For-profit hospitals mark up prices far more than other institutions

Two for-profit hospital chains own nearly 80 percent of the nation's hospitals that have the highest cost-to-charges markups in the United States, according to a study published in the most recent issue of the journal Health Affairs.

Community Health Systems is responsible for fully half of the hospitals on the list, while Hospital Corp. of America accounted for 28 percent, researchers at Washington and Lee University and the Johns Hopkins University of Public Health concluded using Medicare data from 2012. 

Of the hospitals on the list, 49, or 98 percent, are for-profits, and 92 percent are owned by for-profit hospital systems. Forty percent of the hospitals are located in Florida, according to the study.

Those hospitals mark up their charges above what Medicare allows by an average factor of 10. Nationwide, the average markup is 3.4 times what Medicare allows.

"The main causes of these extremely high markups are a lack of price transparency and negotiating power by uninsured patients, out-of-network patients, casualty and workers' compensation insurers, and even in-network insurers," the study's authors wrote.

Hospital charge markups are commonplace, according to Healthcare Dive, but often vary dramatically among different hospitals. A study earlier this year by the Government Accountability Office concluded that differences in markups may be explained by how a hospital approaches patients' treatment just after admission.

Higher markups are a matter of concern to the researchers, who note that "hospitals with substantial market power can use the high markups as leverage with private insurers in price negotiations ... at the same time, insurers are motivated to include hospitals in their networks to reduce the likelihood of having subscribers pay high out-of-network prices. Consequently, high markups may add to private insurance premiums and play a role in the rise of overall healthcare spending."

The study authors also suggested that hospitals use their chargemaster prices to extract more money from uninsured patients, although hospitals have said that is not the case.

To learn more:
- read the Health Affairs article (subscription required)
- check out the Healthcare Dive article

Related Articles:
GAO: Hospital charges drive most geographic differences in care cost 
Hospitals dismiss significance of chargemaster prices 
Finding common ground on price transparency 
Overcharging the uninsured

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