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http://www.modbee.com/columnists/mor...10050086c.html

Hospital’s got to make a profit, sure, but let’s be reasonable

By JEFF JARDINE
BEE LOCAL COLUMNIST
Last Updated: September 16, 2004, 05:10:20 AM PDT

Did you read the story last week about the national study on profit by hospitals?

It’s like The Associated Press college football poll of hospital markup, and Doctors Medical Center of Modesto can claim “We’re No.1!” at 1,185 percent.
This came from a survey commissioned by the California Nurses Association. It focused on profitability on things such as medical supplies, prescription drugs and surgeries.

Another Tenet Healthcare Corp.-owned facility, Doctors Hospital of Manteca, was second at 1,092 percent. But hey, there’s always next year. Memorial Medical Center of Modesto came in 29th at 733 percent.

No one begrudges any business making a fair profit, and hospitals continually have to budget for new and more expensive equipment and technology. But the national markup average was 232 percent among 4,184 hospitals surveyed.

What if every business took the same approach to profits as the health care industry and our local hospitals in particular?

A friend in the car business told me the manufacturer’s suggested retail price includes about a 10 percent profit margin for the dealer. Of course, dealers often add other charges for delivery, dealer preparation (peeling off the delivery tags) and ADP, which stands for additional dealer profit.

Let’s amuse ourselves by playing with the numbers a bit. Take a new car that cost the dealer $25,000. The MSRP, with the 10 percent added, makes it $27,500.
Now, try buying that same car at the top hospital profit margin of 1,185 percent. It would cost you $321,250, and if you know of a preferred provider plan for car buying that includes a $50 co-pay, please share that information with the rest of us immediately.

Same goes for a loaf of bread. A friend in the grocery business tells me the markup in a supermarket is about 25 percent.
At 25 percent, a loaf of bread costing the store $1.93 sells for about $2.40.
With a 1,185 percent markup, that loaf would cost you $24.80.

Got milk?
Got money?
A gallon of milk that sells for $4 probably costs the grocer about $3.20. Using the hospital markup, that gallon would cost you $41.12.
If that wouldn’t make you lactose-intolerant, what would?

Folks in the hardware business tell me the industry’s average markup is 30 percent to 33 percent.

Last week, I bought some shingles for the ridge of a composition roof. The box contained enough to cover a 20-foot-long section and cost the store owner $19.80. Adding in his profit, I paid $24.75 plus tax.
But at 1,185 percent, that would have cost me $254.
It’s enough to give you a heart attack, but who could afford it?