the best way for a hospital to make money? “perverse incentives”

“The US healthcare system does not generally look at improving community health; it looks at marketing services to treat disease. The more disease, the greater the revenue. In a bold move, the US government has just given the state of Maryland (which has had a federal waiver to impose a uniform pricing system on medical charges) the opportunity to experiment with placing global reimbursement caps on hospitals.

The state will also transform how hospitals get paid, from billing for each service provided—an incentive for doctors to order more tests and treatments—to getting paid for keeping people well.

That is how healthcare is offered in most developed nations, but in the US the current incentives are for waiting for disease to develop and then billing for longterm treatment of the disease—as well as the latest costly technological testing and medication.

Furthermore, one of the larger causes of death in the United States is the number of people who acquire incurable infections due to hospital-borne pathogens. In short, many hospitals are not aggressively attempting to limit the transfer of disease while someone is in a hospital for the treatment of another illness!”

From an article titled “Hospitals and Doctors Make Money Off of Illness: Maryland Wants Them to Make People Healthier” by Mark Karlin for BuzzFlash (January 24, 2014).


“Since the mid-1970s, [Maryland] has been the only state to set the prices that hospitals charge patients. Typically, hospitals negotiate with each health insurer individually, leading to disparate rates. In Maryland, all customers pay the same price. Researchers estimate the system has saved $45 billion for consumers over four decades and prices have grown more slowly in the state.

Under the old system, prices in Maryland couldn’t grow faster than the prices set by the Medicare program. But as the cost of health care rose rapidly in recent years, the state struggled to hit that target.

State officials also worried about the old system creating perverse incentives: the best way for a hospital to make money was to provide the highest volume of services, regardless of whether that care made patients healthier. That meant payers would simply sign checks for as many treatments as the hospitals recommended. The new system intends to end that revenue strategy by capping total spending.”

From an article titled “Maryland’s plan to upend health care spending” by Sarah Kliff for the Wonkblog website (January 10, 2014).


In 1974, I was doing a favor for a friend’s brother: he was managing a small Mexican restaurant on Wyoming Avenue in Forty Fort and needed to have the day off. Part of his responsibilities as manager was to tend the bar. Now, this was not a drinker’s bar; the vast majority of drinks poured were to accompany a lunch order.

Still, there were a few regulars. Of course, I didn’t now who they were.

Now I was 23, still a kid. There was a young man not more than a few years older than me sitting at the end of the bar when I came in. Nursing a drink. Despondent. That was immediately obvious. So, after a while, when I had nothing else happening, I walked over and asked him what was wrong.

Oh, I should mention that he was wearing a medical outfit—he looked like a nurse at a time when (and where) male nurses were almost a novelty.

He looked at me and said, “Do you know what the rate of Caesarean sections is in the United States?”


“It’s between 20 and 40% in a lot of American hospitals. You got that? Twenty thirty forty percent of the births in this country are C-sections! I just got back from working in a hospital in Sweden for a year. You wanna know what the rate of C-sections is there?”


“Two to four percent!” He was angry when he said it. “One-tenth of ours!”

I was flabbergasted. I was aware that ours was relatively high and rising compared to the rest of the industrialized world. But not like that!

He took a big sip of his drink. His expression changed to resignation. “Ask me what’s the number one cause of emergency C-sections in America.”

I bit: “What?”

“Because the surgeon is late for his tee-off.”

I poured him another big drink and one for myself . . .


A Caesarean section is usually performed when a vaginal delivery would put the baby’s or mother’s life or health at risk, although in recent times it has also been performed upon request for childbirths that could otherwise have been vaginal.

In recent years, the rate has risen to a record level of 46% in China and to levels of 25% and above in many Asian, European, and Latin American countries. The rate has increased significantly in the United States, to 33% of all births in 2012,up from 21% in 1996. The rate in 2009 varied widely between hospitals, ranging from approximately 7% to 70% of births.

Across Europe, there are significant differences between countries: in Italy, the Caesarean section rate is 40%, while in the Nordic countries it is only 14%.

Medical professional policy makers find that elective Caesarean can be harmful to the fetus and neonate without benefit to the mother, and have established strict guidelines for non-medically indicated cesarean before 39 weeks.” (Wikipedia)

Comments, suggestions, additions, and arguments welcome!