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The State can only control an entity’s status as a not-for-profit on the state level as it provides an exemption from state taxes, the IRS controls who is a not-for-profit entity overall. They are only looking at one indicator and not the big picture. As a state, Indiana ranks near the bottom when it comes to the health of the population; we Hoosiers like their tobacco and their fried food and hate exercise which only leads to higher healthcare bills. Also Medicare and Medicaid do not even begin to cover the true costs of healthcare creating the need to be dependant upon other sources of income to recoup the losses not covered by the government. Additionally no where does this address what hospitals have to pay for supplies and services, especially when it comes to pharmaceuticals which are controlled by the pharmaceutical companies and the pharmaceutical middlemen who grossly inflate their costs which then need to be passed along.
Something that the media never bothers to mention is that being paid at 100% Medicare rates is not sustainable for any entity, whether it’s a hospital or a doctor’s practice because Medicare pays such little reimbursement for services provided
Boo hoo
Don’t cry yet.. Wait until they become for profit, once for profit, they will change the way they collect unpaid obligations. Usually beyond a threshold (often 90-180 days), debt is sold or transferred to third-party collection agencies. These agencies contact patients often aggressively to secure payment.
Some hospitals report unpaid medical debt to credit bureaus, impacting the patient’s credit score. A 1-year grace period exists before medical debt appears on credit reports. This may have gone away during the Biden administration.
If debts remain unpaid, hospitals may sue patients for repayment. Winning a lawsuit allows hospitals to garnish wages or freeze bank accounts. Some hospitals place liens on patient property, preventing sales until the debt is cleared. For-profit hospitals tend to be more aggressive in collections than non-profits, since they do not have the same charity care obligations.
It’s important to recognize that hospitals are not the only entities influencing healthcare costs. Insurance companies, pharmaceutical firms, and medical device manufacturers also play significant roles.
Insurance Companies: In 2022, major health insurers reported substantial profits. For instance, UnitedHealth Group’s net earnings exceeded $20 billion, highlighting the profitability within the insurance sector. Health Insurance Companies have a
profit margin of approximately 3.3% to 3.4%.
Pharmaceutical Industry: Pharmaceutical companies consistently report high-profit margins. In 2022, Pfizer reported a net income of over $21 billion, underscoring the significant profits within the industry. On average pharmaceutical companies gross profit margin is approximately 76.5% with a Net Profit Margin: Around 13.8%. These figures indicate that pharmaceutical companies maintain substantial profitability compared to other industries.
Medical Device Companies: The medical device sector also sees considerable profits. Medtronic, a leading medical device company, reported a net income of approximately $4 billion in 2022. As an industry the medical device companies have a profit margin typically between 20 – 30%
Non-profit hospitals have a median operating margin that ranges from -0.3 to 4.2% and a median operating cash flow margin of approximately 4.9%
These figures illustrate that multiple sectors within the healthcare industry contribute to overall costs, and focusing solely on hospital pricing may overlook other significant factors and players.
Hospitals operate under extensive regulatory frameworks at both state and federal levels. Compliance with regulations such as the Health Insurance Portability and Accountability Act (HIPAA), the Emergency Medical Treatment and Labor Act (EMTALA), and various state-specific mandates requires substantial administrative resources. These regulatory requirements add to the operational costs of hospitals, which are not accounted for when comparing hospital charges to Medicare reimbursement rates.
While House Bill 1004 aims to control hospital costs by leveraging findings from the RAND study, it’s crucial to consider the broader context of healthcare financing. The RAND study has faced criticism for its methodology and for not fully accounting for the complexities of hospital funding. Additionally, focusing solely on hospital pricing without considering the roles of insurance companies, pharmaceutical firms, medical device manufacturers, and regulatory burdens may lead to policies that do not effectively address the root causes of high healthcare costs.
House Bill 1004 proposes revoking the state nonprofit status of Indiana hospitals if their charges exceed 200% of Medicare reimbursement rates. This initiative is partly based on a RAND Corporation study indicating that Indiana has the ninth-highest hospital costs in the nation. However, the application of the RAND study in this context warrants a critical examination, as it may not provide a comprehensive picture of healthcare financing.
The American Hospital Association (AHA) has expressed concerns about the RAND study’s methodology and conclusions. The AHA argues that the study fails to account for the chronic underpayment by Medicare, which does not cover the full cost of care. Consequently, hospitals rely on payments from private insurers to subsidize the shortfall. The AHA cautions that using the RAND study’s findings to inform policy decisions could jeopardize patient access to care.
Similarly, the California Hospital Association has criticized the RAND study for not fully explaining the variation between commercial and Medicare payments to hospitals. They contend that the study’s incomplete findings could lead to recommendations that harm patients and communities.
Given the complexities of healthcare financing, wouldn’t it be more effective to propose a comprehensive plan that addresses all cost drivers—including insurance companies, pharmaceutical pricing, medical device markups, and regulatory burdens—rather than solely targeting hospitals?