Price gouging in the ER: Patients often overcharged but markups highest for minorities, uninsured

Emergency departments across the United States charge adult patients 340% more than what Medicare pays for services, but minorities and the uninsured receive the biggest bills, according to new research from the Johns Hopkins University School of Medicine.

The study, published in JAMA Internal Medicine, found that on average emergency departments charge anywhere from 1.0-12.6 times  ($100-$12,600) more than what Medicare paid for services.

“There are massive disparities in service costs across emergency rooms and that price gouging is the worst for the most vulnerable populations,” lead author Martin Makary, M.D., professor of surgery at Johns Hopkins said in a study announcement.  “This study adds to the growing pile of evidence that to address the huge disparities in healthcare, healthcare pricing needs to be fairer and more transparent.”

The research team analyzed billing records from 2013 for more than 12,000 emergency medicine physicians practicing in nearly 300 hospitals in all 50 states to determine how much ERs billed for services compared to the amount allowed by Medicare. They also used the 2013 American Hospital Association database to identify ERs, and analyzed data from the U.S. Census Bureau and looked at ZIP codes for the ERs to estimate poverty rates, uninsured status and minority populations. They also calculated each service bill’s markup ratio.

In addition, researchers looked at billing information for more than 57,000 general internal medicine physicians in 3,669 hospitals in all 50 states to determine whether any markup differences, and how much, existed between emergency medicine physicians practicing in a hospital’s ER, and general internal medicine physicians who see patients at hospitals.

They found that on average:

  • Emergency medicine doctors had a markup ratio of 4.4 (340% in excess charges), or emergency medicine physician charges of $4 billion versus $898 million in Medicare allowable amounts.
  • Charges were higher when a service was performed by an emergency medicine physician rather than a general internal medicine physician.
  • Overall, general internal medicine physicians had an average markup ratio of 2.1 compared to the Medicare allowable amount.
  • Wound closure had the highest median markup ratio at 7.0, and interpreting head CT scans had the greatest within-hospital variation, with markup ratios ranging between 1.6 and 27.
  • The median Medicare allowable rate is $16 for a physician interpretation of an electrocardiogram, but EDs charged anywhere from $18 to $317, with a median charge of $95 (or a markup ratio of 6.0). General internal medicine doctors in hospitals charged an average of $62 for the same service.
  • ERs that that charged patients the most were more likely to be located in for-profit hospitals in the southeastern and Midwestern U.S., and served higher populations of uninsured, African-American and Hispanic patients.

“Our study found that inequality is then further compounded on poor, minority groups, who are more likely to receive services from hospitals that charge the most,” said Makary, adding that the research highlights the urgent need for federal legislation that will protect uninsured patients.

He pointed to models, such as the Maryland Waiver, that set prices at the same rate no matter what hospital a patient goes to, as methods to increase price transparency and protect patients. Currently, he said, at least seven states have passed some legislation to protect uninsured patients from paying chargemaster prices, a list of billable services developed and closely guarded by each hospital, noting prices that are usually highly inflated and charged mainly to uninsured and other “self-pay” patients.

However, Makary said a national model is necessary to unveil what is currently an inexplicably chaotic and opaque pricing system.