Lyn:
Excellent question!
Most hospitals use philanthropic revenue to fund capital equipment and construction. There are exceptions, of course, but even they are usually targeted to services for specific patient populations; e.g., children, and are not directed to subsidize patient care.
In fact, the perverse economic incentives associated with healthcare finance can penalize hospitals that seek to subsidize operating costs with philanthropy. The current trend is to maximize increases in hospital charges in an effort to maximize increases in governmental and private insurance reimbursement rates. Even if a 10% increase in posted charges leads to only a 1% increase in reimbursements, that's 1% more than they had before. The only patients being billed at the hospital charge rate are patients without insurance who do not qualify for government-sponsored insurance (usually Medicare and Medicaid).
An executive with the Nebraska Hospital Association said at a conference a few years ago that he expected hospitals to discover the need to raise philanthropic monies to fill the operating gap left when true hospital costs (not charges) aren't covered by a combination of insurance and/or government reimbursement plus patient-paid fees.
The difficulty comes in when a hospital is effective in using philanthropy to meet this gap. State Medicaid officials, especially, will see this success as a reason to reduce or fail to increase reimbursements, thereby exacerbating the gap and increasing the need for both philanthropy and cost-shifting.
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Michael L. Wyland
Sumption & Wyland
818 South Hawthorne Avenue
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