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CEO: A Hospital is Still a Business

March 16, 2022

Scott Thoreson, CCMH Chief Executive Officer

by Scott Thoreson, CCMH Chief Executive Officer

Hospitals are an unusual type of business. Most patients and visitors mainly see hospitals as a place to come when they are injured, sick, trying to avoid becoming sick, or just plain trying to become a more healthy type of person. While these thoughts are all accurate, and different in many regards from other traditional businesses, a hospital is still a business.

My last article talked about the different types of hospitals and the differences between them. I’d like to share some thoughts today about how hospitals are different, and yet the same, compared to other businesses with which you are familiar. Hospitals are unique in how we are paid for our services. Businesses that offer health insurance cover their employees to varying degrees for healthcare-related expenses. The federal and state governments provide healthcare coverage for individuals based on their age. The traditional starting point for Medicare is either individuals who are age 65 or their socioeconomic status, with Medicaid or the appropriate state program responsible for this category of individual. The other major category is Self-Pay, and that is for patients who are not covered by either their employer or the government. However, Self-Pay is still a component as it relates to paying a deductible or a co-pay, even though covered by some kind of health plan.

All hospitals have a “charge master,” which is the price that is connected to each of approximately 5,000 charge codes at Carroll County Memorial Hospital. At larger and more specialized hospitals, they have even more charge codes. The “charge master” is the beginning point for the hospital, as the amount hospitals actually get paid, is often based on the charge master. Hospitals might be paid a certain percentage of the charge master based on a contractual arrangement with a health insurance company, or, they might get a fixed payment for a set number of codes that are attributed to a patient’s care. As a Critical Access Hospital, CCMH is paid for certain services based on a cost report, sort of like a tax return, not based on the charge master. CCMH operates Rural Health Clinics and the government pays for these visits on an overall rate, which is subject to legislation and rulemaking. Sometimes hospitals are paid based on another fee schedule, such as Medicare’s fee schedule. Sounds rather complicated, doesn’t it?

If you think about how a grocery store operates, there is a set price for every item, labeled so that it is visible to all. When you bring your cart to the checkout lane, you are responsible for a total at the end. Perhaps you have some coupons or you may have access to governmental assistance to purchase certain items. In the vast majority of cases, there is no other intermediary and you need to pay the total with cash, check or a credit or debit card. If you leave without paying, it is considered theft. When you are done at the hospital, you more than likely don’t know what you really owe as the bill comes after other processes take place. Ultimately, if you don’t pay what is owed at the hospital, we have a Financial Assistance Program we try to initiate with patients that can eliminate up to 100 percent of what is owed. If patients decide not to apply for financial assistance, they most likely end up having their account submitted to a collection agency and, in many cases, this becomes bad debt for the hospital.

Hospitals have employees just like all other businesses. Most recently and into the future, healthcare will be in a worker shortage in just about every category of employee. Many employees in hospitals have to have training before they can start their profession, which can last up to 13 years after high school for surgeons. Hospitals also have to deal with shortages of supplies, medicines, equipment and sometimes the specialized personnel who fix the equipment that doesn’t function properly. When you see empty shelves at the grocery store, you know they have had supply chain issues as well.

I hope this article has provided a bit more of an insight about the business side of operating a hospital. If you have a certain topic you would like us to discuss, please reach out to us at . I wish you good health!

More in this Series:

CEO: Holiday Message (Published December 20, 2021)

CEO: Different Types of Hospital Ownership (Published February 1, 2022)