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Journal Lists Hospitals With Highest Markups Over Medicare Allowables

October 12th, 2016

BALTIMORE – Your hospital probably doesn’t want to be on this top 50 list.

A report published recently in the journal Health Affairs lists the 50 hospitals in the United States with the highest markup of prices over their actual costs.

According to researchers Gerard F. Anderson, PhD, of the Johns Hopkins Bloomberg School of Public Health, and Ge Bai, PhD, of Washington & Lee University, those hospitals – nearly all for-profit institutions – charge more than 10 times the allowable Medicare costs.

Of course, most patients don’t pay the “chargemaster” price because of government and private insurance negotiated rates, the authors point out. On the other hand, they note, out-of-network patients and the uninsured, as well as auto and workers' compensation insurers, bear the brunt the mark-ups, which can be more than 1,000% for the same medical services.

"There is no justification for these outrageous rates but no one tells hospitals they can't charge them," said 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 the study, the researchers analyzed the 2012 Medicare cost reports from CMS to identify the 50 hospitals with the highest markets, averaging more than 10 times what Medicare allows. Overall, U.S. hospitals charged an average 3.4 times the Medicare-allowable cost in 2012.

The study notes that 49 of the 50 with the highest charges are for-profit hospitals, and 46 are owned by for-profit health systems. Half of them are part of Community Health Systems, Inc., and more than a fourth are operated by the Hospital Corporation of America. Florida is the state with the most hospitals on the list – 20.

"For-profit hospitals appear to be better players in this price-gouging game," explained Bai, an assistant professor of accounting at Washington & Lee University. "They represent only 30% of hospitals in the U.S., but account for 98% of the 50 hospitals with highest markups."

The report says only two states – Maryland and West Virginia – set the rates that hospitals can charge for services.

According to the article, the nation’s most expensive hospital is North Okaloosa Medical Center, about an hour from Pensacola on the Florida Panhandle, where the charges average 12.6 times more than Medicare allowable costs.

The rest of the list is available here.