> they don’t know what a bill of materials is for a hip replacement. Rather than identifying the actual labor, supplies, implants, overhead and other expenses tied to an individual procedure...

How often is there a malpractice case for a hip replacement?

I'm willing to bet that the costs of a malpractice case can be one, two, three, or even more orders of magnitude higher than all of those other expenses. Dwarfing any of those enumerated costs. Even cases that they win.

Of course they're looking at the statistics rather than counting beans.

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mixdup 3 hours ago | parent | next [-]

Another problem is that one hip replacement is not the same as another. Differences in patients, complications arise, it's really hard to say you're going to need exactly X syringes and Y feet of gauze and Z liters of blood and which and how much of certain drugs for anesthesia, not to mention with procedures that involve prosthetics you may need multiple on hand, the first one you pick may not fit so you need to go to the second one but you have burned that first one

Finance guys think you're going to turn hospitals into walmart and make it up on ruthless efficiency and volume but it's not that kind of business. There's so much unknown going into any one situation that it makes this "transparency" hard to do. Plus, people want the best and whatever they need to survive so the "consumer" doesn't want transparency

And then you layer on top the huge amount of uncompensated costs from uninsured and denied coverage. It's why a single national payer system actually makes sense, if you can keep the fraud from running amok. We really should just pay for outcomes and spread the actual cost over the entire system

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Traster 2 hours ago | parent [-]

There's two different things you're talking about here. There's the cost estimate- the amount you tell people up front a surgery is likely to cost, vs the actual cost to the hospital. You don't need to guess how many syringes of X you're going to need when you've already done the surgery. At that point you just addd up all the stuff you used, price it up and that's the BOM. Cuban is saying they don't even do that - they don't track their costs on a surgery by surgey basis at all. And because they don't track any of that it's impossible to reason about it.

It's impossible to answer "How much will it actually cost to insure person X" because you don't have any of the data on what the costs will be when person X needs a given surgery, all you have is the aggregate costs of the entire system - a lot of which is misleading because things are cross-subsidized because no one is really tracking costs. It may well be that whilst every surgery is billed equally in reality obese patience are responsible for 80% of the cost. Or it may even be that the hospital is making an average loss on hip surgeries because their negotiations with the insurer drove those prices down whilst brain surgeries give a nice profit margin.

And so you can't ask "How much would it cost for the government to fund service X" because you don't know how much it costs, all you know is the aggregate money spent across all medecine.

	▲	MattCruikshank an hour ago \| parent \| next [-]
		Let's say every now and then, you need to do X. That means you need to be prepared to do X. And what if some of the components of X expire? That means you have to pay to keep them on hand. And the distribution of how often you do X is absolutely not predictable. Sometimes it's months between them. Sometimes it's 10 in a day. If you had to be prepared to serve 20 hamburgers, any given afternoon, with no warning, how much ground beef would you waste, over a year? Counting how much ground beef you did use does actually provide some information. I'm not discounting that. But it absolutely does not tell the whole story.
	▲	mixdup 2 hours ago \| parent \| prev [-]
		>Cuban is saying they don't even do that - they don't track their costs on a surgery by surgey basis at all. And because they don't track any of that it's impossible to reason about it. Then Cuban is wrong. I had a heart valve replacement surgery last year and I got a detailed to the penny to the mg of tylenol what they consumed and what they charged. It was not a big massive one line "heart surgery" on the invoice, there were dozens and dozens of line items. I think quite the contrary they know exactly what their inputs are to a surgery, it's just that is not the only cost you get billed. >because you don't have any of the data on what the costs will be when person X needs a given surgery This was exactly my point, and yes part of it is because of cross-subsidization, but it is also because my valve replacement almost certainly cost someone differently than the next guy having the same surgery the next day because of any number of factors Also part of determining insurance costs is that you probably don't know which surgeries someone is going to need at the time the premiums are being set. Even if you knew perfectly how much every surgery in the system costs, you don't know how many of those surgeries you are going to have to pay for

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infecto 3 hours ago | parent | prev | next [-]

Is that not already baked into the cost of malpractice insurance?

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MattCruikshank 3 hours ago | parent [-]

My insurance premiums go up on their own. They go up more when I file claims. I'm betting the same is true of hospitals.

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infecto 2 hours ago | parent [-]

Of course, that’s how insurance works. My point was there is no calculating needed. You know the risk for each doctor by their malpractice premium.

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MattCruikshank an hour ago | parent [-]

Every prospectus I've ever read, "Past performance is no guarantee of future results."

	▲	infecto 38 minutes ago \| parent [-]
		Not sure what you are trying to say? Yes past performance of investments is no guarantee of future results. It’s a pretty good gauge among other factors for measuring risk in insurance though. Imperfect yes but pretty darn good. Going back to the original comment, your not wrong that hospitals are thinking about malpractice in cost (or should be) my point was that it should be fairly measurable in the base case and tail cases should be few and covered by other riders or self insurance.

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marbro 3 hours ago | parent | prev | next [-]

Malpractice insurance is less than 1% of revenue for all medical specialties except the one that is dangerous and used routinely.

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Leonard_of_Q 3 hours ago | parent | prev | next [-]

They are insured against such risks and with that the insurance costs will be another fixed post on the expense list.

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bluGill 3 hours ago | parent | prev | next [-]

perhaps, but insurance companies are very good at figuring this out and in turn amortizing the costs out.

	▲	bitmasher9 3 hours ago \| parent [-]
		Exactly. Either assign an equal portion of your insurance to all procedures, or use the amortization techniques insurance uses to assign a malpractice risk to the procedure.

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tantalor 3 hours ago | parent | prev | next [-]

You can do both!

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adolph 3 hours ago | parent | prev [-]

There is a financial product known as malpractice insurance in which the outsized cost of a malpractice case is spread out over a risk pool of people with similar risk exposure.

In any case, this cost is not directly part of the "hospital's" cost of service since the surgeon is most often a semi-independent contractor who bills the patient "professional charges" that are separate from the hospital's "technical charges."