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Some hospitals exceed Medicare-allowed costs by up to 1000%
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Hospitals in the United States with the highest charge-to-cost ratios billed uninsured consumers and out-of-network patients more than 10 times the cost allowed by Medicare, according to recent study data.
“There is no justification for these outrageous rates but no one tells hospitals they can’t charge them,” study researcher Gerard F. Anderson, PhD, a professor at the Johns Hopkins Bloomberg School of Public Health, said in a press release. “For the most part, there is no regulation of hospital rates and there are no market forces that force hospitals to lower their rates. They charge these prices simply because they can.”
Researchers utilized the 2012 Medicare cost reports that consist of financial information from all Medicare-certified hospitals in the U.S. The final cohort contained 4,483 institutions. A charge-to-cost ratio was calculated by dividing each hospital’s total gross charges by its total Medicare-allowable costs.
“Medicare-allowable costs” was the cost determined by CMS to be associated with care for all patients and did not exclusively apply to Medicare patients.
The results indicated that the average hospital charged 3.4 times the Medicare-allowable cost, or $340 for every $100 of Medicare-allowable costs incurred.
The researchers wrote that the 50 hospitals with the highest markup of charges had charge-to-cost ratios that ranged from 9.2 to 12.6 times the cost determined by Medicare. This resulted in a markup of approximately 1,000%, they said.
These hospitals were concentrated in the southern United States, with 40% of them in Florida. When compared with all hospitals, these 50 institutions were primarily in urban areas (86%), and less likely to be teaching hospitals (18%). They also were likely to be part of a for-profit health care system.
Nearly three-quarters of the top 50 hospitals with the highest markup were either part of the Community Health Systems or Hospital Corporations of America. North Okaloosa Medical Center in Florida had the greatest markup ratio of 12.6 times the allowed costs.
Only one of the 50 hospitals, Crozer-Chester Medical Center in Pennsylvania, is a nonprofit hospital.
The researchers emphasized that even privately insured in-network patients may be paying greater premiums due to the high markups since hospitals use these markups to leverage with private insurance companies when negotiating prices. This practice in turn trickles down the costs to consumer-level insurance products.
“We as consumers are paying for this when hospitals charge 10 times what they should,” Anderson said in the press release. “What other industry can you think of that marks up the price of their product by 1,000% and remains in business?”
Uninsured patients and out-of-network patients are the most vulnerable to inflated costs, the researchers wrote, with characteristically limited bargaining power. Even when bargaining is an option, the researchers said it is nearly impossible because of the convoluted system of medical billing and a lack of cost transparency.
The researchers suggested that across-the-board transparency on how hospitals price their services and how insurance companies process payments is a partial solution. Currently, most hospitals are not required to disclose their pricing structures. Greater transparency would allow patients to compare one hospital’s costs with another, they said.
Because patients in emergency situations would remain vulnerable to the highest markups, even with greater transparency, the researchers said stricter state and federal regulations are necessary. The researchers cited current state law in Maryland that determines the rate at which hospitals can charge a patient. Maryland had the lowest rate of markups of any state, 1.5 times the Medicare-allowed costs.
“Federal and state policymakers need to recognize the extent of hospital markups and consider policy solutions to contain them,” researcher Ge Bai, PhD, assistant professor at Washington and Lee University, wrote. “Options include limitations on the overall charge-to-cost ratio, limitations on the charge-to-cost ratio for specific services, some unified form of all-payer rate setting, and mandated price disclosure.”
The List
- North Okaloosa Medical Center, Florida;
- Carepoint Health-Bayonne Hospital, New Jersey ;
- Bayfront Health Brooksville, Florida;
- Paul B Hall Regional Medical Center, Kentucky;
- Chestnut Hill Hospital, Pennsylvania;
- Gadsden Regional Medical Center, Alabama;
- Heart of Florida Regional Medical Center;
- Orange Park Medical Center, Florida;
- Western Arizona Regional Medical Center;
- Oak Hill Hospital, Florida;
- Texas General Hospital;
- Fort Walton Beach Medical Center, Florida;
- Easton Hospital, Pennsylvania;
- Brookwood Medical Center, Alabama;
- National Park Medical Center, Arizona;
- St. Petersburg General Hospital, Florida;
- Crozer-Chester Medical Center, Pennsylvania;
- Riverview Regional Medical Center, Alabama;
- Regional Hospital of Jackson, Tennessee;
- Sebastian River Medical Center, Florida;
- Brandywine Hospital, Pennsylvania;
- Osceola Regional Medical Center, Florida;
- Decatur Morgan Hospital - Parkway Campus, Alabama;
- Medical Center of Southeastern Oklahoma;
- Gulf Coast Medical Center, Florida;
- South Bay Hospital, Florida;
- Fawcett Memorial Hospital, Florida;
- North Florida Regional Medical Center;
- Doctors Hospital of Manteca, California;
- Doctors Medical Center, California;
- Lawnwood Regional Medical Center & Heart Institute, Florida;
- Lakeway Regional Hospital, Tennessee;
- Brandon Regional Hospital, Florida;
- Hahnemann University Hospital, Pennsylvania;
- Phoenixville Hospital, Pennsylvania;
- Stringfellow Memorial Hospital, Alabama;
- Lehigh Regional Medical Center, Florida;
- Southside Regional Medical Center, Virginia;
- Twin Cities Hospital, Florida;
- Olympia Medical Center, California;
- Springs Memorial Hospital, South Carolina;
- Regional Medical Center Bayonet Point, Florida;
- Dallas Regional Medical Center, Texas;
- Laredo Medical Center, Texas;
- Bayfront Health Dade City, Florida;
- Pottstown Memorial Medical Center, Pennsylvania;
- Dyersburg Regional Medical Center, Tennessee;
- South Texas Health System;
- Kendall Regional Medical Center, Florida, and
- Lake Granbury Medical Center, Texas.
Disclosure: The researchers report no relevant financial disclosures.
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