The U.S. hospitals with the highest markup of prices are charging some patients more than 10 times the rates allowed under Medicare, a study shows.
The research examined the 50 hospitals in the country that marked up prices the most as of 2012. That means they charge the highest amounts over the cost they charge Medicare patients.
Most insured patients do not pay those higher prices because insurance companies negotiate lower costs. But those who are uninsured or using out-of-network providers as well as auto- and workers compensation insurers, must shoulder the full amount or close to it — unless the hospital voluntarily allows a discount, the study said.
The Worst-Off Suffer
“Hospitals’ high markups, therefore, subject many vulnerable patients to exceptionally high medical bills, which often leads to personal bankruptcy or the avoidance of needed medical services,” said the article on the study in the June issue of Health Affairs.
The researchers, Gerald F. Anderson of the Johns Hopkins Bloomberg School of Public Health and Ge Bai of Washington and Lee University, blamed the problem on a combination of a lack of hospital rate regulation and a lack of competition for what they called “price-gouging.”
The higher rates are used as leverage to negotiate higher prices with private insurers.
— Ge Bai, Ph.D., Washington and Lee University
Bai explained the reasoning for their use of the term: “We only have 30 percent for-profit hospitals in the country, but among the 50 hospitals with the highest markups, 98 percent are for-profit,” she said in an interview. “So they are overrepresented. This is the strongest evidence that for-profit hospitals are deliberately using high markups as a revenue-generating tool.”
Few insured patients remain unscathed.
The practice “trickles down to nearly all consumers, whether they have health insurance or not, and plays a role in the rose of overall health spending,” Johns Hopkins Bloomberg School of Public Health said in a statement.
That’s because the higher rates are used as leverage to negotiate higher prices with private insurers, Bai said. And consumers ultimately pay, through premiums, for the higher rates charged to auto and workers compensation carriers.
When insured patients go to an out-of-network hospital, which they may have to do in an emergency, they too are charged the higher rates, Bai said.
Hospital Official Responds
Rich Umbdenstock, President and CEO of the American Hospital Association, said in a statement issued in response to the study that Medicare and Medicaid payments are set by law and do not reflect hospital costs.
“Medicare and Medicaid pay less than the cost of caring for patients, an annual shortfall of $51 billion borne by hospitals,” he said. “Hospitals across the country work hard to help patients understand their bill and offer financial assistance and discounts to help those in need.”
The study conceded that hospitals need revenues to be above costs to stay in business. “This argument, however, cannot completely explain the wide variation in the charge-to-cost ratio …. or why some hospitals are charging 10 times their own costs,” the researchers said.
Where It Happens
Somewhat surprisingly, the hospitals with the biggest markups were not those in America’s richest cities. No. 1 on the list: North Okaloosa Medical Center in the Florida Panhandle, about an hour outside Pensacola, the researchers said.
Twenty of the 50 priciest hospitals operate in Florida. The rest are in 12 other states. Overall, 76 percent of the top 50 are located in Southern states, according to the study.
The top four hospitals were North Okaloosa Medical Center (Florida), Carepoint Health-Bayonne Hospital (New Jersey), Bayfront Health Brooksville (Florida) and Paul B Hall Regional Medical Center (Kentucky).
The full list: North Okaloosa Medical Center (Florida), Carepoint Health-Bayonne Hospital (New Jersey), Bayfront Health Brooksville (Florida) and Paul B Hall Regional Medical Center (Kentucky), Chestnut Hill Hospital (Pennsylvania), Gadsden Regional Medical Center (Alabama), Heart of Florida Regional Medical Center (Florida), Orange Park Medical Center (Florida), Western Arizona Regional Medical Center (Arizona), Oak Hill Hospital (Florida), Texas General Hospital (Texas), Fort Walton Beach Medical Center (Florida), Easton Hospital (Pennsylvania), Brookwood Medical Center (Alabama), National Park Medical Center (Arkansas), 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 (Oklahoma), Gulf Coast Medical Center (Florida), South Bay Hospital (Florida), Fawcett Memorial Hospital (Florida), North Florida Regional Medical Center (Florida), 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), Lared Medical Center (Texas), Bayfront Health Dade City (Florida), Pottstown Memorial Medical Center (Pennsylvania), Dyersburg Regional Medical Center (Tennessee), South Texas Health System (Texas), Kendall Regional Medical Center (Florida), Lake Granbury Medical Center (Texas).
Even the average U.S. hospital charges its non-Medicare patients far more than for those on Medicare. Costs at the average hospital in 2012 were 3.4 times the amount allowed by Medicare. In other words, if the Medicare-allowed charge was $100, the average hospital charged uninsured patients $340. Hospitals among the top 50 in price charged $1,100.
Bai said what is needed to stop hospitals from charging exorbitant rates is pressure from state and federal legislators. Only two states, Maryland and West Virginia, regulate hospital markups. Federal law does not restrict hospital prices.
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