Search

Many hospital executives and economists have suggested that since Medicare adopted a hospital prospective payment system in 1985, prices on the hospital chargemaster (an exhaustive list of the prices for all hospital procedures and supplies) have become irrelevant. However, using 2013 nationally representative hospital data from Medicare, we found that a one-unit increase in the charge-to-cost ratio (chargemaster price divided by Medicare-allowable cost) was associated with $64 higher patient care revenue per adjusted discharge. Furthermore, hospitals appeared to systematically adjust their charge-to-cost ratios: The average ratio ranged between 1.8 and 28.5 across patient care departments, and for-profit hospitals were associated with a 2.30 and a 2.07 higher charge-to-cost ratio than government and nonprofit hospitals, respectively. We also found correlation between the proportion of uninsured patients, a hospital's system affiliation, and its regional power with the charge-to-cost ratio. These findings suggest that hospitals still consider the chargemaster price to be an important way to enhance revenue. Policy makers might consider developing additional policy tools that improve markup transparency to protect patients from unexpectedly high charges for specific services. [ABSTRACT FROM AUTHOR]

Using Medicare cost reports, we examined the fifty US hospitals with the highest charge-to-cost ratios in 2012. These hospitals have markups (ratios of charges over Medicare-allowable costs) approximately ten times their Medicare-allowable costs compared to a national average of 3.4 and a mode of 2.4. Analysis of the fifty hospitals showed that forty-nine are for profit (98 percent), forty-six are owned by for-profit hospital systems (92 percent), and twenty (40 percent) operate in Florida. One for-profit hospital system owns half of these fifty hospitals. While most public and private health insurers do not use hospital charges to set their payment rates, uninsured patients are commonly asked to pay the full charges, and out-of-network patients and casualty and workers' compensation insurers are often expected to pay a large portion of the full charges. Because it is difficult for patients to compare prices, market forces fail to constrain hospital charges. Federal and state governments may want to consider limitations on the charge-to-cost ratio, some form of all-payer rate setting, or mandated price disclosure to regulate hospital markups. [ABSTRACT FROM AUTHOR]

OBJECTIVES: Self-insured employers cover more people than Medicare, Medicaid, or direct purchasers of private insurance. This study examined the ability of self-insured employers to negotiate hospital prices and the relationship between hospital prices and employer market power in the United States. STUDY DESIGN: Repeated cross-section analysis of commercial claims. METHODS: We used the US Census Bureau County Business Patterns data to estimate employer market power at the metropolitan statistical area (MSA)--year level and used the Truven Health MarketScan commercial claims to estimate mean hospital prices and price ratios at the MSA-year level (2010-2016). We calculated descriptive statistics for employer market power, mean hospitalization prices, and a case mix--adjusted price ratio measure during the study period and analyzed the 10 most concentrated labor markets. We estimated MSA-year--level ordinary least squares regressions of hospitalization price and the price ratio measure on employer market power. RESULTS: Large self-insured employers had concentrated market power in very few MSAs in 2016. The mean value of our employer market power measure was 62 for 2016, compared with the mean value of 5410 for hospital market power in the United States. Regression analyses find a slight relationship: A 1-point increase in employer market power was associated with a $6.61 decrease in the hospitalization price (mean = $20,813), but this result becomes statistically insignificant once the models control for hospital wages. CONCLUSIONS: Employer market power is low in most MSAs. Self-insured employers may consider building purchase alliances with state and local government employee groups to enhance their market power and lower negotiated prices for hospital services. [ABSTRACT FROM AUTHOR]