A new law requires hospitals to post their prices online. The prices vary quite a bit. Why is this?
The main reason, I think, is that in a hospital it is difficult to do cost accounting. "Cost accounting" is figuring out what it costs to do something inside an organization.
Let's make my argument concrete. Let's say you're admitted with pneumonia. The hospital obviously has to charge for the nursing care. To simplify, let's say there's one nurse taking care of you for each 12-hour shift. How do we figure out how much of their time is spent on you? Minute to minute, this nurse could be walking from room to room, sitting down at a computer working on several different charts at once, talking to her supervisor about a problem, and pulling meds out of the medication room. Essentially they are taking care of multiple people during the same hour. It's hard to parse out that time.
And then it's hard to predict how much of the hospital's resources will be used by any individual. Let's say you are in with the pneumonia, but you have chest pain, and a "rapid response" is called. About six people show up in your room within three minutes. One starts doing an EKG, another one checks your vital signs, another puts some different leads on your chest to watch your rhythm on the defibrillator, and another one starts recording the events as they unfold. The doctor arrives and orders a chest x-ray and some lab tests. The x-ray tech comes up from the basement and shoots the film. A nurse from another floor comes over to draw the blood. About 8 minutes have elapsed. This unforeseeable series of events goes on for maybe 25 minutes until the situation is figured out. How does the hospital account for all these resources in your bill?
What about the cost of ensuring that the second-level backup generator works? Of ensuring that if the power goes out in the operating room, the first-level generator kicks in within three seconds? Of quality control on instrument sterilization? Of medications in the pharmacy that reach their expiration date and have to be discarded?
I defy anyone to identify a business environment so complex and so regulated, and that provides so customized a service.
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