It's not even about inventory of individual items (like blood or enough scalpels) it's that they need to have every expensive machine. They need x-ray machines and MRI machines and proton beam cancer treatment and that stuff adds up very quickly. That's why a trip to the ER for stitches can cost five figures in the US, because a large amount of that bill is covering the hospital's cost to be ready not just for the stitches but also car crashes or mass shooting events or whatever

The costs of “hospital overpreparedness” should still be clearly understood (and should probably be funded by taxpayers and not by people who need elective procedures).

To make it more concrete: the lack of hospital capacity is one of the major reasons why COVID lockdowns lasted for so long after vaccines were available. Hospital capacity numbers were what politicians and bureaucrats were watching to determine when and how to ease lockdowns. If we had more excess hospital capacity, the lockdowns would have ended sooner.

When hospitals routinely operate at 120% and a major crisis doubles what we ask of them, people don't get the treatment they need.

I'm sure most of us have stories of friends or relations who needed hospital care during COVID and received less care than they normally would have received outside of the crisis.

There is a real problem. There is a lot of overhead. You can use accounting to hide it in various places, but it still exists. I want a hospital large enough to handle disasters (think tornado destroys a large area), but that means there will be a lot of rooms that the hospital is making payments on but are never used.

It's funny because you're basically making the argument that it's not solely the insurance providers fault, but also equally the providers (which is what most reputable studies on why American health care is so expensive seems to point to).

If a hospital doesn't know what it's own costs are, and are doing creative accounting to hide charges in random places, how the hell is an insurance company supposed to know how much reimbursement makes sense, and if a procedure should be done that costs $10K at this hospital vs $5K at another down the street with seemingly no difference in outcomes.

So w/ the creative accounting, which both the provider and the insurance company knows everyone is doing, you get administrative bloat where both sides have massive billing departments dedicated to figuring out each others BS. And this bloat is a hilariously large amount of the reason why costs balloon.

Both the providers and insurance companies are aligned in driving up costs. Hospitals probably will never get their act together in knowing actual pricing, but lying about it through creative accounting hurts everyone.

I remember the Econtalk episode with the co-founder, "Keith Smith on Free Market Health Care" [0]

0. https://www.econtalk.org/keith-smith-on-free-market-health-c...

Well he has done that on Rx drugs which is equally a hot mess. So he has credibility in this space.

He’s not just some blowhard billionaire with an opinion. He’s really legit shaken things up in Rx and proven it’s a racket.

He has done a lot for affordability with Cost Plus Drugs.

The thing is he'd find a lot of the "unnecessary overhead" is necessary to deal with the payers in the system. You need a massive billing organization to make sure insurance actually pays you. You need a massive compliance organization to make sure Medicare pays you (and that you don't kill your patients and get sued)

If you reformed the whole system you could trim a lot of hospital overhead, but it's a systemic problem. More overhead and waste is happening in the insurance companies which is what needs to be cleaned out first, then you can start dealing with providers' overhead that exists to serve the rest of the system

Customer/Doctor/Insurance is the classic blame triangle.

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.

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.

Some practices are self-insured. Some practices have to pay the first million, up to five million, out of pocket.

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.