Day: January 15, 2010

Everyone knows that hospitals lose money on Medicare patients. To make up for the losses hospitals shift costs to private payers, as much as 400-800% higher. Medicare revenue typically account for 60% or more of a hospitals cash flow on average.

But do hospitals really lose money on Medicare patients? Insiders tell us no. In fact, each hospital’s Medicare reimbursement rates are based, to a large degree,  on a cost-plus approach. Hospitals must file with CMS and attest to their costs.

If hospitals are not required to accept Medicare patients, and if it is true that hospitals lose money on Medicare patients, why do they continue to accept them?

A hospital administrator summed it up this way: “Hospitals do not lose money on Medicare, they make a profit. Any hospital administrator whose hospital loses money on 60% of their revenue will not be employed very long by the Board of Directors.”

Editor’s Note: The American Medical Association disputes the theory that hospitals make money on Medicare patients (see http://www.aha.org/aha/content/2005/pdf/05fragilehosps.pdf). However, go to www.ahd.com and do a little research in your spare time. There is an answer out there somewhere to the question – Do Hospitals Lose Money on Medicare Patients? Some say “Yes” and some say “No”. Who is telling the truth?

In Iowa, a new scheme is underway to soak the feds for more Medicaid money. Here’s how the trick works: Hospitals asked to be taxed by the state. (Right now, most states hospitals are nonprofits and therefore exempt from most taxation.) This generates $40 million in “provider assessment” fees. The state plows the money back into Medicaid, triggering federal matching spending on that cash. (The feds pay about two-thirds of Medicaid.) That money goes right back to the hospitals in exchange for services provided to Medicaid patients. It’s a kind of Do-It-Yourself multiplier effect!

The Iowa Hospital Association, which backs the idea, says the state also would benefit from the arrangement. The association estimates that after the hospitals reap their reward, the state could wind up with about $65 million.

Everybody wins. Except, well, everybody—since this whole runaround is just a way of reshuffling the money of federal taxpayers and dealing it out to hospitals and state governments.

Editor’s Note: Source – www.reason.com, written by Kathern Mangu-Ward, January 8, 2010