Fat Profits from the Sick & Poor
“There are many reasons health care costs are spiraling out of control, but the simplest one to understand is this: nobody knows what anything costs.” Time magazine, 4/13/10
American hospitals charge for their life-saving services the way rug merchants fleece tourists in a Persian market.
In both cases, the sticker price doesn't mean bupkis – unless you're an ignorant tourist in Cairo, or an uninsured patient at Broward Health legally responsible for the gross amount of your hospital bill.
Even worse: hospital accounting methods are more bewildering that a set of Mafia books.
“There is no method to this madness,” replied the CFO of a major California hospital system when a Wall Street Journal reporter asked him how U.S. Hospitals price their services.
Which is how and why, as the National Consumer Law Center reports, the sticker price for rooms, drugs and medical care for an uninsured patient can be two or three times the price paid by insurers.
Again
“Only a handful of Americans truly comprehend the complex payment system for U.S. Hospitals – mostly those whose job is to set, negotiate, and study hospital prices,” note researchers for Health Affairs, a peer-reviewed research journal for health care professionals.
Any basic understanding of hospital finances begins with three key numbers:
First, of course, is the sticker price or the gross patient charges on your hospital bill (which only uninsured patients face).
Then there's amount reimbursed – invariably a percentage of the gross charges paid by Medicare, Medicaid, or private health care insurers (as little as 20% of the gross charges on a your hospital bill).
And third, is the actual cost of patient care, or the amount needed for the hospital to break even.
Trouble is...
You won't find a hospital willing (or able) to break down your hospital bill with those numbers – be it for your next open heart operation or infected hangnail.
Bottom line?
Any time you check into a hospital, Adam Smith's invisible hand will have you by the balls.
Anyhow...
Without understanding the above aspects of hospital finances, it's virtually impossible for anyone to see how and why:
1.Broward's two tax support hospital districts were – and are – are using tax dollars to engage in grossly unfair competition with their
private counterparts
2. The same two tax supported hospital districts suppressed a RAND study of indigent patient care in SE Florida which detailed the
mechanics of indigent patient care as a profit-making business.
That said, consider the following data from the unpublished RAND study which clearly shows how the North Broward Hospital District was generating huge profit margins (five times those of the South District) from indigent patient care.
Rate of Reimbursement - 2001
For a patient's $10,000 gross hospital bill
“Break Even” Tax Revenue Surplus
Point* Reimbursement** “Profit”
North Broward
Hospital District $2,300 $6,000 $3,700
South Broward
Hospital District $3,300 $4,000 $700
*Operating costs per $1 of gross patient care charges.
**Tax dollars reimbursed per each $1 of gross indigent care charges.
(Page 81 unpublished RAND Study)
Thus, to be more specific...
In 2001, the North Broward District's four hospitals:
Provided $134,761,856 worth of indigent care
At a cost of ($30,995,227)
While Collecting $81,756,907 in tax revenues for indigent care
For a “Profit” of $50,761,680 from indigent care.
And finally...
The following is the RAND researchers' breakdown of the reimbursement rates for various patient revenue sources – compared to the “break even” rate for the North Broward District's four hospitals in FY 2001:
Reimbursement Amount
For a patient's $10,000 gross hospital bill
“Break even” (cost) $2,300
Medicare $2,500
Medicare $2,600
Managed Care $2,700
Indigent Care $6,000
All of which is how and why the RAND study never saw the light of day
Oh yes....
The suppressed RAND report also revealed how fat profits from tax-funded indigent care enabled the North Broward District to offer deep discounts in its contracts with Managed Care providers – thus gaining an unfair competitive edge in its battle with other hospitals in the private sector.(Page 79 unpublished RAND study).
Tomorrow: How the District's Tax-funded Scam Works Today
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