Hi Mridul,

I think we need to read option D more carefully.

(D) If the hospitals reduce their costs in providing care, insurance companies will maintain the current level of reimbursement, thereby providing more funds for unreimbursed care

Can we say anything about insurance companies? Whether they will maintain current level of reimbursement or not? Does the passage say anything about when insurers adjust their payments to the hospitals?

Think about these.

Thanks,
Chiranjeev
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B here too. D is tempting but the passage states that insurers have been STRICTLY limiting theiry payments at or below costs.

OA is B

The primary way hospitals have covered the cost of unreimbursed care is no longer available to them. It follows that they have three options: finding a new way to cover costs, reducing costs by giving less unreimbursed care, or suffering a loss.

Look at it this way

Conventional scenario: Hospital spends 1000 bucks on treating a patient. The patient pays back 1100 bucks to the hospital for the treatment helping the Hospital make a profit.

Scenario with private health insurance firms: Hospital spends 1000 bucks on treating a patient. The patient's insurer pays back only 900 bucks to the hospital. So the hospital is making a loss.

The last line shows that in the above example an insurance company will at the maximum pay 1000 bucks and not more for treatment. So the hospitals do not stand a chance to make money.

Option D explains that by cutting their operating costs (i.e. bringing down the cost of treatment lower than 900) they will continue to make profits.

US Hospitals have relied on revenues from paying patients to offset losses from unreimbursed care .
Almost all paying patients reply on government or private insurance .
Now insurers have been limiting on what they pay .
Type- Inference
Pre-Thinking - If one of sources of incomes decreases , then hospitals will to find new ways to raise income or suffer losses

(B) If hospitals do not find ways of raising additional income for unreimbursed care, they must either deny some of that care or suffer losses if they give it. - Correct
(D) If the hospitals reduce their costs in providing care, insurance companies will maintain the current level of reimbursement, thereby providing more funds for unreimbursed care.
Out of scope - we do not know what insurance companies will do
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United States Hospitals have traditionally relied primarily on revenues from paying patients to offset losses from unreimbursed care. Almost all paying patients now rely on governmental or private health insurance to pay hospital bills. Recently, insurers have been strictly limiting what they pay hospitals for the care of insured patients to amounts at or below actual costs.

Which of the following conclusions is best supported by the information above?


(A) Although the advance of technology has made expensive medical procedures available to the wealthy, such procedures are out of the reach of low-income patients.
- adding "advanced technology" = new info. nowhere in passage is new tech included/mentioned. could very well be current/old tech that is currently being used

(B) If hospitals do not find ways of raising additional income for unreimbursed care, they must either deny some of that care or suffer losses if they give it.
- correct as is

(C) Some patients have incomes too high for eligibility for governmental health insurance but are unable to afford private insurance for hospital care.
- "some" = any #. nowhere in passage is anything mentioned about patients who have income too high vs. patients whose income fall too low.

(D) If the hospitals reduce their costs in providing care, insurance companies will maintain the current level of reimbursement, thereby providing more funds for unreimbursed care.
- we have no reason to believe insurance co's will maintain the current level of reimbursement. what happens if it drops/increases?

(E) Even though philanthropic donations have traditionally provided some support for the the hospitals, such donations are at present declining.
- we are given no info to validate the idea that philanthropic donations are declining.

quickest way to go through this problem is POE. learn it. love it. use it.

Kudos please if helpful

United States Hospitals have traditionally relied primarily on revenues from paying patients to offset losses from unreimbursed care. Almost all paying patients now rely on governmental or private health insurance to pay hospital bills. Recently, insurers have been strictly limiting what they pay hospitals for the care of insured patients to amounts at or below actual costs.

Which of the following conclusions is best supported by the information above?

This is an inference type question that requires us to find the premises (since there’s no conclusion). We are told that:

• US hospitals revenues from paying patients use to cover unreimbursed care. (A fact)
• BUT, now all paying patients use government and private insurance to pay instead. (Here’s our turn!)
• Recently, the insurance company have limited how much they back and that amount is often lower than actual costs. (Oh, so the revenue for the hospitals must not be covering as much as before?)

We are looking for an answer choice that connects the change in insurance coverage for paying patients to the revenue of hospitals. According to our anticipated answer, it looks like (B) is our winner.

(A) Although the advance of technology has made expensive medical procedures available to the wealthy, such procedures are out of the reach of low-income patients.
This answer choice brings in an irrelevant distinction between the expenses of wealthy and low-income patients that are driven by technology. This distinction isn’t made in the argument or relevant.

(B) If hospitals do not find ways of raising additional income for unreimbursed care, they must either deny some of that care or suffer losses if they give it.
This answer choice explains what might happen to revenue and care if the insurance coverage will not cover as much as paying patients used to cover on their own!

(C) Some patients have incomes too high for eligibility for governmnetal health insurance but are unable to afford private insurance for hospital care.
This is a distinction that isn’t relevant to our argument. We are not trying to differentiate between government or private insurance.

(D) If the hospitals reduce their costs in providing care, insurance companies will maintain the current level of reimbursement, thereby providing more funds for unreimbursed care.
We don’t know how insurance companies will react to unreimbursed care when current level is maintained. This is also not necessarily true from our facts.

(E) Even though philanthropic donations have traditionally provided some support for the the hospitals, such donations are at present declining.
This is not relevant.
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For option B, we do not know if hospitals would deny the services for unreimburssed ones. Then how can this option be selected.

Can someone help me understand Option B

Hello GMATNinja,

in option B, " they must either deny some of that care " threw me off. Could you please help me to understand How we can infer that Hospitals MUST Deny SOME of that care ?

Let’s consider the statements given in the passage:

• US hospitals have relied on paying patients to offset the costs incurred while caring for patients that don’t pay.
• Patients now use government or private insurance to pay hospitals.
• These insurers have begun to pay hospitals only for the cost of the care that the insured patient receives.

We’re looking for an answer choice that is supported by those statements. Consider (B):


The passage notes that hospitals have typically paid for unreimbursed care with revenue from paying patients. However, it also states that those patients’ insurers have begun to pay hospitals only for the cost of the treatment received by the insured patients. So, what can hospitals do to now cover the cost of unreimbursed treatment?

The first part of (B) eliminates the possibility that the hospitals find additional sources of revenue to cover the cost of unreimbursed care. This leaves only two options: either the hospitals can simply suffer the losses, or they can deny to care for patients that cannot or will not pay. These are exactly the options that (B) details, so (B) is supported by the passage.

I hope that helps!
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AndrewN

Can you please help in understanding the below sentence.

United States Hospitals have traditionally relied primarily on revenues from paying patients to offset losses from unreimbursed care.

The phrase (am I right in saying it as a phrase??Because I think it is a Noun phrase) "unreimbursed care" made the passage tricky to comprehend. As a result, I marked wrong answer.
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Sure thing, warrior1991. You know I like to break down sentences. Yes, unreimbursed care is used as a nominative (noun) phrase in the sentence above, answering the what that the preposition sets up (i.e. from [something]). To keep matters simple, I will offer my blind read of the sentence (that is, I have not looked at the original question):

United States Hospitals have traditionally relied primarily on [money] from paying patients to offset losses from [having provided services to other patients without receiving compensation].

You might wonder why I did not use non-paying patients. To me, unreimbursed care invokes a possible third party, an insurance provider, who may not have made payments to hospitals on behalf of patients who had received care.

I hope that helps. Now, I am going to go back and examine the question myself.

- Andrew
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United States Hospitals have traditionally relied primarily on revenues from paying patients to offset losses from unreimbursed care. Almost all paying patients now rely on governmental or private health insurance to pay hospital bills. Recently, insurers have been strictly limiting what they pay hospitals for the care of insured patients to amounts at or below actual costs.

Which of the following conclusions is best supported by the information above?

(A) Although the advance of technology has made expensive medical procedures available to the wealthy, such procedures are out of the reach of low-income patients.
-advance of technology is irrelevant

(B) If hospitals do not find ways of raising additional income for unreimbursed care, they must either deny some of that care or suffer losses if they give it.
Correct. The key here is recognizing that insurers are more strict on what they pay hospitals, limiting their payment of claims to amounts AT OR BELOW ACTUAL costs…so while historically hospitals have been able to offset losses with patient purchases, the fact that the new source of revenue could be less than what hospitals need means that income must come from somewhere else

(C) Some patients have incomes too high for eligibility for governmnetal health insurance but are unable to afford private insurance for hospital care. X
OK so presumably these individuals (if the situation demands it) pay out of pocket …revenue is going into the hospital. OUT.

(D) If the hospitals reduce their costs in providing care, insurance companies will maintain the current level of reimbursement, thereby providing more funds for unreimbursed care. X
-‘will maintain the current level of reimbursement’…we don’t know that…

(E) Even though philanthropic donations have traditionally provided some support for the hospitals, such donations are at present declining.
-philanthropic donations are irrelevant
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Hello AndrewN sir,

To get the correct answer, This argument is based on assumption that revenues from paying patients is less than revenue from governmental or private health insurance to pay hospital bills, which could pay at or below actual costs.

A clarification:
SO in this scenario, even we can’t be asbolutle sure but the overall idea is that there are chances that hospitals would not get same amount of money as they would have got direlty from paying patiencets.
Reason for thinking as such is because of usage of words “strictly limiting “, which means insurers tends not to pay loosely and try to limit the payments. This is the key idea we need to abstract to resolve the argument even it is not given directly, even it may stand wrong in the end. But by reading the argument, our belief is that hospitals will tend to lose money by insurers coming in between. That's the key point to hold while solving the question.

Am I right in thinking? Please give your thought process while reading such argument.

Hello, imSKR. I can see from the timer that I took this question on 1 November last year, and it is a rare one in that I answered in about 50 seconds. Sometimes you just luck out and know the answer when you see it, and you feel even better about selecting it when you check the others and do not find a compelling alternative.

The crux of the argument is that patients who pay their bills, almost all of whom currently do so via insurance, add extra money to the hospital coffers, and this excess is then used by the hospital to cover losses from unreimbursed care, which may refer to uninsured individuals who received hospital care but then skipped out on the bill (or could be paying it back in small amounts at a time, a situation that would still limit hospital funds). Since insurance companies are now strictly limiting what they pay hospitals for the care of insured patients, the extra money that hospitals used to be able to depend on is no longer flowing in. Answer choice (B) fits in nicely with a reasonable outcome. Either hospitals will have to find a new cash stream, or they will have to turn uninsured people away. Or, of course, they could keep things the same and still offer treatment to anyone, but then they might operate at a loss. There is nothing to argue against in (B) as a logical conclusion, so it is the answer we should get behind.

I hope you can appreciate such a thought process. It is rare that I answer a CR question in under a minute, even an easy question, but I guess everything aligned this time.

- Andrew
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ExpertsGlobal5 KarishmaB - Can you pls explain the meaning conveyed by this portion of the first sentence - "to offset losses from unreimbursed care"?

I did understand that US hospitals are replying on the money received from the patients who is paying them for the medical services that they have taken but unable to understand how they are relying on revenues from loses.
Pls share your thoughts!

Thanks,
Anshul

Hello PanpaliaAnshul,

We hope this finds you well.

To answer your query, the meaning here is that the revenue from paying patients is used to make up for or mitigate losses from unreimbursed care; to "offset" something means to lessen or negate its impact.

We hope this helps.
All the best!
Experts' Global Team
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People with insurance get medicare care from hospitals but do not need to pay the hospitals. The care cost is reimbursed (paid) by the insurance company. Sometimes, the insurance company may deny the payment. Or an uninsured person may get the care but may not be able to pay himself. The hospital faces losses in that case. They make up these losses from the revenue coming from paying patients (by charging them at 'more than actuals')
These days almost all paying patients have insurance and insurance companies are paying off amounts that are at or below actuals. So the hospitals are unlikely to be able to make up the deficit (created by unreimbursed cases) if they do not come up with new revenue sources.
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