U.S. Hospitals Charge Patients Three Times Market Rate

Reports of widespread exploitation and inefficiency in the U.S. healthcare system is hardly shocking anymore, not that it is any less disquieting. From accessibility and cost-effectiveness, to health outcomes like life expectancy and maternal health, the U.S. consistently performs mediocre at best in various metric of performance.

Some months back, I shared an article from Slate that pinned much of this problem on greedy hospitals. A recent study reported in The Atlantic only further bolsters this grim assessment:

North Okaloosa [in Florida], along with New Jersey’s Carepoint Health-Bayonne Hospital, tops the list of the U.S. hospitals with the highest markups for their services, according to a new study in Health Affairs. The study found that, on average, the 50 hospitals with the highest markups charged people 10 times more than what it cost them to provide the treatments in 2012.

On average, all U.S. hospitals charged patients (or their insurers) 3.4 times what the federal government thinks these procedures cost. “In other words, when the hospital incurs $100 of Medicare-allowable costs, the hospital charges $340”, explain the authors, Ge Bai of Washington and Lee University and Gerard F. Anderson of the Johns Hopkins Bloomberg School of Public Health. The ratio of hospital charges to costs has only increased over time: In 1984, it was just 1.35, but by 2011, it was 3.3.

In the study, the facilities that marked up their prices the most were more likely to be for-profit (as opposed to not-for-profit), urban hospitals that are affiliated with a larger health system. Community Health Systems operates half of the 50 hospitals with the highest markups. The U.S. Justice Department has investigated the Franklin, Tennessee-based hospital chain for the way it bills Medicare and Medicaid. In February, the company and three New Mexico Hospitals agreed to pay $75 million to settle a case in which Community Health Systems was accused of making illegal donations to county governments, which were then used to obtain matching Medicaid payments.

Overall, three-quarters of the hospitals on the highest-markup list are in the South, and 40 percent of them are in Florida.

Only Maryland and West Virginia restrict how much hospitals can charge. The Affordable Care Act makes not-for-profit hospitals offer discounts to uninsured people, but it doesn’t set limitations on bills sent to patients treated at out-of-network or for-profit hospitals.

Unsurprisingly, the researchers found that the system is especially predatory towards those that are either most vulnerable in terms of their healthcare needs (such as having chronic or potentially fatal ailments) and those with “the least market power” (e.g. the poor, who also tend be medically vulnerable). Equally unsurprising is how these overcharges are found to contribute to “exceptionally high medical bills, which often leads to personal bankruptcy or the avoidance of needed medical services” — little wonder why the U.S. fares poorly in health outcomes.

As expected, the solutions to such an entrenched and widespread problem will not be easy or politically tenable (at least not yet).

In an statement, Jarrod Bernstein, spokesman for Carepoint Health-Bayonne Hospital, said, “These charge prices affect less than 7 percent of our overall encounters system-wide, and without it, or adequate contract reimbursements, our safety net hospitals that serve the most vulnerable among us risk closure. That is why we are calling for a new healthcare reimbursement system that offers equivalent rates for all patient encounters regardless of where they live that will make these charges irrelevant”.

The study authors say one way to fix this might be to require hospitals to post their markups online so patients can price-compare before they go. But that wouldn’t work for emergencies, for people who live far from all but one hospital, or for the many people for whom hospital charging codes are, very understandably, inscrutable.

Alternatively, legislators could say that hospitals can only charge people a certain amount more than what they would charge Medicare, which usually negotiates some of the lowest rates. Or, more states could do what Maryland, Germany, and Switzerland all do and aggressively limit how much all hospitals can charge, period.

But as the authors note, that last solution would be “subject to considerable political challenges”, which is perhaps a polite way of saying, “will make the Obamacare battle of 2010 seem like a casual game of bridge among friends”.

Maybe it won’t be so politically challenging to change the system once push comes to shove. How much longer will people put up with being preyed upon in their most vulnerable circumstances? Profiting off of sickness and vulnerability — whether as an insurer or hospital — is as morally repugnant as it gets. How could this be tolerable? What does it say about our culture?

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