Tuesday, September 29, 2009

Hospitals in for $200 Billion Windfall Profits per Year from Health Reform.

I am amazed at the low profile the AHA (American Hospital Association) has been taking in the debate over health care reform. Think back you have heard and seen ads from every other sector but Hospitals, yet hospitals are 31% of the cost of medical care in the USA. Why have they been so quiet? Maybe they have a good reason to take a low profile. Maybe they don't want politicians and the public to realize they will be in for as much as $100-200 billion dollar windfall profits.

When you examine a major change think about who are the biggest losers and winners both before and after the change. This will help you understand the rhetoric or lack of it. Currently the hospital are, along with the uninsured patients, the biggest losers. The pharmaceutical and insurance industry the biggest. Using figures from Iowa from 2006, in a survey by the State Health Department, the states hospitals reported their expenses on unreimbursed indigent (uninsured) care. In Iowa the hospital spent $600,000,000 on care to the uninsured that was not reimbursed. This was not what they would have billed, but their actual expenses. They made this up by offsetting costs to those with private insurance. They still operated in the black. You cannot say they made a profit since they are non-profit. However many executives received large salaries and bonuses and many hospitals did expensive capital investments. This was in the face of $600 million write off. Amazing!!!

Well let us snap our finger and let every uninsured have insurance. Lets also say that this insurance will reimburse hospitals at the same rate (so they are competitive with private insurance) as private insurance. This rate is double or more over the reimbursement rate of Medicare or Medicaid. So the hospitals in Iowa will instead of writing off $600 million will be getting a check for $1.2 Billion. This is a swing on their ledger of $1.8 Billion. Now Iowa has a population of about 3,000,000 or one percent (1%) of the population of the entire country. So, if the number can be expanded to the entire country the hospitals of the United States will have as much as $180 Billion windfall profit each and every year.

$180 Billion is enough to pay f0or the cost of even the more expensive House bill for two years. So what I'm saying is that the hospitals will not be doing any more work (they are doing it now as charity) but will be making $180 Billion each year for no further work. Why not give them only $90 Billion windfall (they should be very happy with this) and pay for the entire system.

Please tell me where my logic is flawed.


  1. Yes, lets do that. And while we're at it, lets use part of that windfall to lower the cost of healthcare across the board. After that, lets start paying the people who actually take care of the sick and injured a just wage. You know, like nurses, doctors, aides, etc.--those who do the actual work of health care. Maybe we'll have less of a nursing shortage and actually get good care while in the hospital. Maybe the medical errors will decrease, and we'll all be safer when we need to be in a hospital.

  2. Hospitals will provide more care AND the care will be paid for more fully for indigent patients.

    The reality is that private insurers (and their customers)vend up paying for all of it right now. Medicare payments do not pay the cost of healthcare, and indigent patients receive free care. Private insurers do not have a negotiating position to protect their customers from these transfers.

    A saner solution would have indigent bills covered, Medicare pay its fair share, and private insureds no longer bear the burden of the other two. We will only progress a little towards that solution with universal coverage, but we will move in that direction. There is no reason to believe that hospitals will have the power to simply pocket new additional payments. Even if they "kept" it, in Iowa it would almost entirely be reinvested in the capital that raises the quality of care, which benefits all acute care patients.

  3. James,
    My point is if you snapped your finger and everyone had health insurance there would not be any indigent. You need to re-orient your thought pattern. Yes they would invest hopefully in better pay for nurses and other providers (we doctors are doing ok, take care of the other health care workers).