Every time I hear a comment like Rio Rico’s about tax write-offs, I think of Kramer explaining write-offs to Jerry on Seinfeld.
Actual cost in Aus, about $4375 +/- $1157, AUD, so around $3000 USD, as compared to USA around $5000, but complicated by the fact that exchange rates have been changing, and data in different countries is from different years.
So the $9000 guess given above seems reasonable.
Interesting is that in Aus, the private payment price seems to be at the same level as the cost. So uninsured foreigners charged at around $4500 AUD (I didn’t look long enough to find a recent price list).
Oh, that’s on the nose!
Our local provider is north-central California’s biggest hospital chain, nominally non-profit. But they provide hospital services, not medical services, which are billed by the practice doing the work. Some of our surgeries have not been performed in the hospital but at a nearby “surgical center” owned by an affiliated doctor’s group, which is NOT a non-profit.
MrsRico too-recently suffered a nasty compound fracture. I called 911. Fire crew arrived and stabilized her; private ambulance crew transported her to ER. Wizard orthopedist pieced her together. Medicare and Blue Cross covered most costs but we still received co-pay bills from hospital, anesthesiologist, orthopedist, and I forget who all else. Our coverages didn’t pay everything. What happens to the difference between billed and paid amounts? If not written-off as losses, how do accountants handle it?
Would a lossy hospital be a good place to launder illegal money?
IANAA but it wouls seem to me that it works like this:
Dr. Gassmee charges you $6,000 for an hour of keeping you under. Your insurance pays $4,000 and you are billed the extra $2,000 but since you never woke up, you don’t pay it. The doc declares $6000 of income and a loss of $2000 for net income of $4000 - which oddly enough, reflects reality. (I assume you thought it would be an income of $4000 and a declared loss of $2000 and only pay income on $2000 net. Nope.)
Reminds me of a fun fact in Canadian accounting. A service like a lawyer is subject to GST (VAT, basically a sales tax) currently 5%. This is due when the service is rendered under GAAP, even though often lawyers don’t get paid until the case is over which could be many many months down the road. So a lawyer has to pay on the billed amount whether they get paid yet or not. Not sure what provision there is for recouping the sales tax if they end up not getting paid - much like, what happens to the sales tax a merchant collected and owes if the customer’s cheque later bounces?
The actual statistic is that 50% of all personal bankruptcies include medical debt, not are caused by medical debt. Big difference.
For the longest time (not sure if they still do) Medicare required that they pay no more than the lowest price accepted by the provider.
And hospital charge master prices are, for the most part, just totally made up. While no one is expected to pay them, they will try to get uninsured patients to pay it.
Why is this wrong? How are unpaid bills not considered a business expense? I thought business expenses could be deducted from total income thus lowering your tax bill. E.G. I had $100 in expenses and $90 in costs so I made $10. Does it matter if $5 of those costs were unpaid bills?
Not true (well, not wrong but misleading):
Also, there is a study cited in this article but the study is pay-to-view:
Scenario 1 - I book an inflated revenue amount of $10 million, when the truly collectible amount is only $5 million. It costs me $3 million to provide these services.
Revenue - $10 M
Bad debts - ($5 M)
Net Revenue - $5 M
less costs - ($3 M)
Taxable income = $2 M
Scenario 2 - I bill and book revenue that I believe that I will collect of $5 million. It costs me $3 million to provide these services.
Revenue - $5 M
less costs - ($3 M)
Taxable income - $2 M
The tax I owe will be the same in either scenario.
RioRico asserted the reason that they book larger revenue amounts is so that they can get the tax write-off. You don’t get a** larger **tax write-off for booking inflated revenues and writing off the bad debt. So that’s not a reason for booking inflated revenue amounts.
So, you are telling me that we can discern the actual cost of medical services from their tax returns?
How come no one ever does what you just did to tell us why aspirin can cost $30/pill in the E.R.? I can buy aspirin for $0.01/pill and have it shipped to me for free. I am willing to bet a hospital can get a bulk discount but let’s say it costs them $0.01/pill.
You are telling me we can find where they get their 3000% markup in their tax returns? That they are only booking a loss of 3% on that pill and the other 2997% goes out the window?
It may be so. I would be shocked if that is what their books showed and if their books DID show that then why in the world would any insurance or the government put up with paying more than a nickle or dime per pill?
So many things.
The government (medicare) is not allowed to negotiate drug prices.
The difference between the two scenarios is that hospitals will then widely say that they write off 5 million dollars a year as benevolence where in reality they have done absolutely nothing.
The massive problem with health care is that 30 or 40 years ago business people saw a system ripe for abuse. Hospitals used to be run by doctors, it was the rare CEO that was not an MD, and no, they did not make 7 figure salaries. It is not irrelevant that venture capital firms and hedge funds are buying both hospitals and medical practices. This is why it is so common to see a hospital that is in network, but the ER group is out of network and charges hallucinatory amounts for services. The ER network is out of network AND is owned by a hedge fund who insists on a 20% return on investment. And of course, at the point of origin is greedy physicians who found they could make millions of dollars selling their practice and still remain employed with the same income as pre-sale. Unfortunately, this greed has directly led to the kind of problems we have now.
[quote=“Whack-a-Mole, post:30, topic:848753”]
Not true (well, not wrong but misleading):
I want to thank you. I have never been able to drill down to the original studies but you have done the work for me.
One thing I find very sad is that there are now a number of charities who are now purchasing and forgiving old medical debt that they purchase for at most pennies on the dollar. The sad part is that charity money is in my mind wasted to forgive debts that should not exist.
First you shifted the goal posts of your argument from talking about tax benefits and why certain companies may overinflate revenues so that they can book a tax loss…to the clarity of profit information in tax returns. Second, tax returns are not public information, so even if the tax returns did include detailed information as you suggest, you would not be able to gain access to such info. Third, any information that would be provided in the financials in a tax return or a publicly available financial statement, would be on a consolidated basis of all a hospital’s operations and not to the detail of how much they charge patients for aspirin and how much it costs them for such apsirin.
Most hospitals in the US are not-for-profit (Catholic, university, etc) or publicly owned. In that case, do tax benefits still factor into the decision making process? Do they even pay income taxes?
I did not shift the goalposts. Many very profitable companies pay no taxes because they manage to make their accounting look like they made no money. Movie studios are notorious for stiffing people who would get a percentage of the profits by claiming a movie made no money…even if the movie was wildly successful. (Citations upon request)
You are here telling us hospitals can’t just inflate prices and then claim a write-off. At the simplest level I agree. I cannot sell you my pen for $1 million and then claim a loss of $999,999 because you only gave me $1 for it but that is because I am just some regular schmuck and the IRS would kick my ass. Clearly companies can and do get away with creative accounting (see above).
How does a hospital calculate their costs to bring one aspirin pill to a patient and get it to $30? If that patient cannot pay their bill does the hospital write it off as a loss of a penny? A nickle? A dime? Or $30?
I don’t think a hospital can arbitrarily declare any price for its services. But it can probably get away with claiming a market value.
So if one hospital claims the cost of a day’s care in an ICU is $90,000 for taxation purposes, they might get questioned by the IRS. But if they can then show that five other hospitals in the same region are also charging the same price, they can then say that their price is the market value and not just some price they made up.
I get what you are saying but health care costs for the same procedure can vary wildly suggesting something arbitrary about it. Certainly costs will vary some from place to place but health cost variations seem to get way outside the lines of geographic factors (e.g. more expensive in San Francisco than Butte) and local market fluctuations.
This suggests the hospitals are making shit up.
It’s more “mission critical”. It involves more equipment, more IVs, more nursing coverage, and more of pretty much everything else.
nm (posting went weird on me)