Aldeen’s Sunday Morning Bathroom Read – The OMG Edition

By Doug Aldeen

Rand recently published its report ( Rand 5.0) that suggests hospitals, on average, markup their prices for commercial carriers at 254% of Medicare. The American Hospital Association in its press release, in typical fashion, takes organizations like Multiplan to task and asserts that Multiplan and its commercial carrier clients are somehow to blame.

The Multiplan business model is a result of excessive hospital pricing. The reality is that if the hospital’s simply charged a reasonable number, Multiplan would cease to exist. Multiplan currently trades at .59 cents (down 6.15%) as of 5/16/24. (Check THIS out)

Suggestions for Rand 6.0:

1. Distinguish between services people use and don’t use and respective percentage of facility net patient revenue.  For example, a review of recent financials for both an HCA facility in Florida and Memorial Hermann (Houston, TX) indicate the following:

a) HCA (for profit): Overall facility markup of 1380% BUT for the top services utilized at this facility the markups are as follows:  anesthesia (18,880%); CT (17,251%); OR (2116%); Radiology (7881%); EKG (7870%) and Lab (4806%) for an astonishing average markup of 9,787%;

b) Memorial Hermann (not for profit): Overall facility markup of 528% BUT for the top services utilized at this facility the markups are as follows: anesthesia (1501%); CT (3310%); OR (1044%); Radiology (1632%); MRI (1691%); ER (992%) for an average markup of 1,695% ;

c) There are a ton of additional services provided inside these facilities that DECREASE the overall average markup that nobody uses and is immaterial to the bottom line;

2. Benchmark the RAND Report against the applicable facility’s Medicare Payment to Cost Report. HCA, at this facility, at 93% of Medicare covers 150% of its costs. Paying 254% of Medicare is like paying a pirate ransom;

3. Provide a year-over-year review of any increase in charges relative to costs. “Turbocharging” ( substantially increasing chargemaster rates relative to costs to access an outlier payment) is expressly illegal in the Medicare (tax dollars) market at rates of 13-1. See attached DOJ complaint from 2012 against Beth Israel Hospital. HCA, at this facility, increased its charges by $212mm from one year to the next while only increasing its costs by $17mm or 12.4x. This facility collects “net other payers” ( i.e. non-governmental payers) 13.6% of what it bills and generates a 29.6% profit margin. Hospitals routinely turbocharge their rates relative to their costs in the commercial market because they can. Momma said don’t grow up to be a cowboy but you should seriously consider running a hospital;

In the meantime, don’t get sick… .