Sliceitup wrote: ↑Tue Aug 03, 2021 5:56 pm
ken_sylvania wrote: ↑Tue Aug 03, 2021 5:35 pm
Ken wrote: ↑Tue Aug 03, 2021 2:46 pm
If the hospital doesn't expect to get paid either way, which will their accountants prefer when it comes to tax time? A write-off off $100,000 or a write-off of $2 million. I'm guessing the latter. Which is why I suspect a lot of hospital pricing really has to do with inflating their write-offs rather than extracting blood from a turnip.
How does one benefit them more than the other?
I may be wrong, but I think what he’s saying is if someone can’t pay, regardless of price, then the hospital can write that off as a loss, reducing their tax liabilities. So if you write off a million, it’s much better for your taxes than a hundred grand.
Maybe I'm a bit dense, but it seems to me that whether a million dollar write off is better all depends on the starting point. If they are charging a higher price to begin with, then the initial income is higher. So that it takes a larger write-off just to get down to the same place.
For instance, say hospital A charges $100,000 for a surgery, has direct costs of $40,000 and overhead of $35,000. That leaves them with a profit of $25,000 to pay taxes on.
If hospital B charges $500,000 for that same surgery, has the same direct costs of $40,000 and overhead of $35,000, but then writes off a $400,000 self-pay discount, they have the exact same $25,000 of profit to pay taxes on.
How is that a financial incentive?
I'm not saying there might not be other social reasons to do this, but I'm asking about the specific statement that was made - that this is probably better financially for tax reasons.