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April 27th, 2010
09:00 AM ET

Prescription for Waste: Outraged by hospital fees

Editor's Note: When Dr. Linda Galloway learned she needed surgery to save her vision, she scheduled the procedure immediately with her opthamologist. And what an eye-opener it was – when the hospital bill arrived. Today, our senior medical correspondent Elizabeth Cohen reports for part two of our series "Prescription for Waste." Tomorrow on American Morning, why can't we regulate what hospitals charge? They've been doing it in one state for thirty years, saving $40 billion. Could this be the way to solve America's health care crisis?

Sound off: Share your health care horror stories with us. Post your comments below.

soundoff (36 Responses)
  1. JULIE

    What Americans are also bleeding from is litigation. No one realizes, that sometimes, all the efforts to care for people are futile. Not all doctors are bad, but, there are some so zoned out on drugs, they make some huge mistakes. And, some other creepy doctors that make up crap to get your money. 40 years as hairdresser, man, I could tell you stories that would make your hair stand on end. Must be payments under the table to keep these cases out of court. Called "dump" cases. Lawyers hold them up until laws of limitation expire.
    I say, 3 times and you are out of the medical profession. Prison should be all you are fit for. When you have doctors that tell people they have cancer and remove 1/2 their face, and, find out later they never had cancer. total of 6 people that I knew of by the same idiot. I saved the 6th one, by telling her to get a 2nd opinion, and in our area, 20 is not too many, and, get out of town. Another guy, had radiation on his head, only to find out later he never had cancer.
    What is wrong with Americans is greed, selfishness and downright stupidity.

    April 28, 2010 at 8:38 pm |
  2. George V. Britton

    Dear AMfix: I found Elizabeth Cohen's April 28th story (AM fix) about how much hospitals "mark up" their costs interesting but very misleading for patients and consumers of medical services. The jist of Dr. Cohen's story is that hospitals in different states show wide variations in what they charge for a hospital stay (what CNN calls "mark up") . Elizabeth compared hospital "mark ups" in Maryland, Delaware, and Pennsylvania.

    Unfortunately, her comparison is flawed and does not present a true picture of what hospital costs really are and what hospitals actually get paid from insurers. First of all, hospitals are licensed in the state they operate, so one might expect that each state has different ways to "control" hospital rates, much like auto insurance costs differs from state to state. So, it is not an apples-to-apples comparison to show average "mark ups" across state lines.

    Maryland, a small state with fewer than 40 hospitals, is a so called "rate review" state, and every hospital submits its budget (costs and "charges") to the state regulators for approval every year. Their "mark ups" are irrelevant, as what they get paid is determined by the state. Statewide, hospital margins are under 3%.

    Pennsylvania is very aggressive at regulating what hospitals get paid for treating the poor (Medicaid). Medicaid payments in Pennsylvania hospitals on average cause hospitals to lose money, a negative margin of 6.8% in 2008, a far cry from Dr. Cohen's assertion about "326%" mark ups.

    Medicare, the federal program that pays hospitals and doctors if you are over 65, is one of the largest "insurers" in the US. Rates are controlled by Medicare regulators on a national (formual) basis. No way these payments are "marked up" by 100s of percents. Since over 50% of patients in any hospital at any given time are covered by Medicare, "mark ups" are not even a factor in what Medicare pays a hospital. Medicare requires detailed cost statements from every US hospital each year to determine accuracy and fairness.

    A far better means of comparison of hospital charges would be to see what hospitals in the same state actually net from insurers and from government programs like Medicaid and Medicare, how much free care each hospital provides to its community, and if their net profits, if any, are reinvested in programs and services to improve access to medical care.

    Hospital costs and pricing are far from transparent and need to be examined accurately so we can know what we are really paying to get medical care. AMfix should provide expert commentary on this complex issue not only from individual MDs like Dr. Cohen, but from non-partisan hospital financial experts who can dissect the true costs we all end up paying. Such expertise would be of far greater value to consumers who want to understand and influence what they pay for medical care.

    Sincerely, George V. Britton, MS, MBA
    Washington, DC

    April 28, 2010 at 10:13 am |
  3. MD New Hampshire

    This piece holds Maryland up as a beacon of cost savings. The reporters did not tell you that, in Maryland, medicare and medicaid pay THE SAME rates for services that private insurers do. Therefore, hospitals in Maryland do not need to shift costs from insurers like medicare and medicaid that, in most other states, often reimburse hospitals BELOW the cost to provide those services. I agree with the other writers that the CNN piece also does not address the millions of dollars in FREE CARE that hospitals provide to people in their communities who pay nothing at all for medical services.

    April 28, 2010 at 9:21 am |
  4. al mackenzie

    Public option health care insurance. Have a monthly deduction off your paycheck. The hospital is guaranteed payment...they can then lower their prices. They bill the government. The government pays the bill from the tax revenues. YES, YOU MUST PAY MORE TAXES. Suck it up and quit your whining. There is no such thing as a free lunch.

    April 28, 2010 at 9:07 am |
  5. Ken Kimsey

    This is the kind of coverage I wish you had run during the healthcare reform debate. So much of the coverage back then was anything but informative, generating far more heat than light. Far too much coverage focused on reporting of the talking points of various stakeholders. Far to little coverage allowed your reporters to dig deeply into healthcare and offer more objective information.

    I applaud the decision to run this series and am finding the viewer feedback very insightful thought-provoking. Their feedback indicates your viewers are much more capable of thinking analytically than your coverage during the healthcare reform debate seemed to suggest. Often, that coverage consisted of continuous video loops of screaming wackos at town hall meetings.

    Keep Elizabeth Cohen on the story. Let your journalists be journalists, and give us more informative reporting like this.

    April 28, 2010 at 8:32 am |

    Lloyd Blankfein & Jamie Dimond vs. the collective intelligence of all D.C. politicians (White House included) = WALL ST. WINS!!!!!!!!!!!!!!

    April 28, 2010 at 8:25 am |
  7. Howard

    Most people including you in the media don't understand the financial soup that goes into making a hospital bill. I sat on the advisory board of a teaching hospital, and here are some of the factors. There is a term called the payer mix and it is made up of funding streams like medicare/medicaid, private pay and insurance reimbursement. Financial drains like the uninsured who go to the emergency room for primary care, because no private practice doctor will see them, have to be paid for. Most states do not fully reimburse hospitals for this, add to that 20% of premiums paid to insurance companies go to profits of them and the cut backs of government payers, and the under insured..Insurance companies get that profit from denying care or allowing people to have surgical procedures and then denying payment for pre-existing conditions leaving patients stuck with the bill. Hospitals are constantly struggling with the payer mix because of the issues I described, and in NJ 6 hospitals closed because of it throwing more uninsured and government funded patients into other struggling hospitals. this is why hospital cost shift to different payer streams, and inflate the cost of procedures to recoup for services given because of the under payment form the payers I described .
    In other states the hospitals refuse care to the uninsured and ambulance drivers drop off these patients at the entrance and leave right away
    It's a mess and will get worse not better, and factors such as obesity , and other chronic disease will put a strain on hospital services. Just telling hospital to charge less is not the answer. Getting more primary care out there, and a change in life styles that lower risk is

    April 28, 2010 at 8:15 am |
  8. Lingee

    people talk about the enormous waste in hospitals & their marks ups, goldman sachs CEOs but take a look at hospital CEOs, CFO's & their annual salary, not to mention the bonuses they rake in every year in the name of "non-profit" they tell us they have to cover the cost of the uninsured but the big guys (administrators, CFO's) are pocketing it; How many of them are foregoing their bonuses during this time when main street people are suffering

    April 28, 2010 at 7:51 am |

    Hmmm... Wall ST. hedging their bets is "immoral & unethical" & yet we NEVER hear anything when they donate millions to both parties in election years.

    if the regulators are watching porn & lack understanding of derivatives, who will regulate Wall St. Goldman has the "smartest guys on Wall St". These politicians don't have a clue what happened or how to correct it.

    April 28, 2010 at 7:50 am |
  10. Kevin Epstein, M.D.

    Your story is interesting and makes for good sound bites, but you are not asking the question that really matters. What are the hospitals operating margins? I believe that you will find few hospitals with large profit margins. There are a tremendous number of uninsured patients for which the hospital "eats" Also the reader must understand that the bulk of hospital care reimbursement is pre-determined by contract with insurers including medicare. In my Primary care office, If I charged $50 for a visit, the insurer would say, we will only pay 60% of your charge, so in order to get the $50, we need to charge $90 etc..... These numbers can be very misleading when taken out of context. While we all know there is waste in the system, I am not sure your series is providing information in the correct context to give your readers a true understanding of the situation. I am not on the board of any hospital, but I have seen what is happening to the hospitals and primary care offices in my community in western Massachusetts.

    April 28, 2010 at 7:44 am |
  11. Gil Fernandez

    Hospitals need to increase the price of their services because there are so many uninsured people that do not pay. Hospitals need to provide services regardless of patient's ability to pay. I wonder what percentage of people actually pay their bills. If hospitals don't over price their services they would probably have to close.

    April 28, 2010 at 7:37 am |
  12. Gerard

    This is what a capitalistic society produces for it citizens and consumers. The medical industry has not been an ethically responsible is all based on how much money can be made. Heavy regulation is needed to protect the American citizens from this monster medical industry....from the health insurance companies to the hospitals and clinics. The industry sure has not taken on its own leadership in providing affordable healthcare. It is a very good thing that healthcare reform is now law. All those who opposed it will eventually see the benefits from of now they are blinded by propaganda from selfish, self seeking, greedy, uncaring, un-American medical industry CEOs and "blind as a bat" conservatives. Involving as many Americans as possible in the medical mix will create many more jobs.....and hopefully bring some economic fairness to the medical industry as far as the consumer is concerned. The markups on most all medical equipment and drugs hopefully will not be in the 4,000 to 5,000% range. This is extremely unethical, hypocritical and unforgiveable. It is pure greed in its worst form.....yet they still sleep at night. No conscience....what more needs to be said?

    April 28, 2010 at 1:00 am |
  13. canadian one

    No bill for same care in Canada.

    Hmmm, it seems you do not want your readers to know this or why else would you have blocked my comment?

    Yes, in Canada with universal health care the total bill would be zero. Zero in the US for same treatment if you adopted the universal health care.

    Makes you wonder who edits these comments. Insurance companies?

    April 27, 2010 at 7:50 pm |
  14. Smith in Oregon

    Shocked? Not at all, the Republican party and Republican lawmakers have been in the pocket of Big Medicine for decades and it's paid off in hundreds of Millions of campaign dollars from Big Pharma, Big Health Insurance and the American Medical Association.

    The consumers as always in such a cozy Republican lawmakers relationship with hyper greedy corporate special interests, take's it on the chin and in the pocketbook. Resulting in poor service, cattle car medical exams and the enormous loss of life savings in order to deal with life threatening illness which is often not successfully treated and healed meaning the consumer is simply milked of all their life savings while the patient DIES.

    Outraged, Shocked? Not really, it is simply the Republican lawmakers out of control greed and corruption costing Americans a great deal of their income.

    It does no good to be outraged, they have Americans over the barrel. Like Big Oil and alternative energy supplies, alternative medical treatments which are widely less expensive are largely discouraged and largely unsupported by those same Republican lawmakers primary donors in the Big Health Insurance Corporations, go figure!

    April 27, 2010 at 5:09 pm |
  15. Adrian Snare

    Savings billions ?
    Which state is this?
    And there is far more in life than just saving, even trillions.
    We need more educated consumers, there is so much that they do not understand.
    But, no question , improvement is necessary, vital..
    Waste must be culled, but first identified....
    Throw away forceps?
    They could cost but $0.17 each, in lots of millions....
    The hospital has a lot of explaining to do.....
    I think we may have a bunch of old billionares around who do not want to see anything changed, else they have to work for a living..
    Is this true???

    April 27, 2010 at 4:51 pm |
  16. A. C.

    My husband handles stock for a small ER unit. He'll come right out and admit that they charge the patient 4-8 times what it costs him to buy disposable products. And it's not to make a profit, in his case the hospital is associated with a religious charity and is a non-profit organization.

    The problem is that for everyone who comes in with insurance and pays maybe half their bill (see Donna's comment above), 4 other people come in who cannot pay, have insurance that will not pay, or are only there looking for narcotics, and so are never going to pay. So you're not paying for your stuff. Your insurance company is being billed double what it ought to cost you times the four other people who aren't going to pay to cover the fact that insurance pays 50% at best. At the end of the day the hospital breaks even. And this is a non-profit, if they have to make a profit for shareholders it would be even worse.

    I'm sorry if you don't like the idea of socialized medicine, because it's already here, it has been for decades now. You're already paying for the other guy. At least some kind of universal insurance would make it a set fee for everyone, not a surprise on your bill.

    April 27, 2010 at 4:43 pm |
  17. Carole

    I had outpatient knee surgery 2 months ago – the operative word (no pun intended) being "outpatient." I was there for a total of 3 1/2 hours, from the time I walked in the door to the time I was wheeled out. The cost, NOT including the doctor, nursing staff and anesthesiologist? $38, 400! For what??? The doctor charged us another $10,000, and we haven't yet gotten a bill for the anesthesiologist. I'm still in shock. And that's WITH insurance. To those of you who think health care reform is not needed, all I can say is you'd better stay healthy!

    April 27, 2010 at 3:21 pm |
  18. Canadian One

    We do not have this problem at all in our health care system. The bill that you would have received under our system is zero.

    April 27, 2010 at 3:15 pm |
  19. Adrian Snare

    State one state that does regulate hospital costs...
    Why only one..
    And which state is this??.
    One of my ideas in health care reform is to eliminate all of the insurance companies.
    Pay as you go, but this does not always work as many procedures can, legitimately cost a man 10 years wages.
    Obviously, something is needed....Thru our social security and Medicare, expand this to cover all.
    Our taxes will and must increase, the bottom line will be less.
    Also, the Republicans must be kept out of this equation as they do represent the old ways and the old corruption.

    April 27, 2010 at 2:49 pm |
  20. Thoughts on health care

    I have seen hospitals at lots of different levels, and I am not convinced that the problem belongs to hospitals. They seem to be the favorite punching bag, but I don't see it in real life.

    April 27, 2010 at 2:44 pm |
  21. Thoughts on health care

    Also worth looking at is moral of the people that work in hospitals now. (It might look noble and glorious, but I remember going home after being in feces, vomit, around all kinds of bugs that I really didn't want to take home to my family. It's heavy work to move people, and emotionally exhaustive. Quite frankly, it wears people out. They aren't overpaid.)

    April 27, 2010 at 2:41 pm |
  22. Thoughts on health care

    Agree...I heard the cost of the electricity bill of one of the hospitals that I worked for...incredible. Not to mention that they all have backup generators.

    I don't think the problem belongs to hospitals. I would be looking at the insurance companies. Several years ago I read that some states were thinking of putting caps on the profits that insurance companies could make. Look at how many hospitals have closed in the past 10 – 15 years. While you are at it, look at helicopter crashes...and ask if they are spending enough?

    April 27, 2010 at 2:34 pm |
  23. Thoughts of health care

    There's a word for this, but I don't recall what it is now, but its when the insurance plan requires that you have to get the cheaper drug (often that don't work) first and then you have to keep going back to the doctor and finally get to the drug that works. I think that should be eliminated from insurance policies. Better to just get the drug that works right off the bat. From my perspective, that adds to the cost of my healthcare.

    And I'm sure there's a flip-side to this as well. There isn't one blanket statement about cost that can be made here.

    April 27, 2010 at 2:28 pm |
  24. Sandra

    Single payer would be good.

    April 27, 2010 at 2:19 pm |
  25. Sandra

    People do have preferences in how they work and prefer some tools over others (example: Would you like your eye surgeon to have the capability of removing cells in strip, or by the cell? One machine cost more than the other. Which would you rather have? So, when you compare really have to do your homework. One place is going to say they cost less for the same surgery, but...)

    Patients aren't widgets and there's NO WAY we can treat them as such. (example: We can't use the same stitching material for everyone...some people are allergic to a particular material, and it won't heal. This stuff matters. When you get to the level of the actual individual patient, I would be very careful about what you are doing...could cause things to be more expensive...that I would agree with.)

    There are operational things they could work on, but I would be very careful when it gets down to the individual patient.

    April 27, 2010 at 2:14 pm |
  26. Donna Deems

    I think the idea that the mark up from a hospital can be compared to the increased cost to eat at a restaurant, rather than cook at home is ridiculous. I can't choose to have surgery at home if I can't afford the mark up!

    April 27, 2010 at 2:07 pm |
  27. Sandra

    I'm sorry, this segment is not giving the whole story here and will only serve to mislead people. They didn't get to the people that can actually answer this question. (The AHA is a little distant from actual hospitals...more like administration. This answer was from the 30,000 ft view and maybe that's all people can say in a soundbyte, but this came across incorrectly.) No, you wouldn't want to bring in your own hospital supplies...we won't even talk about infections. There are LOTS of people in hospitals (that you seriously need and I assure you, you wouldn't like it if they weren't's bad enough as it is) that aren't charging directly for their services. A drug comes into the pharmacy fairly inexpensively. Every drug that comes into a hospital has an actual documented trail (which used to be paper, but is being converted to electronic medical records now...and that takes IT folks...that are VERY expensive and they run into very real problems, training staff to use it in some of the larger hospitals can take a couple of years), the pharmacy technician stocks the drugs into inventory and when they are needed, calculates, reconstitutes, and draws up the drugs for each patient (some of these are very time consuming), they get checked by an actual pharmacist, the orders that were written by the physician are double checked by the pharmacist to make sure the labs are ok and that these drugs don't react with each other, and corrected if necessary. None of these folks charge directly. Rather than charge for each individual time on that patient which would be a nightmare, they calculate what that cost and include that in the price of the drug. I've worked in several hospitals in the midwest, and I have to say, I really don't see that the problem belongs to hospitals. And I do worry about how many hospitals have closed in the past 10 years in this country. There are things to look at, but I'm not convinced this is one of them. Good if people understand it, but this wasn't right. Nurses don't charge directly. So, how would that work? The nurse swipes at your door and charges individually for each task? It really doesn't work that way. They are also charting and such outside of your room. I'm sure there are abuses somewhere, but as a blanket statement about the cost of health care, this isn't quite right.

    April 27, 2010 at 2:02 pm |
  28. wesley

    Im a Physician Assistant at a major hospital hospital in Queens NY and in response to this piece, it's not true that patients cannot take there home medications. There's a process for patient to take there own medications. Once requested providers can or have to make an order for patient to take there own meds. Patients supplies meds and Pharmacy verifies and nurses can then issue back to patient. Another point is insurance reimbursement for equipment. I guarantee the hospital is not receiving $800 reimbursement from the Insurance company. This is also not limited only to hospital, but also Dr offices also do the same. This issue is not as clear cut as the report put it. Please investigate further.

    April 27, 2010 at 1:44 pm |
  29. uncfweddy

    WHAT A JOKE! Everyone wants to blame insurance companies for outrageous health care cost inflation. You rarely hear about the ridiculous, runaway costs charged by hospitals, ambulatory care facilities and physician offices. Thank you, CNN, for telling this story. (You should do a follow up story about the cost of aspirin in a hospital ... many facilities charge $12-$15 per over the counter dose.)

    And Donna, hospitals aren't going broke because of private insurance companies. They are paid fairly. Granted, they usually don't get away with charging an insurance company $860 for foreceps, but they still manage to pass along a nutty mark up.

    April 27, 2010 at 1:42 pm |
  30. JULIE

    Hospitals are much like those creepy Bankers answering questions today.
    Over priced and making zillions while people like me cannot afford health care.
    I am appauled. My son lives in a country where they found it is cheaper to provide good health care in early stages than, to rob people for poor unaffordable health care in these United States.
    Sorry, America is full of crooks, top on down.
    The biggest form of rip off is this therapy clinics and health provisions.
    My mom as I got her out of nursing home. This foreign lady came to "give" her physical therapy. 4 sessions. For 1/2 hour she wrote in some little book. Other 1/2 hour she asked my mom to walk to refigerator 10 times, Stand up and sit down 10 times. Other session, sshe asked my mom to sit up and get off bed 10 times. Unbelievable waste of not only time, but, when bill came charged to social security was $16,000. You have got to be kidding me. A 10 cent copy of exercies would have provided the same "therapy".
    Same with my father, he went to therapy, to get out of chair ten times, raise his arms 10 times. to the turn of over $4,000 each 1/2 hour session. Unbelievable.
    Mom died in nursing home when I could no longer care for her, she went out of control and doctor who would not prescribe a slight sedative, where she was pounding out windows. This nursing home because she was diabetic, 5 times gave her insulin without checking her blood. They never saw that she was not eating. 5 times I was called to emergency room, where they had to give her sugar to offset the insulin. 6th time she never made it out. She passed away after 4 months. To the tune of care of $5,000 per month for extra care.
    They killed my mom.

    April 27, 2010 at 1:39 pm |
  31. Tom

    The spokesman from the American Hospital Associate is just plain brain dead. Of course a steak dinner is cheaper at home than out. But unlike the steak where the markup goes for the cost of the dinning room, chefs, etc. in a hospital you pay for the OR, doctors, nurses, etc as well as the steak!!

    There is no accountability. Insurance actually likes the price to go up as their cut is a percent of everything so they don't have any incentive to force the price lower.

    BTW, I saw that forceps and there is no way that should cost the approximately $200 the medical supply house was charging etc.

    April 27, 2010 at 1:37 pm |
  32. Kurt w

    Costs are outrageous because many claimants never pay a dime. That is all. Public Aid pays anywhere from 6-40%. Who must absorb the loss? It is the insured/private patients who do make up the difference. I can tell you that in the ER, 19 of 20 patients I've seen there do not ever pay anything at all. kw

    April 27, 2010 at 11:31 am |
  33. Abby

    I wish you would report on the hospital as a whole. When you ask about surgery only you get how they have to cover the cost for nurses, the OR, electricity, etc. If you look at only the surgery, that makes sense. The problem is that this is the excuse they give you for everything from medications to your room cost for a semi private room. You get charged $1000 per day or more for your room ( I could stay at a 5 star hotel penthouse for that kind of money ) I have paid $10 for aspirin, $10 for a 25 cent comb, $2000 per hour for the operating room and so on and so on. The list just keeps going on in every area of the hospital. If the extreme prices in the OR are needed to pay for nursing, electric etc, they why do they have to charge such outrageous amounts in every area of the hospital facility? If we only ask about one area of the hospital, they can get away with saying it is to cover all areas. If you look at the outrageous amounts all over the hospital, then that excuse looses credibility.

    April 27, 2010 at 10:55 am |
  34. Donna

    It was explained to me by a doctor of mine who quit practicing that doctors and hospitals are forced to make deals with insurance companies that the insurance company will only pay x% of the "full price" of a good or service from the doctors/hospitals. If they don't, the insurance companies (in most markets monopoly/oligopolies) will not contract with that provider.

    In her case the x% insurance companies would pay was 50%. Since then I have seen insurance payment details from my insurance companies over the years where the company is paying 25-30% or less.

    Please investigate this angle of the story. Take a look at the insurance contracts providers and facilities have in place. Take a look at insurance Explanation of Benefits (EOB) documents from insured patients. The EOB can be mind-blowing. Here is info from a laboratory charge of mine for a bunch of blood tests (9 line items): Total charge: $451. Total insurance allowed/covered: $42.70. My responsibility (after the insurance 90% coverage): $4.75. Insurance pays versus what an uninsured person would have to pay: 10.5%

    My doctor explained to me that, though she had had poor uninsured patients that she wanted to charge much less, she could not. If the insurance companies found out she charged an uninsured patient a lower rate, they would either pull their contract, or demand they now pay only 50% of that fee.

    As a result of this insurance practice, hospitals and doctors have to mark up their goods and services 300,400, or 500% just to get payment from the insurance companies that will cover their costs.

    Uninsured patients are then stuck with outrageous prices so that the facility or provider can keep insurance contracts and cover their operaating costs.

    April 27, 2010 at 10:54 am |
  35. Tim

    Hospital costs do not reflect the true cost and value of supplies needed for medical procedures or services. The forceps shown could not have cost more than $20.00 to manufacture and most likely could be manufactured for under $10.00.

    I had cervical spine surgery, a stroke and open heart surgery in the past year. I can give many examples of waste, excessive charges on medical supplies and practices that border on fraud. However, everyday insurace companies, patients and medicare pay for these services. I was fortunate to be in a frame of mind to where I was able to catch some of these practices.

    I was charged 145.00 a month rent for a wheel chair for 14 months.This Chair could not have cost more than 200.00 to manufacture. I was charged 350.00 for a small package of pads, batteries and skin lotion for a tense unit that was sold to me in a less than ethical manner. These pads, batteries and lotion could not have had an actual cost of more than 20.00

    I could go on and on but this is just a small example. The problem is nobody does anything about this.


    April 27, 2010 at 10:44 am |