Inflated Hospital Costs

The average profit margin at the nation's hospitals is low.  They were 4.4% in 2003 according to the hospital association.  Professor Melnick is probably not including fixed costs and administrative costs in saying that hospital charges are more than double the actual costs and a large component of hospital fixed costs is paying for uncompensated care for under-insured patients.  That is one reason the hospitals charge a fictional list price that very few patients actually pay. It is a kind of price discrimination to try to recoup those fixed costs.  Uwe Reinhardt says that in 2004, "U.S. hospitals were actually paid only about 38 percent of their "charges" by patients or their insurers."  That means that the hospitals billed charges that are over two-and-a-half times greater than what they actually got paid.  More at Medianism.org