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Cheesecake Medicine: Tips from the Prognosis: Profits Investigative Series

Cheesecake Medicine: Tips from the Prognosis: Profits Investigative Series

Picture of William Heisel

The suggestion by Atul Gawande in the New Yorker that hospitals should act more like the Cheesecake Factory prompted a hot debate among health policy experts and health writers. All of them should also read the Prognosis: Profits series by The News & Observer and The Charlotte Observer in North Carolina.

The series just won a Bronze Bartlett & Steele Award, and I couldn’t be more jealous. Having any award with the name of those two incredible journalists attached would make you feel like you had truly accomplished something good.

Ames Alexander, Karen Garloch, Joseph Neff and David Raynor documented in brilliant detail the way the state’s public and nonprofit hospitals are actually very much like the Cheesecake Factory in the way they rake in the cash. And, if you don’t include stock options, the hospital executives actually earn more than most Cheesecake Factory executives, by my math. Here are tips from the series with more to come on Monday.

Don’t make money the enemy. Health writers can fall into a trap that paints any sort of money making seem evil. They forget that most of the companies involved in health care are, in fact, working to make a profit , and that a profit incentive does not mean that the companies aren’t looking for better ways to make patients healthier and happier.

As the Reporting on Health Collaborative wrote this past weekend, researchers trying to create a vaccine for valley fever would love it if a big pharmaceutical company focused on profits came along and gave them some funding. It would jumpstart the research and potentially save thousands of people from suffering and dying from the disease.

The News & Observer and Charlotte Observer reporters did not vilify hospitals for being profitable. They instead examined the trade-offs for those profits, writing:

They’ve made their money largely from employer-sponsored health insurance, often inflating prices on drugs and procedures – sometimes to three, four or 10 times over costs. North Carolina hospital costs are more than 10 percent higher than the national average for Aetna, said Jarvis Leigh, a network vice president. They’ve hiked their fees each year, leaving many patients with crippling debt. Some hospitals have sued thousands of patients, while others have turned to collection agencies to pursue debtors.

Contrast how it’s supposed to work on paper with how it really works. One of the patients being pursued by a collection agency is Johnnika Pyles. The 19-year-old didn’t have health insurance when she was admitted to Person Memorial Hospital. She had hoped that the nonprofit hospital with a charity-care mission would help her lower her bill. As the reporting team discovered, the hospital still tried to make a 50% profit off her. The team wrote:

Chief Financial Officer James Leis encouraged Pyles to file and mailed her a four-page charity care application and a written agreement called a promissory note. If Pyles paid off half of her debt, the promissory note said, the hospital would write off the other half. But this arrangement was not charity. It was profit. Medicare cost reports show that Person Memorial’s emergency room costs are about 21 percent of the charges billed. This means Pyles’ care cost Person Memorial roughly $1,150, so if she paid $2,743, the hospital would make a profit of more than 50 percent.

Next: Outsourcing for expertise and defining your terms

Photo credit: Katrin Morenz via Flickr

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