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

Talk about sticker shock: Some U.S. hospitals charge patients more than 10 times the rates paid by Medicare.

Of the 50 U.S. hospitals with the highest charges, 49 are for-profit institutions, 20 operate in Florida, and half are owned by a single chain, according to a study published in the journal Health Affairs Monday.

That doesn’t mean all or even most patients end up paying those charges. Private insurers are able to negotiate the sticker price down significantly. Patients paying out of pocket can often negotiate discounts or get charity care if they are low-income.

The average U.S. hospital charges a somewhat less staggering sum: 3.4 times the rates paid by Medicare, the federal health care plan for the elderly and disabled which pays fixed rates for procedures.

But for uninsured patients asked to pay full charges, insured patients who end up at an out-of-network hospital and patients whose treatment is covered by casualty or workers compensation insurance, these charges can matter a lot.

“Hopefully this is a wake-up call for people to recognize there’s a problem,” said Gerard Anderson, a professor of health policy at Johns Hopkins Bloomberg School of Public Health, and one of the authors of the study, which analyzed 2012 Medicare cost reports.

“There is no justification for these outrageous rates but no one tells hospitals they can’t charge them,” Anderson said.  “For the most part, there is no regulation of hospital rates and there are no market forces that force hospitals to lower their rates. They charge these prices simply because they can.”

Even after full expansion of coverage under the Affordable Care Act, 30 million Americans will remain uninsured and may face particularly high charges, the study said. The law requires nonprofit hospitals to offer reduced-cost or charity care to eligible patients, but the provision does not apply to for-profit hospitals.

“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,” the study said.

Of the 50 highest chargers, half are owned by Community Health Systems, a for-profit chain with 199 hospitals. The company made $18 billion in profits in 2014 — 45 percent more than in 2013. The researchers looked at charges at nearly 4,500 Medicare-certified hospitals nationwide.

Florida most likely had the most high-charging hospitals because it has an exceptionally high proportion of for-profit hospitals, consumer advocates said. North Okaloosa Medical Center, a CHA hospital in the Florida panhandle, had the highest charges of all: 12.6 times Medicare’s rate.

In a written statement, CHA spokesperson Tomi Galin said CHA provided more than $3.3 billion in charity care, discounts and other uncompensated care for patients in 2014, as well as “millions of dollars in taxes that help fund critically important services in every community where we operate.”

The charges examined by the study, Galin said, “are not relevant measures of what consumers, insurers or the government pay for services.”

Chip Kahn, president and CEO of the Federation of American Hospitals, a trade group representing for-profit hospitals, also argued that the charges examined by the study were not a fair assessment of hospital prices. If the study had instead examined the actual payments by patients, they would have found that hospitals on the list charge just 1.3 times what Medicare pays, compared to a national average of 1.2, he said.

A hospital’s charges can matter even for patients with private insurance, said Ge  Bai, a co-author on the study and a professor at Washington and Lee University. Hospitals use those charges as leverage during negotiations with insurers, and starting from a higher price point can drive up even discounted prices.

“Except for patients with government insurance, few consumers are immune from negative financial impacts caused by hospitals’ high markups,” Bai said.

“We as consumers are paying for this when hospitals charge 10 times what they should,” added Anderson. “What other industry can you think of that marks up the price of their product by 1,000 percent and remains in business?”

The highest charging hospitals were in 13 states, mostly in the South. Besides Florida, the states included Alabama, Arkansas, Arizona, California, Kentucky,  New Jersey, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas,  and Virginia.

The markups charged by the 50 hospitals on the list varied dramatically by procedure.  Anesthesiology had the highest charges: an average of 112 times more than Medicare rates. The markup for nursery services, on the other hand, was three times the Medicare rate.

The authors recommended that state and federal lawmakers enact policies to limit these charges.  In Maryland and West Virginia, for example, state agencies set the rates that hospitals are allowed to charge for services.  Requiring hospitals to disclose their charges for individual procedures could also help patients shop for the lowest-cost option, they said.

Categories: Cost and Quality, Health Industry, The Health Law