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April 27th, 2010
12:09 PM ET

Surgical equipment price a shocker

By Sabriya Rice, CNN Medical News producer
and Elizabeth Cohen, CNN Senior Medical Correspondent

When Dr. Linda Galloway learned she needed surgery to save her vision, she scheduled the procedure immediately with her ophthalmologist.

What an eye-opener it was when the hospital bill arrived. She noticed several high-priced items, including a charge of $863.20 for disposable forceps.

"Surgical instruments can be expensive but I think $863.20 is really outside of the realm of realistic prices," she complains.

Then Galloway, an obstetrician in Orlando, Florida went online and found similar forceps for $1,155 for a box of six, or $192 each.

"I was outraged. I tried to get an explanation as to why I was charged that amount of money," she said. When she called the billing department, the answer upset her even more.

"They said when you signed consent for the procedure, you allowed us to charge anything we wanted to and therefore, this is what it is," she recalls.

Galloway says she was especially upset because with her insurance plan, she has to pay 20 percent of her medical bill and if the hospital is going address her as a consumer, then she wants them to level the playing field.

"I need to be in power to do things.  If you're going to charge me this amount of money, then I need to know exactly what instruments you're going to use and what medications you're going to use. Because I can then buy them outside and bring them to the hospital."

Florida Hospital, the place where Linda had her surgery says their charges are fair and compatible with other hospitals.

"Like all other hospitals across the country, [Florida Hospital] bases charges on a charge master that serves as a guide,” a spokeswoman wrote in an e-mail.  She says that an independent contractor compares Florida Hospital’s charges with those of other hospitals and that the results show “we are in the mid-range in that pricing structure."

But is markup of more than four times the market rate really reasonable?

According to the American Hospital Association, the prices increases are necessary.

“A hospital is a very expensive enterprise to keep open 24 hours a day, 7 days a week, 365 days a year and ready for any medical need or emergency. And that does lay out a basic level of cost that has to be captured through the charge structures," says Rich Umbdenstock, president of the AHA.

Umbdenstock says that hospitals have to compensate for programs such as Medicare and Medicaid that traditionally underpay, and that each hospital has to set prices in a way that helps their bottom line.

"The hospital has to be able to bring in more money than it spends or else it won't be there for the next patient.”

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soundoff (25 Responses)
  1. Amy

    I wonder if the representative from the American Hospital Association has ever contemplated completing eye surgery in his home? Comparing health care to a steak dinner is ludacris, yes, an individual should take responsibility for her own health care, but at times interventions by professionals are needed. I don't know of anyone who absolutely can't cook without the help of a chef!!!!! Something has to be done with the rising costs in health care and these rediculous mark-ups can be the first to go.

    April 27, 2010 at 13:39 | Report abuse | Reply
  2. David

    I use to work as a temp front desk person fir an ocular diagnostics clinic about (16) yrs ago. My job duties included ordering prescribed, as well as non-prescribed color and non-colored contact lenses for clinic patients. I would order them at cost from the company, example; the hospital would bill the patient hundreds of dollars, $350.00 sometimes Less or more, but this was the average. And remember I worked there (16) yrs ago. The company would charge us maybe $30.00 somtimes prescribed could be as little as $18.50. I remember ordering a lot of acuview disposable lenses. I was shocked to say the least!

    April 27, 2010 at 13:44 | Report abuse | Reply
  3. John

    I am a Surgical Services Director at a Major Rural Trauma Center. Products we are forced to buy are killing us. Our supply costs are going up 41% a year and our uninsured are going up 18%. Our surgical volume has dropped 9%. Hospitals are spiralling downward, financially. Goodbye little community hospitals. You really need to see the Healthcare Crisis from the inside. If half our costs are labor and no one is getting a raise, where is the money going? You need to look at those companies that make those forceps we have to buy. Look at the companies that make our Orthopedic Implants. That sell us our suture, gowns and gloves. They are killing us. Costs up, volume down and Americans are "running the gauntlet" without insurance.

    April 28, 2010 at 07:44 | Report abuse | Reply
  4. Not Buying It

    Maybe health insurance should not be a for-profit industry. Maybe we should slowly decrease our defense budget and raise the medicare and medicaid reimbursements. Instead of bailing out banks or the auto-makers, let's spend more tax money on subsidizing hospital bills so they can't rationalize this price-mark-up thievery.

    April 28, 2010 at 12:08 | Report abuse | Reply
    • tigrismedicalequipment

      Best

      November 2, 2016 at 07:29 | Report abuse |
  5. Aaron

    Paying $863..20 for a $200 piece of equipment is pretty bad. Maybe my ignorance is showing but why does a disposable forceps cost nearly $200? Is this medical equivalent of the $400.00 dollar Pentagon hammer?

    April 28, 2010 at 20:52 | Report abuse | Reply
  6. Steven Schopler MD

    Buy any item in a retail store and it is marked up at least 3 times over the wholesale cost to cover shelf space, inventory costs, employee costs, and (gasp) profit.

    In a hospital, there are huge inventories of equipment that require complex inventory processes, full documentation, guaranteed sterility, 100% quality control, and immediate availability at the bedside.

    Try accomplishing that without marking up wholesale costs.... especially when 20 to 30 percent of patients have no insurance and will never pay their bill.

    There is lots wrong with the health care economy, but this hysteria about the hospital bill is mostly grandstanding... Dr. Galloway's insurance company never paid the $863 for the forceps... they paid a lump sum negotiated at a substantial discount for her diagnosis, hospitalization, and treatment.

    April 29, 2010 at 01:19 | Report abuse | Reply
    • Tigrismedicalequipment

      Best blog

      November 8, 2016 at 07:26 | Report abuse |
    • A M

      Sorry to say but that is BS. Every big company has inventory cost and they in general do not mark up their supply cost 3-4 times. For example for Walmart the cost of goods they sell is nearly 75% of their total revenue. Even if 30% of the patients is uninsured that would mean just about 35-40% increase of their prices.
      Also this does not answer the question of the previous post why do the supply company charge 200$ for a simple forceps?
      That can be manufactured in the millions. It seems a scam, they arguing "we provide life saving services so it must be so expensive, try to force us to be more cost effective and you risk your life."

      January 5, 2017 at 02:09 | Report abuse |
  7. Laura

    So, you are saying that because of Medicare and Medicaid patients, you have to charge 4x more for surgical supplies to other patients? Really? In essence, we are paying for their procedures. How fair is that?

    I used to work for a hospital and know what they charge. It is ridiculous how much is charged, and the patient doesn't know unless they ask for an itemized bill. A box of surgical gloves is $25.00, yet the hospital will charge the patient for the entire box if one set of gloves is used. The same goes for medications the patient has to take.

    I have said for years that this overpricing has to come to an end. No wonder people can't afford to go to the hospital even if they have insurance! My daughter had to go to the ER at Florida Hospital when she was an infant. She was seen by a PA, not a doctor. I was charged for a doctor visit. The doctor never even so much as poked his/her head in the door! I was eventually, months later and after several phone calls, able to get a refund for the difference. $60 saved, since I had no insurance at the time.

    The inflation of medical costs has skyrocketed in the past few years. A typical ER visit with no real invasive procedures done used to cost $500. It is up over $1000 now. This has to stop!

    I have insurance available to me if I choose it. I can't afford it. My salary hasn't gone up in 5 years, and everything else has spiraled upwards to the point where I am now living paycheck to paycheck. Every penny counts. I pray that I never need to go to the doctor or a hospital. If I can't afford to go to a movie, than I sure can't afford to pay for a box of gloves when only one set of gloves was used! And don't get me started on dentist offices.

    Look at it from a consumer's standpoint. I feel so sorry for those who lost their jobs and their insurance from the recession, and those such as myself struggling to make every penny stretch. The UCR isn't even used anymore. That went out the window years ago.

    April 29, 2010 at 09:07 | Report abuse | Reply
    • William Flowe

      Hospitals are not paid on a line-item basis, rather hospitals are paid using some sort of grouper. Think of a groper as a computer program that averages all charges normally associated with a specific service or diagnosis group and then sets a payment based on that average cost.

      Other considerations are used to add or subtract payment from the grouper average. For instance, in theory, a teaching hospital has lots of student physicians that are paid at a lower rate than a board certified specialist. Therefore, a teaching facility would face a small deduction compared to the average payment.

      On the other hand, a rural hospital may have to pay higher salaries to attract physicians and nurses. That hospital may get a little extra for being a rural access hospital. Lots of different things drive the payment up or down.

      Finally, a patient gets an invoice. Upon receipt of that invoice, an insurance company has already negotiated a discount for all of its clients. The patient is being asked to pay a co-pay on the already discounted rate.

      So, are healthcare costs rising? Yes! Is it the fault of the hospital the insurance companies? No! While the hospitals and the insurance companies generate vast revenue, very little of that revenue is retained earnings. In fact, many insurance companies are publicly owned (that's right, you probably own stock in your own insurance company) and several hospitals are part of large, publicly owned corporations as well.

      Two things are driving up the cost of healthcare in America: #1 the declining value of the dollar, and #2 the supply-chain markup on items necessary for healthcare.

      The only people getting rich off of healthcare are investors.

      August 13, 2011 at 22:40 | Report abuse |
  8. Chris

    This article goes to show you that the American Health Care system is out-of-whack. I mean do a Google search for "Surgical Forceps" and you can find numerous sites selling stainless steel forceps and disposable forceps at much lower pricing than $863.20. Just look at this page of forceps I found on a Google search: http://www.bbsinstruments.com/forceps_dissecting.html

    The forceps on this page are stainless steel and reusable (not disposable) and presumably are medical grade, and range from a little over $5.00 to about $20.00!!!

    I mean $10.00 for a pair of reusable forceps and hospitals are charging $800+, this is just disappointing. Maybe hospitals should stop relying on their huge supplier contract companies who mark-up everything they sell and start doing a little sourcing on their own!

    May 5, 2010 at 16:41 | Report abuse | Reply
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