Hospital Markups For Services Can Be as High as 20 Times the Cost

inflationA study that was conducted by Johns Hopkins University researchers found that for some services hospitals can charge up to 20 times of what it costs. The researchers found this practice in both private and nonprofit hospitals, and the conclusions that the researchers drew was that in many instances, they marked up the price so much just because they could. Researchers said while they understand that hospitals need to make money, they recommended a cap on markups or better transparency from hospitals to patients on what standard rates are for hospitals in the area or what the Medicare rate is for the service.

In the journal Health Affairs, the published article said that many complicated procedures like CT scans, MRI tests, electrocardiology tests and anesthesiology services were the ones where these markups would occur. Even though this practice was discovered in nonprofit and private hospitals, on average the highest markups were found in for-profit hospitals that had were system-affiliated or were the dominant hospital in their area. Researchers found that the markups tended to be for complex treatments. Some of the average charge-to-cost ratios (what the hospital charges versus the hospital’s expense for that treatment) were 1.8 for general inpatient care, and 28.5 for a CT scan.

These markups can trickle down to patients, especially uninsured patients or those who are not in-network, or their insurers. It can be hard to say no to what could be an expensive procedure if you’re in the hospital or have come in because of an emergency. It also means workers’ compensation patients who are receiving these higher priced services cost their insurers more money as well. That could raise premiums for employers.

Patients don’t usually know how much their stay will cost until after it’s over, and doctors can’t always predict what services or treatments they will need to use. There can be a lack of transparency about costs. In workers’ comp though, patients are not responsible for the payments so they may not be as likely to speak up if they are questioning a treatment. Not only does that lead to increased costs for payers but it could also lead to unnecessary treatments for patients.

The full text can be found here.

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