Under almost all circumstances, you wouldn’t pay $629 for a bandage right? If there were a critical need, that’s a different story.

Malcolm Bird experienced something that I have a few times. His wife accidentally cut his 1-year old’s finger when trying to clip her finger nails. (Full disclosure: This is the very reason why I pawn this chore off to my wife. If you aren’t a parent, it’s almost impossible to imagine how small the nails are and how difficult it is to cut them.)

When you cut a finger tip, it bleeds a lot. He did what came naturally and took his daughter to the emergency room. (I almost did the same thing when my youngest split his lip. It seemed like a ton of blood, but it stopped very quickly.)

Bird explained his experience in this article:

“Then [the doctor] literally runs the finger under the tap, dries it, puts a Band-Aid on it, and says that’s it. We’re very relieved, we go back to the car, and the Band-Aid falls off. But it was fine because it had stopped bleeding.”

So imagine Bird’s surprise when he got a $629 bill from the hospital. Fortunately, his insurance company was able to bring it down to $440.30. That’s still an expensive bandage, right?

Welcome to the world of hospital charges. I had one of these types of things once and it took months to get them to correct and erroneous billing code. In the meantime, they threatened to send me to collections which would have hurt my credit.

As the article explains, the bandage isn’t really $629. That’s just the cost that the hospital devised for performing the service. It’s kind of like how pizza doesn’t code $10 to make, but you have to pay for the overhead of the employees and the rent/maintenance of the pizza shop (among other things).

With hospitals it’s a lot more expensive and complicated.

The hospital explained that the bandage itself was $7. (Side rant: You’d think that a hospital could get better pricing than $7 for a single bandage that falls off in the car on the way home. I feel like I can buy a whole box of bandages for a few dollars at Wal-Mart and certainly a hospital should be able to negotiate much better pricing.

The hospital also explained that it billed $311 for seeing the doctor and another $311 for the emergency department itself. So it really is like paying for the pizza maker and the pizza shop.

The article explains that it was 5 minutes of the doctor’s time. The doctor was billing at an hourly rate of $3732… or nearly $30,000 for an 8-hour shift. Now obviously the hospital has to pay the doctor even if there are no patients, so some money could be expected to cover those lean times at 3AM when most people are asleep. In fairness, the doctor likely isn’t doing a lot of work at that time.

The other $311 for the emergency room is called the facility fee. Mr. Bird is paying for using the emergency room. The article explains it as like a club have a cover charge. It’s a fixed fee.

It feels to me that maybe the cover charge should be less and they should make it up by billing more for actual care.

Another difficult issue is that there’s no pricing transparency. The article points out that it can be from $15 to $17,000 for a common procedure. Bird said that if the hospital had been upfront about its pricing he probably would have called a friend who is a doctor.

I’m trying to think about from the hospital’s point of view. I keep coming back to thinking about what would happen if the police or fire department were run this way. So someone breaks into your house and steals your DVD player. You go to the police station to report it. You get billed for the cost for the police station existing and talking to the police officer. You get a bill for $600?

Why does a hospital have to be different than a public utility? It seems to be every bit as much as a need. Couldn’t facility fees be covered by people’s taxes? I know everyone doesn’t want taxes to be raised, but it seems like it would make more sense than paying for a library. (And I love libraries.)

As for the cost of seeing the doctor, it seems like the hourly rate of $3732 might be a little much. In fact if the doctor only worked for those 5 minutes and no one else entered the ER to be billed, he’d still be making around $77,000 a year (assuming 250 working days). Sure that’s not a great doctor’s salary, but it isn’t bad for only working 5 minutes a day, right?

My question is whether the hospital is operating efficiently. In a case like this, was seeing a doctor even necessary? It seems like the kind of thing school nurses could treat. Couldn’t they have triaged the care and save the doctor’s time for things that really need it?

With a few simple changes the cost of visit could be more in line of around $100 or maybe even less in a case like this. It’s still excessive, but it isn’t crazy banana pants excessive.