Hospital price raises to inelastic demanders or lunch in the cafeteria

Tyler Cowen writes:

I would be interested to know more about the insurance reimbursement rates for hospital food, but at the very least I suspect there is no higher reimbursement allowed for higher quality.  Combine third party payment with a flat price for rising quality and see what you get.  Furthermore, low quality food is another way the hospital raises its prices to inelastic demanders, again circumventing relatively sticky reimbursement rates from the third party financiers.  It’s one sign that the net pressures are still in inflationary directions.

There are several other answers and the question is “Why is hospital cafeteria food so poor from a nutritional point of view? Fried chicken, preservative-filled cold cuts, cheese everywhere, etc. Keep in mind I am not talking about the food served patients who may have appetite problems. It is food they serve everyone else including doctors and nurses, many of whom know better.”

On a related note, here is what machine separated chicken (e.g., pre-chicken nuggets) looks like…