Daily newspapers from coast to coast ran stories on the Anderson et al paper, “Health Spending in the United States and the Rest of the Industrialized World,” recently published in the journal Health Affairs ( see chart and caption in STAT Read). Why the slavish interest? As consumers pay more of the cost of their health care, the price of it has gone from a figure haggled over between payors and providers to an issue of keen personal finance relevant to all of us.

The Anderson paper was more notable for dispelling popular notions regarding the cause of our high prices than for describing why our care does cost so much more. And at $5,267 per capita, we do pay considerably more than the $2,193 median of other industrialized nations. But we do not pay more for health care because there is an MRI on every corner. The authors concluded that Americans actually have access to fewer health care resources than consumers in other industrialized countries as measured in the number of hospital beds, physicians, and nurses per capita, and MRI and CT scanners per capita (see chart in STAT Read). Malpractice does not appear to be a factor, either. As measured per capita, the US awards averaged $16 per capita in 2001, compared with $12 in the UK, $10 in Australia, and $4 in Canada. In all four countries, malpractice represents less than 0.5% of health care spending.

Why do we, then, pay so much more for health care than other industrialized nations? On this subject, the authors have written previously and concluded that “it’s the prices, stupid.” Our system costs more because the prices for hospital rooms, physician services, and drugs are higher. But for many hospitals in America, those prices may not be high enough. Price is a moving target in our rough-and-tumble, quasi-private, quasi-public system, and it is increasingly difficult to understand. Take, for example a patient who recently had a surgical hernia repaired. Billed at a cost of $404,002, that amount was discounted by $367,601.98, leaving the hospital a payment of $36,400 from the insurer. The key question is this: Did $36,400 cover costs? The ability to get a price that covers expenses is what fiscal solvency is all about, and according to a recent editorial in Trustee , by Nathan Kaufman, senior vice president of health care strategy for ACS Health Care Solutions, San Diego, if a provider cannot consistently generate an operating margin of between 3% and 5%, that provider will pay a premium in the debt market and fall behind in the competition to acquire state-of-the-art capital. He offered the following advice:

Assess costs and negotiate rates based on what you need to achieve a reasonable operating margin . Do it every year. Medical-surgical occupancy rates are at 75%, so payors cannot shift away from a provider that refuses to accept a bad contract rate.

Set rates proportionate to volume . “Your largest payor should pay at least 130% of Medicare, and all others should pay more,” Kaufman advises.

Be prepared to walk . It may be the only way to receive signficant concessions.

To preserve the integrity of our system, hospitals must not just survive, they must prosper. And to do so, the price has got to be right.

Cheryl Proval