Health Affairs study IDs 50 hospitals that mark up 'prices' by more than 1,000%

All but one of the facilities is a for-profit

Fifty U.S. hospitals charge more than 10 times the cost of performing a procedure, according to study published Monday in Health Affairs.

However, hospital officials note that hospital "chargemasters"—or the price that the hospital lists for a given procedure—do not represent the actual amount that an insurance company or uninsured patient would pay for a procedure.

The counter-argument: Prices (mostly) don't matter

Details of the study

For the study, Ge Bai at Washington and Lee University and Gerard Anderson at Johns Hopkins Bloomberg School of Public Health compared hospitals' chargemasters to the estimated costs of procedures, which they determined based on the costs that Medicare would permit for a procedure. To do so, they used government data for more than 4,000 Medicare-certified hospitals from May 2012 to April 2013.

The researchers determined that the average markup for a procedure was 340%. "In other words, when the hospital incurs $100 of Medicare-allowable costs, the hospital charges $340," the researchers wrote in Health Affairs.

However, the researchers found that chargemasters varied significantly by hospital. At the 50 hospitals with the largest markups, the average markup was 1,010%. All but one of those hospitals are for-profit facilities.

Commenting on the findings, Anderson noted that "there are no market forces and no regulatory forces that keep the prices down." He explained, "Nobody is telling them that they can't. [The compiled information] hasn't been publicly available. They haven't been shamed."

Hospital officials weigh in

The Federation of American Hospitals (FAH), a trade group representing for-profit hospitals, warns that the study fails to consider the charity care provided by the facilities that it identifies.

"The study does not recognize that the listed hospitals provided nearly $450 million in uncompensated care in 2012 alone," says FAH CEO Chip Kahn said.

Hospital prices see first year-over-year drop since 1998

Accounting for discounts offered for uninsured patients "would have had a significant effect on the charge-to-cost-ratio reported, and therefore the implications of the study's results," FAH argues.

More broadly, hospital officials say that chargemasters do not accurately represent procedures prices because insurers negotiated discounted prices with hospitals and uninsured patients have access to discount programs (Sun, Washington Post, 6/8; Begley, Reuters, 6/8; Sherman, "Moneywatch," CBS News, 6/8; Fox, NBC News, 6/8; Kennedy, AP/Minneapolis Star Tribune, 6/8). 

The takeaway: A new study has identified major markups for procedures at many U.S. hospitals, which the researchers largely attribute to a lack of regulations and market forces preventing the large price tags.

Your guide to price transparency

As the number of high-deductible health care plans increase—and more patients consider cost when choosing providers—organizations need to get up to speed on price transparency. This guide outlines objectives for:

  • Maximizing your patient financial counseling department;
  • Preparing your department for the increased volume of patients asking about out-of-pocket medical costs and pricing for scheduled procedures;
  • Creating collateral that explains out-of-pocket financial responsibility for a medical service to patients; and
  • Developing online portals and third-party avenues to help create a culture of price transparency.


Next in the Daily Briefing

Hospitals apply to become medical marijuana distributors

Read now

You May Also Like