Welcome to Econ Talk, part of the Library of Economics and Liberty. I'm your host Russ Roberts

of George Mason University and Stanford University's Hoover Institution. Our website is econtalk.org

where you can subscribe, find other episodes, comment on this podcast, and find links to

another information related to today's conversation. Our email address is mailadicontalk.org. We'd

love to hear from you. My guest today is Stephen Lipstein, president and CEO of BJC Health

Care, a $3.1 billion hospital in St. Louis, Missouri. Steve, welcome to Econ Talk. Thank you very

much for having me. We've done a number of shows in the past on health care. I thought it

would be useful to talk to someone on the hospital side about hospitals' day-to-day operations

and the policy environment they're in. I'd like to start with pricing. Anybody who's been

in a hospital and gotten a bill or seen a bill always finds it a bit mysterious. Tell

us a little about how prices get set and what leeway you have or don't have.

Well, Russ, to start off with, I think most of our listeners would be interested to know

where the money comes from in a health care system such as BJC. BJC has 13 hospitals.

Two of them are big teaching hospitals. Three of them are small rural hospitals. Some

have are located in suburban neighborhoods, some are located in the urban core. So when

you think about our mixture of hospitals, we're thinking big and small, teaching and non-teaching

urban and rural pediatric in adult. About 30% of the revenue that we take in as a health

system comes from the federal government through Medicare. Medicare is the federal program

that ensures people over the age of 65 and certain categories of the disabled. About

13% of our revenue comes from Medicaid. Medicaid is the program that is funded jointly by

the federal government and by the state and ensures people who live below a certain threshold

of the federal poverty limit and other categories of the disabled. Now for those two groups,

...