Medicare prices are too low to operate on. They generally factor in the bare minimum or slightly less for the variable costs of a procedure but severely under value the fixed costs of providing the same procedure. So those costs largely get pushed to commercial payors as those are the only ones who can shoulder it.
There’s plenty of arguements about waste and executive compensation but when I was a healthcare CFO we had our financials separated where I could see individual hospital performance and all the executive/corporate stuff was separate and it still was an issue as basic capex was hard to keep up with in a hospital that had a low % of commercial patients.
Sure you’re not thinking of Medicaid? Medicare was generally pretty good for reimbursement. When my wife treated Medicaid patients, she often lost money on the cost of the supplies used to treat them, let alone rent and paying the staff etc etc. Most doctors who see Medicaid patients do it as basically pro bono. Some figured out how to game the system with economies of scale but it’s nearly impossible do do and maintain a decent standard of care.
But Medi care was right with the commercial insurers on reimbursement.
Medicaid is usually a big loss for hospitals. It’s just a cost of doing business and another reason why someone else has to pay more. It’s completely a subsidy essentially. This is why certain areas only have a county hospital, it’s likely the same area that is a food desert and has no retail banks, the simple truth is too high of a Medicaid mix will quickly sink a for profit hospital.
Medicare is as I described. Every specialty and procedure has its quirks though, some even make a killing on Medicare and not commercial but the hospital kind of represents a portfolio and the overarching economics in aggregate favor the commercial insurance. I’m guessing your wife’s specialty had decent Medicare rates but it’s not always true.
There’s even some private insurance which is effectively Medicare that has different reimburse ranges (Medicare advantage plans).
Executives like to lament the lose money on Medicare but I never really saw it that way. If you look at it isolated, sure it’s true. But if you look at it as a portfolio where your fixed costs are covered by another cohort, then it’s a huge volume to add and make money at the contribution profit line. You just have to be careful not to run fixed costs as a percentage of total revenues or something like that. The extra volume Medicare brings to a hospital or network of hospitals also has tremendous negotiating power for pharma, medical supplies and devices, etc.
Those are fair points. From our specialty clinic's POV, Medicare has been great as far insurers go[0]. I've not had to deal with them at a hospital's scale.
[0]File under "damning with faint praise".
> Executives like to lament the lose money on Medicare but I never really saw it that way.
We're in the totally opposite boat. We actually prefer Medicare patients vs private insurance not only because of the reimbursement, but the way in which they reimburse us (one lump sum vs visit-by-visit auth that requires manpower to manage).
Some of the requirements can be onerous, but on the whole, they're easier to plan for than the private stuff.
You’re not a hospital then. I see this with some specialties or types of providers. I’ve also seen it do complete 180. As in, Medicare is high reimbursement for a decade or two allowing a specialty to proliferate, then one day they rug pull the rates and the specialty is scrambling because they’ve not been running managed care part of their practice (the part that negotiates with commercial plans). It’s a huge headache all around and I do agree Medicare is easy once established.
Generally speaking Medicaid is worse than Medicare for provider reimbursement rates. In some states, Medicaid plan members are effectively uninsured because they can't find a provider within reasonable distance who will take new patients.
> But Medi care was right with the commercial insurers on reimbursement.
As I said in another comment, I'm with a provider and Medicare is easily one of our best payors. We actually have contracts with private insurers that say they have to reimburse us at least 80-85% of what Medicare would. They also give us the money up front, with a public formula that we can count on vs. a hidden formula that requires us to go back for more auth (and thus needs more people to manage).
That back and forth is a huge time suck. Knowing that Medicare will reliably pay $X for code Y makes life vastly easier. Contrast with, say, UHC: “preapproval? That mean we agree to pay $Z, but only if we want to!”
Contracts are negotiations
Yes, that's what a contract is. I don't remember asking for a definition.
But you blame the contract as to why commercial pays less, when it’s because that’s what someone accepted. They’re obviously going for a low number and it’s your sides job to negotiate for yourself. I just made another comment about lazy managed care, then you prove my point here.
While you didn’t ask for a definition, you should try and connect the dots.