Healthcare finance: Little has changed since mid-1960s

Out of curiosity, I  decided to wander through the archived online edition of the Los Angeles Times on the day I was born.

At the risk of dating myself, on the day I entered the world, you could rent a decent apartment for a little more than $100 a month, buy a new car for around $2,000 and get by on $125 a week.

But there were a couple of other items that caught my attention. Rheingans Hospital in the rural town of Paradise, Calif., closed its doors. Its chief executive officer complained that the "reimbursement formula of Medicare is so unrealistic that a proprietary hospital like ours couldn't live with it."

At the time Rheingans decided to roll up its red carpet, Medicare was in effect for seven months. The article did not say how Rheingans was paid for treating elderly patients eight months prior.

Fortunately, the government has fixed Medicare and hospital executives no longer grouse about reimbursements.

In the same issue, a group of 33 hospitals averted a labor action in the Bay Area by the California Nurses Association (CNA), which wanted better pay for its membership. The union wangled a 14 percent raise out of hospitals as a result.

Down in Los Angeles, Cedars-Sinai Medical Center closed 45 beds at its main hospital and another 30 at a satellite facility--the site of my actual birth--because it couldn't hire enough nurses. As in Northern California, it raised pay in order to attract more nurses to its staff.

Back then, a Cedars nurse received $500 a month to start, while the Bay Area nurses topped out at $510. That's the equivalent of about $45,300 a year today, according to the inflation website calculator.net. The current mean pay of a nurse is around $69,000, according to the Bureau of Labor Statistics.

Fortunately, the bump up in pay over the decades has mollified the CNA and other labor unions. They're no longer at loggerheads with hospital executives over compensation issues.

I'd like to say that I was astonished to see essentially tthe same stories surrounding hospital finance from a very long time ago as today. But I'm not.

The life expectancy the year I was born was 70; it's now much closer to 80. Healthcare technology and delivery is more sophisticated and expensive, and the amount per person spent on their health is nearly six times what it was on the day I was born, according to The Big Picture. Translation: There are a lot more older patients to treat, and it costs a lot more to treat them.

And, let's face it, whether an individual or an institution, all are creatures of habit--if they change, it is barely noticeable, even over the course of decades.

The industry has only recently discussed quantifying the value of healthcare delivery, of not just blindly paying out whenever someone gets treatment. And the discussion occurs only incrementally. The readmission penalties, the accountable care organizations and the other programs intended to cut the costs of care all nibble at the margins. And while hospital executives may still think Medicare rates are unrealistic, they're completely dependent on that program's revenue. As a result, they will fight tooth and nail to preserve every dollar of it.

I'm fairly optimistic that I'm only halfway through my life. If, much closer to the end than the middle, I revisit the newspaper headlines again, I'm pretty certain it will still be a case of everything old is new again. - Ron (@FierceHealth)

Suggested Articles

It’s an idea that could save Medicare billions of dollars a year, but it would have a major impact on physicians’ revenue.

Lloyd Dean will become the sole CEO of Chicago-based Catholic hospital giant CommonSpirit Health.

Male physicians starting their careers are paid an average of $36,600 more than their female colleagues, according to a new study.