What's the Meaning of a Discount?

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Hospitals by and large need to generate about a 3% operating margin. When you take that together with their non-cash expenses like depreciation, you'll end up with about 9% to 10%. Very few payers actually pay less price if any. The system doesn't make much sense, which is why at this particular point in time, the prospect of trying to reform this system makes a whole lot of sense to a lot of people.

Steven Lipstein, President and CEO of BJC HealthCare--a $3 billion hospital system in St. Louis, Missouri--talks with EconTalk host Russ Roberts about the economics of hospitals. They discuss pricing, the advantages and disadvantages of specialization in modern medical care, and culture and governance of non-profit hospitals vs. for-profit hospitals. At the end they talk about the positives and negatives of a national health board patterned after the Federal Reserve.