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Study of 4,000 U.S. Hospitals Shows High Hospital
Charges Fuel National Healthcare Crisis; Names Most, Least Expensive
Those who charge most make the profit, those who
charge least lose money
Sept. 10, 2004 - New research on pricing practices
of over 4,000 hospitals across the U.S. documents that huge markups in
charges to patients, especially for prescription drugs, medical
supplies, and surgeries, are a major factor in exacerbating the nation’s
health care crisis and the pricing scandal that has prompted hearings,
lawsuits and a growing public outcry.
The research is contained in the second annual
report on charges prepared by the Institute for Health and
Socio-Economic Policy (IHSP) and commissioned by the California Nurses
Association. It underscores that high prices are directly linked to
industry profits and the increased “corporatization” of the healthcare
industry, and correlates hospital markups to other healthcare industry
pricing practices, especially by the pharmaceutical giants.
Included in the report is a listing of the nation’s
100 most expensive and 100 least expensive hospitals, the top 10 most
expensive hospitals by state, and the 40 hospitals that charge the most
for operating room services, prescription drugs, and medical supplies.
The research is based on federal cost reports with aggregated data for
over 30 million patient discharges in fiscal years 2002-2003 filed for
all patient services and other financial categories for 4,100 U.S.
hospitals.
For the full text of the report click here
Overall, the nation’s 100 most expensive hospitals
marked up their gross charges an average of 673% over their costs –
meaning the average top 100 hospital would bill $673 for a patient’s
case where the actual costs were $100.
The national average for all 4,184 hospitals
surveyed was a 232% markup, a 13% increase over the national average for
the prior IHSP report. The increase was even greater for the 100 most
expensive hospitals, a 28% jump over the prior IHSP/CNA survey.
Among the highest markups are those that have
become the major profit centers for hospitals – charges to patients or
health plans for prescription drugs, medical supplies or operating room
services.
For the top 40 hospitals, the study found medical
supply markups of up to $9,593%, drug charge markups as high as 6,796%,
and operating room markups of up to 1,950%. In other words, the hospital
that leads in supply charges puts an average sticker price of $9,593 on
supplies that cost the hospital on average $100. On drugs, the national
average sticker price was a 399% markup – an increase of more than 50
points over prior IHSP findings.
Other highlights of the report include:
·
Hospitals that charge the most tend to make the most profits or net
income. The hospitals ranked in the top 10% of markups on charges
reported an average of $14.8 million in profits. The bottom 10% in
charges reported average financial net loses of $159,000.
·
Hospitals that are part of systems and large hospitals tend to have
higher markups on charges than independent and small hospitals.
For-profit hospitals had the highest average sticker prices, a 351%
markup, while government hospitals had the lowest average charges of
185% over their costs.
·
Contrary to the argument that an unfettered market reduces costs,
Maryland, the most highly regulated state on healthcare in the U.S., had
the lowest state average markups on charges over cost, an average of
120% – with no effects on profitability, about two thirds of Maryland
hospitals were profitable, right at the national average.
· New
Jersey, California, Florida, and Pennsylvania are the most expensive
places to get sick. New Jersey hospitals marked up their charges over
costs by an average 415%.
The IHSP study cites the list price charged by
hospitals. Typically Medicare as well as HMOs and other large third
party payers negotiate discounts on final payment. But high charges also
prompt higher payments by Medicare and the other payers, a fact
increasingly recognized in the current national debate on charges.
However, the list price is the charge demanded of
the uninsured, one reason for the widespread scrutiny and lawsuits over
hospital billing practices.
Massive markups by pharmaceutical corporations
Drug companies have been shown to mark up their
prices over costs fueled by the unprecedented economic concentration
among big pharmaceutical firms. Fifty companies now control two-thirds
of the world’s pharmaceutical market, and five of the 10 largest firms
have recently merged.
As these firms consolidate and gain market power,
they can more easily dictate higher drug prices, and fan consumer demand
for name drugs through massive advertising campaigns. HMOs and health
plans respond to the price hikes with their own premium increases and
tightening up drug formularies available to plan members.
“The battle among HMOs, Pharmas and Hospitals to
enrich and/or protect their market shares, revenues and profits” is a
key factor in driving up overall healthcare costs, increasing the ranks
of the uninsured, and fostering a growing healthcare crisis, writes IHSP
executive director Don DeMoro.
“Tough restrictions on price gouging, which should
be applied to all segments of the healthcare industry are long overdue.
But that step will fall far short of resolving the broader healthcare
crisis unless accompanied by fundamental overhaul of our market driven
healthcare system,” said CNA President Burger, RN.
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