Friday, May 24, 2013

Excessive Hospital Profits

These days it seems like everyone is a financial expert and wants to cast stones at people or companies they believe are "excessively wealthy" or "unjustly profitable".

The latest group is, of all people, a nurses association, that claims that hospitals are now the villains raking in obscene profits.

The nurses' research found what appear to be staggering statistics: U.S. hospitals charge on average $331 dollars for every $100 of their total costs, a 331 percent charge-to-cost ratio. From 2009 to 2011 (the most recent year for which the data is available), hospital charges lunged upward by 16 percent, while hospital costs only increased by 2 percent.
“There is no other word for this than price gouging,” said Deborah Burger, co-president of NNU whose research arm, the Institute of Health and Socio Economic Policy produced the findings based on an analysis of publicly available Medicare Cost Reports.
I realize most of these nurses probably never took a business course, but let's hope they know how to balance a checkbook. I will go out on a limb here and assume some of them have filed a health insurance claim at one point in their life, and then took the time to review the EOB.
If they did it would be obvious that the amount collected by the hospital bares no relationship to the actual billed charges.
Hospitals are like any other business in that, they report earnings based on collected revenue less expenses.
Almost no one pays sticker price for a car, or full fare for airline tickets. I wonder if these nurses believe car companies and airlines report earnings based on the full price?
If hospitals really were guilty of making a 331% profit EVERYONE would want to get in that game. I don't know about where these nurses live, but here in Atlanta hospitals are closing their ER and L&D departments because . . . they are losing money.
I guess they want to just hang on to the surgical and critical care parts that are the money makers.
So while the nurses believe the word of the day is price gouging, I would say there is a different word. I would describe the nurses as part of the low information crowd.

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