their own big money by becoming lobbyists for the health care industry after their “public service” (er, uh disservice) ends. 80% of Congressmen go on to become lobbyists.

In Part 2 we reported on a cancer patient by the name of Sean Recchi who was told that he had to pay his $83,900.00 bill upfront and in cash because the hospital wouldn’t take his “discount insurance.” Recchi was administered 660 mg of a cancer wonder drug called Rituxan. He was charged $13,702.00. The hospital, MD Anderson, probably paid around $3000.00 for the drug making the markup for Recchi’s lifesaving shot about 400%.

The motto for the drug industry might as well be “Your money or your life.” Americans spent $307.4 billion on prescription drugs in 2010. Marcia Angell, MD, former editor of the New England Journal of Medicine writes in “The Truth About the Drug Companies,” subtitled “How They Deceive Us And What We Can Do About It”: “Now primarily a marketing machine to sell drugs of dubious benefit, the [drug] industry uses its wealth and power to co-opt every institution that might stand in its way, including the US Congress, the Food and Drug Administration, academic medical centers, and the medical profession itself.”

No wonder then that more people today die from legal prescription drugs than from illegal drugs.

On a personal note, I went to a dermatologist a few years ago with a skin rash. He prescribed a product called Taclonex. When told at the pharmacy that a 60 mg tube of Taclonex would cost $600, I went on the internet and got the same product from a Canadian pharmacy for $100.

Even though we spend more on health care than other countries, we have worse outccomes. Life expectancy in the US is not even in the top 20. In fact we’re behind Jordan, Greece, the Virgin Islands, Puerto Rico, Bosnia and Herzegovina and Portugal coming in at a rank of 50.

Shannon Brownlee, a medical journalist says “We have a disease care system. We have a very profitable disease care system.” It’s a system that “doesn’t want you to die and it doesn’t want you to get well.” In either case that would kill the cash cow which fee for service medicine provides. “It just wants you to keep coming back for your care of your chronic disease.”

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John Lawrence

John Lawrence graduated from Georgia Tech, Stanford and University of California at San Diego. While at UCSD, he was one of the original writer/workers on the San Diego Free Press in the late 1960s. He founded the San Diego Jazz Society in 1984 which had grants from the San Diego Commission for Arts and Culture and presented both local and nationally known jazz artists. John received a Society of Professional Journalists, San Diego chapter, 2014 award. His website is Social Choice and Beyond which exemplifies his interest in Economic Democracy. His book is East West Synthesis. He also blogs at Will Blog For Food. He can be reached at j.c.lawrence@cox.net.

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