The South Dakota Association of Healthcare Organizations (SDAHO) recently submitted a guest column to The Dakota Scout titled “Setting the Record Straight: Why Hospital Costs Reflect Value, Not Dishonesty – A Response from South Dakota’s Hospital Community.” The article, authored by SDAHO President/CEO Tim Rave, addresses misconceptions about hospital costs and highlights the vital role hospitals play in ensuring access to care.
Read the full article here: Dakota Scout – Viewpoint: Hospital Costs Reflect Value, Not Dishonesty (Published September 16, 2025).
While we understand the frustration South Dakotans feel about rising health care costs, recent commentary oversimplifies a complex issue and unfairly characterizes hospitals as the primary villain in healthcare affordability. As representatives of South Dakota’s hospital community, we feel compelled to provide crucial context that was missing from this discussion.
The Reality of Hospital Operations
Hospitals are not charging arbitrary rates to maximize profits. The difference between Medicare reimbursement and commercial insurance rates reflects a fundamental economic reality: Medicare typically reimburses hospitals at rates below the actual cost of providing care. In many cases, Medicare payments don’t even cover the basic expenses of maintaining life-saving equipment, staffing emergency departments 24/7, or providing uncompensated care to uninsured patients.
When the article suggests hospitals charge “$2,500 for what Medicare pays $1,000,” it ignores that Medicare’s $1,000 may only cover 80% of the actual cost. Commercial insurance helps hospitals bridge this gap, ensuring we can continue serving all patients regardless of their insurance status or ability to pay.
The True Drivers of Healthcare Costs
Hospital costs represent just one piece of a much larger puzzle. Consider what hospitals provide that other health care settings cannot:
- 24/7 Emergency Services: Hospitals maintain fully staffed emergency departments around the clock, ready to handle everything from heart attacks to car accidents. This readiness comes at enormous cost, whether we see one patient or one hundred on any given night.
- Advanced Technology: Modern health care requires sophisticated equipment—MRI machines costing millions, robotic surgical systems, and life-support technology. These investments benefit entire communities but require significant capital and maintenance.
- Specialized Staffing: Hospitals employ highly trained specialists, nurses, and technicians who command competitive salaries. We also maintain staff levels to handle sudden surges in patient volume, as we witnessed during the COVID-19 pandemic.
- Uncompensated Care: South Dakota hospitals provide millions of dollars in charity care annually to uninsured and underinsured patients. These costs must be absorbed somewhere.
Addressing “Site-of-Service” Concerns
The characterization of different pricing based on care location as “dishonest billing” misrepresents the additional value and capabilities that hospital-affiliated practices provide. When a physician practice joins a hospital system, patients gain access to:
- Integrated electronic health records that improve care coordination
- Enhanced after-hours support and emergency backup
- Access to hospital-based specialists and advanced diagnostic services
- Quality improvement programs and safety protocols
- Financial counseling and charity care programs
These enhancements come with additional infrastructure costs, regulatory compliance requirements, and staffing needs that independent practices simply don’t face.
Our Commitment to Transparency and Affordability
South Dakota hospitals are actively working to address affordability concerns:
- Price Transparency: We’ve implemented comprehensive price transparency tools, going beyond federal requirements to help patients understand their costs upfront.
- Financial Assistance: Our hospitals provide extensive charity care and payment plan options for patients facing financial hardship.
- Efficiency Improvements: We continuously work to streamline operations, reduce waste, and improve efficiency while maintaining quality and safety standards.
- Value-Based Care: Many of our hospitals are transitioning to value-based payment models that reward quality outcomes rather than volume of services.
The Bigger Picture
Health care costs are driven by multiple factors beyond hospital charges: pharmaceutical prices, medical device costs, insurance administrative expenses, and the growing complexity of medical care all contribute to rising premiums. Singling out hospitals ignores the role of insurance companies, pharmaceutical manufacturers, and other stakeholders in the healthcare ecosystem.
Moreover, South Dakota’s hospitals provide tremendous economic value to our communities. We’re often among the largest employers in our regions, providing good-paying jobs and contributing millions to economic activity. During natural disasters, health emergencies, and community crises, hospitals serve as critical infrastructure that communities depend on.
Moving Forward Together
Rather than pointing fingers, we should work collaboratively on real solutions:
- Support federal legislation that addresses prescription drug costs
- Advocate for Medicare reimbursement rates that reflect actual care costs
- Encourage insurance transparency in coverage decisions and prior authorization processes
- Invest in preventive care and population health initiatives that reduce the need for expensive interventions
South Dakota’s hospitals remain committed to providing high-quality, accessible health care to all residents while working diligently to control costs. We welcome continued dialogue with business leaders, policymakers, and community members about sustainable solutions that ensure health care remains available and affordable for all South Dakotans.
We’re not the enemy in this fight—we’re partners in finding solutions that serve our communities while maintaining the excellent healthcare that South Dakotans deserve.
