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> they don’t know what a bill of materials is for a hip replacement. Rather than identifying the actual labor, supplies, implants, overhead and other expenses

> they don’t know what a bill of materials is for a hip replacement. Rather than identifying the actual labor, supplies, implants, overhead and other expenses tied to an individual procedure... How often is there a malpractice case for a hip replacement? I'm willing to bet that the costs of a malpractice case can be one, two, three, or even more orders of magnitude higher than all of those other expenses. Dwarfing any of those enumerated costs. Even cases that they win. Of course they're looking at the statistics rather than counting beans.

tantalor 14d ago
You can do both!
infecto 14d ago
Is that not already baked into the cost of malpractice insurance?
- MattCruikshank 14d ago
  My insurance premiums go up on their own. They go up more when I file claims. I'm betting the same is true of hospitals.
  - infecto 14d ago
    Of course, that’s how insurance works. My point was there is no calculating needed. You know the risk for each doctor by their malpractice premium.
    - MattCruikshank 14d ago
      Every prospectus I've ever read, "Past performance is no guarantee of future results."
      - infecto 14d ago
        Not sure what you are trying to say? Yes past performance of investments is no guarantee of future results. It’s a pretty good gauge among other factors for measuring risk in insurance though. Imperfect yes but pretty darn good. Going back to the original comment, your not wrong that hospitals are thinking about malpractice in cost (or should be) my point was that it should be fairly measurable in the base case and tail cases should be few and covered by other riders or self insurance.
    - grebc 14d ago
      I’m not sure that’s how it’s supposed to work. Every insurer will tell you they calculate all the probabilities and charge you the appropriate premium. But we all know they just recoup losses next year. There’s no actuarial math going into it.
      - infecto 14d ago
        [flagged]
bluGill 14d ago
perhaps, but insurance companies are very good at figuring this out and in turn amortizing the costs out.
- bitmasher9 14d ago
  Exactly. Either assign an equal portion of your insurance to all procedures, or use the amortization techniques insurance uses to assign a malpractice risk to the procedure.
adolph 14d ago
There is a financial product known as malpractice insurance in which the outsized cost of a malpractice case is spread out over a risk pool of people with similar risk exposure. In any case, this cost is not directly part of the "hospital's" cost of service since the surgeon is most often a semi-independent contractor who bills the patient "professional charges" that are separate from the hospital's "technical charges."
mixdup 14d ago
Another problem is that one hip replacement is not the same as another. Differences in patients, complications arise, it's really hard to say you're going to need exactly X syringes and Y feet of gauze and Z liters of blood and which and how much of certain drugs for anesthesia, not to mention with procedures that involve prosthetics you may need multiple on hand, the first one you pick may not fit so you need to go to the second one but you have burned that first one Finance guys think you're going to turn hospitals into walmart and make it up on ruthless efficiency and volume but it's not that kind of business. There's so much unknown going into any one situation that it makes this "transparency" hard to do. Plus, people want the best and whatever they need to survive so the "consumer" doesn't want transparency And then you layer on top the huge amount of uncompensated costs from uninsured and denied coverage. It's why a single national payer system actually makes sense, if you can keep the fraud from running amok. We really should just pay for outcomes and spread the actual cost over the entire system
- Traster 14d ago
  There's two different things you're talking about here. There's the cost estimate- the amount you tell people up front a surgery is likely to cost, vs the actual cost to the hospital. You don't need to guess how many syringes of X you're going to need when you've already done the surgery. At that point you just addd up all the stuff you used, price it up and that's the BOM. Cuban is saying they don't even do that - they don't track their costs on a surgery by surgey basis at all. And because they don't track any of that it's impossible to reason about it. It's impossible to answer "How much will it actually cost to insure person X" because you don't have any of the data on what the costs will be when person X needs a given surgery, all you have is the aggregate costs of the entire system - a lot of which is misleading because things are cross-subsidized because no one is really tracking costs. It may well be that whilst every surgery is billed equally in reality obese patience are responsible for 80% of the cost. Or it may even be that the hospital is making an average loss on hip surgeries because their negotiations with the insurer drove those prices down whilst brain surgeries give a nice profit margin. And so you can't ask "How much would it cost for the government to fund service X" because you don't know how much it costs, all you know is the aggregate money spent across all medecine.
Leonard_of_Q 14d ago
They are insured against such risks and with that the insurance costs will be another fixed post on the expense list.
- MattCruikshank 14d ago
  Some practices are self-insured. Some practices have to pay the first million, up to five million, out of pocket.
marbro 14d ago
Malpractice insurance is less than 1% of revenue for all medical specialties except the one that is dangerous and used routinely.

tantalor 14d ago

You can do both!

infecto 14d ago

Is that not already baked into the cost of malpractice insurance?

MattCruikshank 14d ago
My insurance premiums go up on their own. They go up more when I file claims. I'm betting the same is true of hospitals.
- infecto 14d ago
  Of course, that’s how insurance works. My point was there is no calculating needed. You know the risk for each doctor by their malpractice premium.
  - MattCruikshank 14d ago
    Every prospectus I've ever read, "Past performance is no guarantee of future results."
    - infecto 14d ago
      Not sure what you are trying to say? Yes past performance of investments is no guarantee of future results. It’s a pretty good gauge among other factors for measuring risk in insurance though. Imperfect yes but pretty darn good. Going back to the original comment, your not wrong that hospitals are thinking about malpractice in cost (or should be) my point was that it should be fairly measurable in the base case and tail cases should be few and covered by other riders or self insurance.
  - grebc 14d ago
    I’m not sure that’s how it’s supposed to work. Every insurer will tell you they calculate all the probabilities and charge you the appropriate premium. But we all know they just recoup losses next year. There’s no actuarial math going into it.
    - infecto 14d ago
      [flagged]

bluGill 14d ago

perhaps, but insurance companies are very good at figuring this out and in turn amortizing the costs out.

bitmasher9 14d ago
Exactly. Either assign an equal portion of your insurance to all procedures, or use the amortization techniques insurance uses to assign a malpractice risk to the procedure.

adolph 14d ago

There is a financial product known as malpractice insurance in which the outsized cost of a malpractice case is spread out over a risk pool of people with similar risk exposure. In any case, this cost is not directly part of the "hospital's" cost of service since the surgeon is most often a semi-independent contractor who bills the patient "professional charges" that are separate from the hospital's "technical charges."

mixdup 14d ago

Another problem is that one hip replacement is not the same as another. Differences in patients, complications arise, it's really hard to say you're going to need exactly X syringes and Y feet of gauze and Z liters of blood and which and how much of certain drugs for anesthesia, not to mention with procedures that involve prosthetics you may need multiple on hand, the first one you pick may not fit so you need to go to the second one but you have burned that first one Finance guys think you're going to turn hospitals into walmart and make it up on ruthless efficiency and volume but it's not that kind of business. There's so much unknown going into any one situation that it makes this "transparency" hard to do. Plus, people want the best and whatever they need to survive so the "consumer" doesn't want transparency And then you layer on top the huge amount of uncompensated costs from uninsured and denied coverage. It's why a single national payer system actually makes sense, if you can keep the fraud from running amok. We really should just pay for outcomes and spread the actual cost over the entire system

Traster 14d ago
There's two different things you're talking about here. There's the cost estimate- the amount you tell people up front a surgery is likely to cost, vs the actual cost to the hospital. You don't need to guess how many syringes of X you're going to need when you've already done the surgery. At that point you just addd up all the stuff you used, price it up and that's the BOM. Cuban is saying they don't even do that - they don't track their costs on a surgery by surgey basis at all. And because they don't track any of that it's impossible to reason about it. It's impossible to answer "How much will it actually cost to insure person X" because you don't have any of the data on what the costs will be when person X needs a given surgery, all you have is the aggregate costs of the entire system - a lot of which is misleading because things are cross-subsidized because no one is really tracking costs. It may well be that whilst every surgery is billed equally in reality obese patience are responsible for 80% of the cost. Or it may even be that the hospital is making an average loss on hip surgeries because their negotiations with the insurer drove those prices down whilst brain surgeries give a nice profit margin. And so you can't ask "How much would it cost for the government to fund service X" because you don't know how much it costs, all you know is the aggregate money spent across all medecine.

Leonard_of_Q 14d ago

They are insured against such risks and with that the insurance costs will be another fixed post on the expense list.

MattCruikshank 14d ago
Some practices are self-insured. Some practices have to pay the first million, up to five million, out of pocket.

marbro 14d ago

Malpractice insurance is less than 1% of revenue for all medical specialties except the one that is dangerous and used routinely.