Assignment: Health Care Coverage
In the event that hospitals cannot shift the costs of uncompensated care and gov- ernment program losses to private payers either because the private payers refuse to pay increased charges (by using competitors instead) or because the private payers refuse to pay for costs unrelated to their patients, the hospital must cut costs. Problem 5.1 demonstrates cost shifting first and then cost cutting. The following problems project how much cost must be shifted or cut. The actual shifting takes place in the pricing of the products and services that make up a patient day and will be discussed in chapter 9 on setting charges (see appendix 9.1, Cost-Shift Pricing).
Assume your organization has 100 patients analyzed in the following manner:
15 Medicare patients, who pay $2,000 per diagnosis 25 Medicaid patients, who pay $1,800 per diagnosis 20 managed care patients, who pay charges minus a 20% discount 10 managed care patients, who pay charges minus a 25% discount 10 private insurance patients, who pay charges 10 charity care patients, who pay nothing 10 bad debt patients, who pay nothing
Your organization’s average cost per patient is $2,000. Calculate the charge necessary to recover your cost.
Study Guide:Layout 1 12/27/07 2:33 PM Page 5
6 Practice Problems and Case Study
Cost-Cutting Self-Quiz Problem
Using the data from the self-quiz problem on cost shifting, assume those who pay charges will allow a maximum charge of $2,100. Calculate the amount of costs you will need to cut to break even.
Study Guide:Layout 1 12/27/07 2:33 PM Page 6
00_Nowicki (2339) Book.indb 119 5/17/17 10:57 AM
When President Lyndon B. Johnson signed Medicare and Medicaid into law on
July 30, 1965, millions of Americans and about half our nation’s seniors lacked health
care coverage, unable to afford basic health care services or weather a medical
emergency. The signing of Medicare forged a promise with older Americans—that
those who have contributed a lifetime to our national life and economy can enjoy
their golden years with peace of mind and the security of reliable medical insurance
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