Study shows wide gap between hospital charges for public, private insurers

It's a matter of faith that most hospitals earn the biggest margins on patients that have private insurance. But a new study indicates that acute care facilities routinely clean up on such patients.

Hospitals charge private insurers about twice as much on average for certain procedures than they do government payers, according to the study, conducted by Truven Health Analytics and the Agency for Healthcare Research and Quality and published in the American Journal of Managed Care. That's based on a survey of more than 3.3 million hospital discharges in 162 counties in six states that occurred in 2006.

The average charge to Medicare for the procedures--treating acute myocardial infarctions and knee arthroplasties--was $7,628 in 2012 dollars. For private payers, it was $13,713. For those heart attack patients, it was $11,000 charged to Medicare versus $23,485 charged to private payers. Among those undergoing knee surgery, Medicare was charged $10,824, versus $21,098 charged to private payers.

The differentials among the lowest and highest-charging hospitals was even more dramatic. One hospital in the study charged $5,508 for one of the procedures (it was not indicated if it was for treating an AMI or knee surgery patients), while the priciest hospital charged $30,071.

Among hospitals in regions that commanded greater market share, they also charged slightly higher rates for knee arthroplasties, but not for treating the heart attack patients.

The study made a variety of controls, but those covered by private insurance were between the ages of 40 and 64, while those enrolled in Medicare were over the age of 65, and presumably in poorer health due to age compared to their counterparts with private insurance.

The study warned that cuts to Medicare reimbursement under the Affordable Care Act may be made up by charging privately insured patients more for their care. "There is a growing concern that the disparity between the prices paid by public and private payers will continue to increase," the study said. Data show that prices for many procedures performed by hospitals have been rising sharply, and that previous studies has shown an already significant gap between public and private insurance charges for knee surgeries.

To learn more:
- read the AJMC study

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