How Much do Your Hospitals Charge You?

13 July 2015 |

The U.S. schedule of payments for Medicare represents what the government has calculated health procedures should cost. However, unless a patient is covered by health care insurance, patients sometimes are charged whatever a doctor or hospital wants to charge. A new study says the 50 highest-charging hospitals in the U.S. charge an average 10 times more than prices allowed by Medicare. The study was authored by Ge Bai of Washington and Lee University and Gerard F. Anderson of the Johns Hopkins Bloomberg School of Public Health.

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The biggest problem with this situation, Bai and Anderson point out, is that the people who already are most likely to be down-and-out (those without insurance) are the ones who face the burden of hyper-inflated prices. They indicate that these exceptionally high medical bills often lead to “bankruptcy or the avoidance of medical services.” Prices for insured patients are held down through negotiation by the insurance companies.

Some patients who face high health care prices are insured, but find themselves needing to pay higher prices to use hospital facilities not in their preferred provider networks. This might be because they don’t live near a hospital covered by their policy. Other patients are charged high prices through workers’ compensation and automobile insurance policies.

Anderson, in an article published recently by The Washington Post, said he believes the hospitals are “price-gouging because they can” and “marking up the prices because no one is telling them they can’t.”

The study doesn’t include the cost of doctor’s services—only direct patient costs and costs of hospital administration.

High-charging hospitals are mostly for-profit

According to the study, all but one of the nation’s highest-charging hospitals are for-profit hospitals. In fact, two large health care systems operate 39 of the 50 hospitals: Community Health Systems and Hospital Corporation of America.” The offending hospitals are located mostly in metropolitan areas and in the Southern United States. A full 40 percent of them are in Florida.

The number one highest-charging hospital, according to the study, is North Oskaloosa Medical Center in Florida. Uninsured patients there are charged 12.6 times the actual cost of patient care as listed in Medicare price schedules. This compares with a typical hospital, which charges about 3.4 times the cost of patient care, the study said.

To give you an idea how much this ratio has risen over the years, the study shares that hospitals charged only 1.3 times the actual cost of care in 1984.

Are new restrictions needed to hold down prices?

Many articles have appeared about the Bai/Anderson study since it was released. One of the most compelling questions the articles raises is whether or not something should be done through legislation about these shocking markups.

Currently, the Affordable Care Act requires not-for-profit hospitals to offer discounts to the uninsured. Only two states have passed bills limiting how much hospitals can charge. Most articles published about the study agree that wholesale legislation of health care prices would constitute a major shakeup of the system, and is therefore not necessarily an acceptable solution.

Bai and Anderson suggest hospitals could publish markups to help patients compare prices, which theoretically would bring prices down naturally through competition. It could take a while for prices to come down, however, and it remains to be seen whether such a measure would help as much as the authors hope.

It’s important to remember that patients who end up with exceptionally high hospital bills are often assisted by hospital charitable programs and partners such as the United Way and private foundations set up expressly for the purpose of covering high medical costs. Foundations often focus help on specific illnesses or types of medications.

Why hospital patients worry about price

This study touches on one of the greatest worries of medical patients who find themselves being treated in a hospital: exorbitant costs. Stories of $100 aspirin tablets are legendary. In fact, it has become a part of our culture to believe hospitals will charge as much as they like.

Although things have changed somewhat with the passage of the Affordable Care Act, we still worry that hospitals are being allowed to charge wildly high prices. Perhaps this study and other efforts are positive steps toward a fairer pricing system.