Hospitals Are Wrong About Shifting Costs to Private Insurers
Conversely, hospitals in more competitive regions are more efficient and can earn a profit on Medicare prices. But, because of competition, they must charge lower prices to private insurers. Put it together and it is hospitals’ underlying costs, driven by competition — not cost shifting — that lead to differences in prices charged to insurers and Medicare shortfalls or profits.
.. Another weakness of the cost shifting theory is that it runs counter to basic economics. Hospitals that maximize profits, or even maximize revenue to fund charity care, would not raise private prices in response to lower public ones. In fact, such a hospital would already be charging the highest possible prices to all payers.
.. Likewise, retailers charge lower prices to clear inventory, not higher ones to make up for less revenue from early purchasers.