Stuart Craig, assistant professor at the University of Wisconsin-Madison’s School of Business who studies health care spending, said hospital’s operating margins are also “a function of their choices.” He points out that most hospitals are nonprofit entities, so they should be motivated to keep patient costs as low as possible and invest any profit back into their facilities.
“Hospitals will often defend high commercial (insurance) reimbursement rates by saying, ‘Well, we lose money on all these Medicare patients,’” Craig said. “But those are choices that they’re making to set their cost structure. Like, if you looked at hospitals that operate in markets that are mostly Medicare patients, they just set a lower cost structure and stay open.”