United States Hospitals have traditionally relied primarily on revenues from paying patients to offset losses from unreimbursed care. Almost all...
GMAT Critical Reasoning : (CR) Questions
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?
Passage Visualization
| Passage Statement | Visualization and Linkage |
|---|---|
| United States Hospitals have traditionally relied primarily on revenues from paying patients to offset losses from unreimbursed care. |
Establishes: Traditional hospital revenue model Example: Hospital ABC has:
Key Pattern: Hospitals depend on SURPLUS from paying patients to cover losses |
| Almost all paying patients now rely on governmental or private health insurance to pay hospital bills. |
Establishes: Current payment structure Example: Of Hospital ABC's paying patients:
Implication: Insurers now control most hospital revenue |
| Recently, insurers have been strictly limiting what they pay hospitals for the care of insured patients to amounts at or below actual costs. |
Establishes: New reimbursement constraints Example: Hospital ABC's new reality:
Critical Change: Paying patients no longer generate surplus revenue |
| Overall Implication |
FUNDAMENTAL BREAKDOWN: The traditional model depended on surplus from paying patients, but insurers now prevent any surplus generation. Before: Paying patients → Surplus → Offset unreimbursed care Now: Paying patients → No surplus → Cannot offset unreimbursed care |
Valid Inferences
Inference: Hospitals will have increasing difficulty offsetting losses from unreimbursed care under current conditions.
Supporting Logic: Since hospitals have traditionally relied on surplus revenue from paying patients to offset unreimbursed care losses, and since insurers now limit payments to amounts at or below actual costs (eliminating surplus), hospitals can no longer use their traditional method to cover unreimbursed care costs. The fundamental revenue model that hospitals depended upon has been disrupted.
Clarification Note: The passage supports that the traditional offset mechanism is being undermined, but does not specify what alternative strategies hospitals might pursue or whether they will definitely face financial crisis.
This choice discusses expensive medical procedures being available to wealthy patients but out of reach for low-income patients. While this might be true in reality, the passage doesn't provide any information about technology advances, procedure costs, or wealth disparities. The passage only discusses hospital revenue models and insurance reimbursement policies, so we cannot draw this conclusion from the given information.
This choice correctly identifies the logical consequence of the situation described in the passage. Since hospitals traditionally used surplus revenue from paying patients to offset unreimbursed care losses, and insurers now limit payments to actual costs (eliminating surplus), hospitals face a clear dilemma. Without their traditional funding source, they must either find alternative income, deny unreimbursed care, or accept financial losses. This conclusion flows directly from the breakdown of the traditional revenue model.
This choice discusses patients with incomes too high for government insurance but too low for private insurance. The passage mentions that patients rely on governmental or private insurance, but provides no information about income thresholds, eligibility criteria, or patients who fall between coverage gaps. We cannot infer anything about specific patient demographics or insurance eligibility from the given information.
This choice suggests that if hospitals reduce costs, insurance companies will maintain current reimbursement levels, providing more funds for unreimbursed care. However, the passage tells us insurers limit payments to 'at or below actual costs,' which suggests payments would decrease if costs decrease. This choice contradicts the logical relationship between costs and reimbursement established in the passage.
This choice discusses declining philanthropic donations to hospitals. While this might affect hospital finances, the passage contains no information about donations, philanthropy, or trends in charitable giving. We cannot draw any conclusions about donation patterns from the information provided about insurance reimbursement policies.