Dr. G. Keith Smith's website is a great source of important insightful information about how not for profit hospitals operate and how insurance companies make money by having higher billed amounts from hospitals. The name non-profit hospital is analogous to dry cleaning.Dry cleaning uses liquids soit is not really dry and if non-profit hospitals did not generate receipts greater than costs they would not be a hospital at all for very long.
See here for details from Dr. Smith regarding some of the ways hospital make money.
A few years ago years ago a not for profit hospital sent me the following bill for a colonoscopy I had . This does not include physician's fee.
Total charge was $2527 and CMS and my Medicare supplemental carrier paid $ 589 leaving $1938 as "uncompensated" So why send me a bill for any amount that they knew would not be paid in its entirety? Thanks to Dr. Smith we have an explanation.
Smith calls it the "uncompensated care scam" which seems like an accurate characterization. To make up for the money that hospital "looses" in uncompensated care ( the difference between what they bill and what they receive) the federal government ( and I believe state governments may have a similar program for Medicaid) has a program known as DSH (Disproportionate Share Hospitals ). Using some arcade formula CMS computes a value that the hospitals will receive for this bookkeeping loss.
The medical insurance companies have their own scam,known as "repricing" in which they receive a percent of the "saving" they obtain for their employer clients by contracting fees for various procedures and hospital charges. The trick seems to be a mark up on the price the insurance company and hospital agree on so that the alleged savings and the reward for the insurance company is higher,
So the more the hospital losses the more they get paid by CMS and the higher the bills the hospitals charge the more the insurance companies make.