Some Hospitals Charge 1000% Of Medicare Rates? That’s Outrageous!

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Some hospitals charge more than 10 times the Medicare rate, according to a new study published in Health Affairs on Monday.

“…..the mystery of the chargemaster continues. “What other industry can you think of that marks up the price of their product by 1,000% and remains in business?” said co-author Gerard Anderson.

Study: The highest-charging hospitals are for-profit—and CHS owns half of them

By Katie Bo Williams | June 9, 2015

Dive Brief:

  • Some hospitals charge more than 10 times the Medicare rate, according to a new study published in Health Affairs on Monday. For-profit institutions charge the highest rates—49 out of the 50 highest chargers—with Community Health System owning half of those hospitals. Twenty of the 50 highest chargers were in Florida.
  • For comparison’s sake: The average U.S. hospital charges 3.4 times the Medicare rate, according to the study, which looked at 4,500 Medicare-certified hospitals across the country.
  • Echoing other research, the study also showed that mark-ups varied widely by procedure. Anesthesiology procedures, for example, showed an average mark-up of 112 times Medicare rates, compared to nursery services, which were marked up only three times the Medicare rate.

Dive Insight:

CHS is disputing the validity of the study’s metrics. Hospital spokesperson Tomi Galin said in a written statement that the charges that the study looks at “are not relevant measures of what consumers, insurers or the government pay for services.” Galin pointed to CHS’ uncompensated and charity care, which she pegged at $3.3 billion in 2014. CHS, which owns 199 hospitals, made $18 billion in profits last year—a 45% boost over 2013.

Chip Kahn, president and CEO of the Federation of American Hospitals, which represents for-profits, backed up Galin’s assessment. According to Kahn, if the study had examined actual payments by patients (rather than charges), it would have revealed that the hospitals on the list “charge” just 1.3 times the Medicare rate (compared to a national average of 1.2).

Study co-author Ge Bai disputes that high charges and high payments are unrelated. She explains that because charges are used as a jumping-off point for negotiations with private insurers, “starting from a higher price point can drive up even discounted prices,” KHN reports.

But the mystery of the chargemaster continues. “What other industry can you think of that marks up the price of their product by 1,000% and remains in business?” said co-author Gerard Anderson.

Pressure on hospitals to provide justification for their sticker prices is growing—possibly because the prices themselves are growing. New data on hospital charges released by CMS this month reveal a steady, if modest, uptick in prices. Major joint replacement grew from $50,116 to $52,249—a rate of about 4%—from 2011 to 2012, and from $52,249 to $54,239—a rate of 3.8%—from 2012 to 2013, CMS notes.

Want to read more? You may enjoy these two charts that explain the Medicare data release of hospital charges.

 

Recommended Reading

Kaiser Health News: Study: Highest-Charging U.S. Hospitals Are For-Profits, Concentrated In Florida

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