Fixed costs vs. variable costs. It costs a million dollars to have a hospital, then there is a further $250 marginal cost to treat another patient. If there are 2000 patients then the average patient has to be charged $750 ($250 + $1M/2000) to cover costs. If Medicare says $500 or GFTO then $500 is more than $250 and they "make" $250 by accepting Medicare, but if they received that much from the average patient they wouldn't cover their costs.
