Hospitals are Underpaid by Medicare and Medicaid?

By January 11, 2019 Commentary

Not a good week for drug companies and hospitals, but that is due to their own behavior.  After yesterday’s 340B program issue, now we have the American Hospital Association talking about how wonderful its members are because they do such good for the community by being underpaid by Medicare and Medicaid.  (AHA “Fact” Sheet)   The AHA defines underpayment as being reimbursed less than the actual cost of care.  Their method of calculating costs is ridiculous and has nothing to do with actually understanding what it costs to provide direct care to a Medicare or Medicaid patient.  AHA says that hospitals are underpaid $53.9 billion by Medicare and $22.9 billion by Medicaid and only get 87 cents for every dollar of cost.  As I recall, MedPAC, whose analysis is a little more credible, has found that most hospitals actually make money on Medicare.  The AHA public relations person apparently works in Albania so they can have no shame about making these absurd claims.  The part of the “fact” sheet that really had me rolling was where AHA said that non-profit hospitals had to take Medicaid and Medicare or they would lose their tax-exempt status (we are supposed to feel sorry for these poor victims); with the clear implication being that these hospitals would prefer to dump those programs and just make as much money as they can off the commercial market.  I am wondering when the AHA will release a fact sheet on how much money hospitals make from commercially-insured members.

Let’s see, hospital systems have consolidated to the point where they have dictatorial powers in most markets and use that power to demand very high commercial insurance prices.  At the same time the supposedly non-profit hospitals grossly overpay their management teams, make little effort at other cost control tactics and spend a lot of money marketing themselves and trying to create a better image and brand.  Here is an idea, at least in regard to supposedly non-profit hospitals.  How about if we ban all marketing, advertising and sales efforts by these firms, which would save them a lot of costs.  Then let’s put very stringent limits on executive compensation.  Might be surprised how well these hospitals can do on even Medicare and Medicaid rates.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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