The 50 hospitals in the United States with the highest markup of prices over their actual costs are charging out-of-network patients and the uninsured, as well as auto and workers’ compensation insurers, more than 10 times the costs allowed by Medicare, new research suggests. It’s a markup of more than 1,000 percent for the same medical services.
The findings, from Dr. Gerard F. Anderson of the Johns Hopkins Bloomberg School of Public Health and Dr. Ge Bai of Washington and Lee University, show that the combination of a lack of regulation of hospital charges in the United States and no market competition is leading to price-gouging that trickles down to nearly all consumers, whether they have health insurance or not, and plays a role in the rise of overall health spending. The report is published in the June issue of Health Affairs.
“There is no justification for these outrageous rates, but no one tells hospitals they can’t charge them,” says Dr. Anderson, a professor in the Bloomberg School’s department of health policy and management. “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.”
For their study, Drs. Anderson and Bai analyzed the 2012 Medicare cost reports from the Centers for Medicare and Medicaid Services to determine a charge-to-cost ratio, an indicator of how much hospitals are marking up charges beyond what Medicare agrees to pay for those with its government-subsidized health insurance.
The 50 hospitals, they found, charged an average of more than 10 times the Medicare-allowed costs. They also found that the typical United States hospital charges were on average 3.4 times the Medicare-allowable cost in 2012. In other words, when the hospital incurs $100 of Medicare-allowable costs, the hospital charges $340. In one of the top 50 hospitals, that means a $1,000 charge.