South Texas Health System Defends 920% Price Markup

Rick Scott

What business do you know that marks up their prices by 920% and still stays in business?

STHS disputes most expensive hospitals study

By KRISTEN MOSBRUCKER Staff Writer | Posted 11 hours ago

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Ge Bai, a certified public accountant, said she was inspired to research the profit margin for hospitals across the nation after reading in detail her own medical bill about six years ago.

“I noticed a big difference between the gross cost for service and the contractual adjustments,” Bai said. “I was like wow, I was lucky to have health insurance — but somebody must be paying that.”

Bai, a professor of accounting at Washington and Lee University in Virginia, co-authored a study that ranked the top 50 most expensive hospitals in the U.S. that was published this month in Health Affairs, a peer-reviewed journal.

South Texas Health System, which owns several hospitals including McAllen Medical Center, Cornerstone Hospital and Edinburg Regional Medical Center, ranked No. 48 for charging patients on average 9.2 times the cost of the procedure across its 816 beds, according to the study.

Last year, STHS built two freestanding emergency rooms to expand its network in Mission and Weslaco along Expressway 83. But researchers gathered data from the Healthcare Cost Report Information System collected by the Centers for Medicare and Medicaid Services in 2012.

South Texas Health System administrators declined an interview for this story and submitted a statement. In it, they said the hospital network provided $385 million worth of uncompensated medical care in 2014. (Is this based on egregious chargemaster rates that have nothing to do with costs? Hospitals who accept Medicare are compensated for taking on indigent care patients – Editor)

“The charge-to-cost ratios referenced in the article do not represent prices paid by patients for care provided,” wrote Lisa Killion, the health system’s spokeswoman. (That is probably a true statement because patients are likely charged way north of cost-to-charge ratios – Editor)

The actual average cost for patients is closer to market rate in the region and the larger profit margin is based on lower expenses and efficient cost controls rather than high prices, she said. Patients with health insurance do not pay the total bill, as many procedures are covered entirely by insurance companies and consumers are generally responsible for co-pays. (What are market rates? clients in the Valley pay 100% of Medicare and since Medicare patients represent a large number of hospital patients in the region, is 100% of Medicare a market rate? – Editor)

“For those that are uninsured or underinsured, South Texas Health System provides substantial discounts to such patients through financial assistance policies and programs,” Killion added. (Discounts off egregious chargemaster rates that have no relationship with costs is the biggest scam since Victor Lustig sold the Eiffel Tower twice – Editor) See Hospitals Dismiss Significance Of Chargemaster Prices?

If the study included those discounts the results would be “significantly different,” administrators argued. Bai said she’s not convinced. (Discounts mean nothing – Editor)

“Our current hospital pricing system charges the highest price to the most vulnerable patients and the patients with the least market power,” Bai said.

The North Okaloosa Medical Center in Florida topped the list with a ratio of 12.6 times the cost. Four other Texas hospitals also made the list — Texas General Hospital in Grand Prairie, Dallas Regional Medical Center, Laredo Medical Center and Lake Ganbury Medical Center — and all averaged at least nine times the cost per procedure was charged to patients.

The majority of hospitals on the list are owned by Hospital Corporation of America or Community Health Systems, two of the largest hospital system conglomerates in the country.

Bai said that while patients with private insurance may not pay the gross charges out of pocket, if the hospital is out-of-network consumers could face the higher costs. Also, some patients are pushed to out-of-network hospitals if the local region doesn’t provide specialty care needed for an illness. Rio Grande Valley cancer patients often travel to Houston for care, for example.

“We pay a higher premium because insurance companies have to pay the full cost hospitals charge and worker compensation cases pay the full cost, too,” she said.

One solution is to request the federal government to enact price ceilings on medical care — to prohibit any hospital to charge more than 300 percent of what Medicare would pay for the same procedure. Nationwide, only 30 percent of hospitals are for-profit, but 89 percent of hospitals on the list were for-profit. (300% of Medicare is ridiculous – clients pay 100% – 120% of Medicare- Editor)

“We don’t have the ability, knowledge or time to compare prices before services are delivered in health care,” she said. “That’s why market forces don’t work.” (It is not about comparing prices, it is about comparing costs – Editor)