Mark Cuban argues the fundamental problem in U.S. healthcare is not whether the system is run by the public sector or the private sector. It is that hospitals do not know what their own services cost.
During an Aug. 18 episode of KFF Health News’ “What the Health?” podcast, the entrepreneur and co-founder of Cost Plus Drug Co. said the lack of granular cost information undermines hospital pricing, reimbursement negotiations and broader debates over healthcare reform.
“The fundamental issue is transparency and trust … [and] there are a lot of hospitals that don’t know their costs,” he said. “They just know their cash balance.”
His criticism centers on the methods hospitals use to estimate the cost of providing individual services. Mr. Cuban argued that Medicare cost reports and hospital cost-to-charge methodologies do not give organizations the same product-level cost information that businesses in other industries routinely use.
“Your total cost over your total revenue, which gives you a percentage, and they apply that percentage across everything, as opposed to using actual costs,” he said. “And because they don’t have real costs, they don’t know what a bill of materials is for a hip replacement.”
Rather than identifying the actual labor, supplies, implants, overhead and other expenses tied to an individual procedure, Mr. Cuban argued hospitals often rely on broader accounting methodologies that spread costs across services. He also pointed to hospitals’ use of group purchasing organizations to negotiate surgical implants, noting that some health systems partly own GPOs while also paying fees to use them.
“It’s not run like a real business,” he said. “And so when you don’t run something like a real business … you’re going to have the same problems.”
The comments build on a critique Mr. Cuban has increasingly directed at hospital economics.
Speaking on “The Healthcare Bridge” podcast with Nathan Kaufman, managing director and founder of Kaufman Strategic Advisors, he said that if he bought a hospital, he would operate it like a startup, strip out unnecessary overhead and make costs and reimbursements public “down to the penny.”
“You’ve got to think of your hospital as a startup, and your first doctors as your first employees or your partners,” Mr. Cuban said. “I put my entrepreneur ‘Shark Tank’ hat on … [and ask], ‘What would it take to get people to choose me?'”
Transparency before payment reform
Mr. Cuban said the same cost problem complicates one of healthcare’s longest-running policy debates: whether a larger government role would make healthcare more affordable.
He said he is not opposed to Medicare for All, single-payer healthcare or universal coverage, but argued that changing who pays does not solve the underlying problem if neither providers nor purchasers understand their costs.
“If healthcare costs $1 per person per year, great. Taxpayers would pay that,” Mr. Cuban said. “But when you don’t know all the costs — when there’s no transparency — it’s impossible to determine if it’s a better solution or not.”
Governments should require contracts involving federal, state and local agencies to disclose both their terms and prices, according to Mr. Cuban, who argued that confidentiality provisions make it harder for purchasers to determine whether they are receiving competitive rates or negotiate better agreements.
“The number one rule of healthcare contracts is you can’t talk about healthcare contracts,” he said, comparing the industry’s confidentiality practices to the 1999 movie “Fight Club.”
Mr. Cuban has increasingly tried to apply that philosophy beyond pharmaceuticals. His Cost Plus Wellness platform connects self-funded employers directly with healthcare providers through publicly available contracts, bypassing traditional insurance arrangements. Mr. Cuban has described the effort as an “open-source project” intended to give other organizations a model they can replicate.
Cost Plus Drugs has also said it would publish its provider contracts, extending the transparent-pricing model that underpins its pharmacy business.
Hospitals face growing transparency pressure
Mr. Cuban’s comments come as hospitals face heightened federal scrutiny over price transparency.
New federal requirements took effect April 1, including additional standards for machine-readable files, executive attestations regarding data accuracy and reporting of allowed amounts. More than 500 hospitals received federal warning notices in June over potential price transparency noncompliance.
CMS has fined nearly 30 hospitals over alleged violations this year, with some penalties approaching $1 million — a relatively modest amount for many hospitals within larger health systems, but potentially more consequential for small, rural, critical access and independent hospitals.
But Mr. Cuban’s argument goes beyond publishing what hospitals charge or what insurers pay. His focus is on whether health systems themselves have sufficiently detailed information about the underlying cost of delivering individual services.
That distinction could become increasingly important as employers and providers experiment with direct contracting. Direct arrangements with employers are gaining traction, and Mr. Cuban argues that hospitals should examine the full administrative cost of commercial payer relationships, including denials, payment delays and clawbacks, when assessing profitability.
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