- Del Meyer, MD - https://delmeyer.net -

DRGs and Hospital Price Gouging

Where did the runaway health care costs originate? Why did the government and the business world get so involved in reducing costs? Where was the high-cost center that precipitated all this? Who was the culprit?

Hospital charges were so exorbitant that the government’s best efforts to control Medicare and Medicaid costs were to implement the DRG, or diagnostic related groups. The hospitals then gained experience with shortened hospital stays because they could make the same amount of money for a 3-day stay as for a 5-day stay, e.g. for a cholecystectomy to save two days of hospital costs.

If a three-day stay worked, why not a two-day stay? Why not a one-day, or even 23-hour stay? This would then bypass the federal DRG restrictions and the DRG for a gallbladder, which was $8500 a few years back and included an average of five hospital days, was bloated to $14,000 according to my patients. Why didn’t the doctors get up in arms about this?

Some doctors did but they were driven out of the system and some even lost their license. There was a ready-made system for hospitals and their favorite doctors to bloat their revenue. The PEER REVIEW system, ostensibly to weed out bad doctors, actually eliminated good doctors. Data suggested that over 70 percent of doctors eliminated because of “concerns” over their professional ability had no evidence of inferior practices. But the hospital “letters of concern” to individual doctors, as to why a certain test or procedure wasn’t done, caused doctors to order more tests and do more procedures than were necessary. This is how the hospitals initially made money. The favorite doctors were the ones that had the highest utilization costs for which the hospitals could charge a handsome profit.

When the DRGs came, the emphasis was then on short hospital stays with as few expensive tests as possible. Signs were posted, “Bed shortage, discharge early.” The “letters of concern” then went to doctors who didn’t get the patient out fast enough.

Although doctors were always considered to be in charge of the health care system, they really haven’t been during the last couple of decades since the HMOs and managed care organizations (MCOs) took over.