In the event someone visits and er and bill is written off as a charity case or said person doesn’t pay how does the hospital make money?

Question

It’s from my understanding the er cannot denying seeing you even if you can’t or refuse to pay. So in the event of a very large bill and the hospital does a charity right off how does the hospital make money. In addition, it is my understanding that if you don’t care about your credit unpaid medical bills won’t impact you since it isn’t a government expense (like student loans) so they can’t garnish wages. So how do they make money on these cases? Also my mom is a doctor and has said that right offs are very common since insurance only covers a percentage. Why would a hospital do this since they don’t get paid?

In: Other

Answer 1

If a hospital doesn’t sell the unpaid bill to a debt collection agency and writes it off, it will register on their books as a loss.

However, because of the way hospital and insurance companies interact in the US, a write off of a $3000 bill likely did not actually cost the hospital $3000.

Hospitals are incentivized to overcharge for equipment and procedures because they deal with insurance companies who haggle them all the way to the bank. That’s why insurance companies make a strict distinction between ‘in network providers’ and refuse to pay for ‘out of network providers’ unless you file a claim or for special circumstances. Hospitals who are in-network providers with an insurance company have already struck a deal between each other about how much they will pay for certain procedures and care. Say it costs the hospital $0.25 to give you a Tylenol, and according to the deal with your insurance company, the hospital will only get from them $0.27 per Tylenol they give you. Obviously not all procedures cost the same, and since every contract negotiation start with a back and forth haggling over prices, hospitals are incentivized to inflate their prices to maximize their profit margin within their contract.

This is relatively good for a person with insurance who went to a in-network provider for care but for someone uninsured or out of network, they get charged those huge overinflated numbers and that’s why you get news articles about $75 hospital Tylenol and the like. So when a hospital writes of a bill, they are technically losing money but not as much as you think.