Final answer:
Hospitals do not always collect full rates due to the uneven access to medical facilities among different populations, the complexities of healthcare reimbursement models like HMOs, and the inadequate compensation from government programs. These factors, coupled with economic externalities and adverse selection in insurance markets, contribute to financial strains on hospitals serving poorer communities.
Step-by-step explanation:
Why Hospitals Do Not Always Collect Full Rates
Hospitals often do not collect their fully established rates for services rendered due to various systemic issues. One major factor is that access to medical facilities is not uniform across populations, with poor people and those without health insurance less likely to receive preventive care and more likely to require emergency services, where hospitals must provide care regardless of the patient's ability to pay. This disparity was heightened before the Affordable Care Act, and despite some improvements, challenges remain. Additionally, the healthcare system has moved toward models like health maintenance organizations (HMOs), complicating the reimbursement process.
In a fee-for-service system, providers are reimbursed for individual services, but this can lead to cost inflation as there is less incentive to control expenses. Also, hospitals often receive lower compensation from government programs like Medicare and Medicaid than their established rates, which affects their revenue.
The situation is compounded by the economic externality where costs for the indigent care are shifted to those with insurance. Hospitals in poorer areas or those serving a large number of indigent patients risk financial struggles, with the reimbursement often not covering the full cost of treatment. Adverse selection in insurance markets further complicates this, making insurance too costly for low-risk individuals while attracting high-risk individuals, which can distort the market.