June 29, 2012
Well the Supreme Court finally ruled on the individual health insurance mandate. For such a politically charged topic, I am sure it’s not over. But the fact remains that in 2005, there were 45.5 million Americans without healthcare insurance, and research released by the North Carolina Institute of Medicine estimated that this number will reach 54 million in 2012. So in some form or fashion, we have to address the issue; it’s not going to go away on its own.
There are very few hospitals in the U.S. are willing to turn away patients that do not have the ability to pay. Because of this, providers typically have had to absorb uncompensated services. Considering an emergency room visit starts at $100 and a premature baby starts at $100,000, these costs are enormous. It is estimated that these costs total about $42.7 billion or 37% of the U.S. healthcare bill each year and are absorbed by the hospital, government, or through higher premiums.
The unpaid costs of treatment are typically passed on in higher premiums for the insured and higher taxes, resulting in cost shifting. Health Affairs has estimated that cost shifting adds at least $1,000 to an individual’s premium.
Take a look at a recent project we did for an MD Buyline member hospital. The hospital was looking at one video tower for their surgery department and the board was questioning if it was going to be a revenue generating purchase. We helped them lower their cost of capital, service, and consumables so they could increase their margins over $100,000. However, the CFO and the reimbursement specialist brought up the fact that 10% of their patients are uninsured and they will not get reimbursed. With this in mind, I ran the business plan again for the video system and the projected profits dropped from $351,000 over three years to $92,000.
So for a healthcare administrator, it’s a given that you have to watch your costs. Unless you are getting the best deal, you are not even in the running with the hospital across the street. But the real elephant in the room is the 50 million plus uninsured. Now, at least it’s out on the table for congress to talk about if they do not like the decision.