The thesis is correct that a health-system CEO shouldn’t make $17m/yr. It’s a non-profit largely funded by tax payers and maintains its market share by government regulations. Just the charity care component is a bit misleading.
How would margins be defining in this case? When I hear that the margins at gas at a gas station are x%, I understand that they are basically talking about how much I pay per gallon minus how much the gas station paid per gallon. However, it feels like defining margins in a health system would be much more complex. Is it just lookin at the raw materials (e.g. how much do medications, bandages, and scalpels cost the hospital)? Depreciation on expensive equipment like MRIs? Does pay factor in and if so is it just the salaries of people who actually do the work like managers, nurses, and doctors or also the compensation for people like CEOs?
A homeless alcoholic withdraws and gets seizures, spending a week in the ICU. He is not on Medicaid, but qualifies. After paying for all his care and applying for Medicaid on his behalf. The hospital might get 50 cents back for every dollar they spent. (They spent on doctors; nurses, medications; EMR bill, case management, etc.).
This guy will essentially come back 5-6 times per year. With negative margins every time because that’s how Medicaid is designed.
2nd scenario is a 70 year old with a knee replacement surgery and great insurance Medicare + supplemental. He spend a day and half in the hospital and the money that his insurance paid, would be ~130-150% cost of care.
Average everything out; and you end up with 3-6% margins.
Obviously, salaries are big part of the cost. So, perhaps the margins will be better if the CEO is paid less. But, overall its a low-margin business because the biggest payers are Medicaid and Medicare and they more or less pay whatever they want via legislative means.
I suspect they don't because it's not financially solvent to do so, given the number of patients who use those services. That on it's face seems to bring into question the claim that they are net-negative (whether that's due to legislation or other means).
Example Form 990 (search inside for Schedule H): https://my.clevelandclinic.org/-/scassets/files/org/about/fi...
See also page 8 of this pdf: https://www.aha.org/system/files/media/file/2023/10/Results-...
My understanding is that medical billing is inflated so they can anchor a high value to help in their negotiations with medical insurance. I'm wondering if this is the medicare adjusted value (i.e., what medicare says the procedures are worth) or the artificially inflated value?
[1]: https://en.m.wikipedia.org/wiki/Emergency_Medical_Treatment_...
So, to be generous, maybe there's a case that if a hospital gets a bulk of its revenue from the ER, it's a better business case to accept Medicare. But I don't believe that's the case for most hospitals, so it still leads me to question the premise that medicare is a net negative (or else we'd see a lot more 'non-participating' hospitals).
If the doctor is making an order of magnitude more for their time than the receptionist, it's far more effective to have more receptionists for the work either of them could do.
Is it actually government funded, or does it sell services which the government pays for?
I dont know if it is Baader–Meinhof phenomenon, but it seems like I increasingly see funded used to describe revenue for services rendered.
It seems like a bit of a bait and switch, because the word funded often carries come connotation of ownership, obligation, or charity.
And for that matter, the former definitely doesn't hold, because nearly every entity gets some tax break. Every homeowner is "government funded".
Maybe indirectly. As a charity they get lots of benefits that allows them to save money.
Some of the impacts are identical, but they have other fundamental differences.
I pay less than 100% tax, but I wouldn't say that the government is funding my lifestyle