Is your hospital charging fair prices for services?
According to a recent study published in JAMA Internal Medicine, the cost of emergency medical care varies widely from one hospital to another in the United States — and many charge exorbitant markups.
The research team that published the study analyzed billing records for 12,337 emergency medicine doctors from 2,707 hospitals across all 50 states in 2013.
Additionally, they found that emergency departments charged an average markup of 340 percent on Medicare allowable amounts.
The Medicare allowable amount is the sum of what Medicare reimburses for a service, the deductible and coinsurance paid by beneficiaries, and any amount that a third party is responsible for covering.
Some people think that Medicare allowable amounts are set too low.
But Dr. Martin Makary, MPH, the study’s senior investigator and a professor of surgery at Johns Hopkins University School of Medicine suggested they reflect the true costs of providing care.
“The reality is, the vast majority of medical centers do accept Medicare patients, which tells us they likely find those patients profitable to them,” he told Healthline.
“Therefore, what Medicare is paying them is probably somewhere close to the actual cost of delivering that service. It’s either similar or higher than the true cost to the hospital.”
His research team found that hospitals in neighborhoods with higher proportions of uninsured, African-American, and Hispanic patients tended to charge higher markups.
While they don’t know why that’s the case, Makary is concerned about how it may impact community members and contribute to healthcare disparities.
“This problem is a real problem,” he said. “And it’s crushing everyday Americans.”
Difficult to shop around
When the researchers calculated each bill’s markup ratio, they found wide variability between hospitals.
The emergency departments studied charged anywhere from 1.0 to 12.6 times the Medicare allowable amount for services.
For a procedure with a Medicare allowable amount of $100, that translates to a price range of $100 to $1,260.
They also found that emergency departments tended to charge more than internal medicine departments for the same procedures, even within the same hospital.
The American Hospital Association (AHA) noted differences in patient needs across communities as an explanation for price variances in a statement sent to Healthline.
“Hospital payments will vary because they reflect each individual hospital and the unique care needs of the patient population it serves,” the AHA noted. “For example, one community may have sicker patients with more chronic illness while another may care for more uninsured patients.”
While Makary acknowledged that some variations in pricing may be justified, he also believes that predatory pricing practices are a problem.
“When you go to a hospital bleeding, holding the wound as you walk into the emergency room, you’re often asked to sign a form that says you legally agree to pay for a bill that you not only haven’t seen but can’t get an estimate on if you ask,” Makary said.
“In my opinion, these represent predatory pricing practices. They’re unfair contracts pushed on people at a time when they’re most vulnerable, with markups that can be at times egregious,” he added.
When patients don’t know what they will be charged ahead of time, it’s difficult or impossible for them to shop around. This is especially true for patients in the middle of a medical emergency.
More protections needed
In some cases, hospitals waive fees or negotiate charges down.
But in other cases, patients are stuck with the full bill.
Those who lack insurance or access out-of-network care are particularly vulnerable.
“When you go out of network, you can sometimes be responsible for the entire bill,” Makary told Healthline. Additionally, he said if a patient doesn’t have insurance or their insurance only pays a small part of the bill, your bill could be sent to collections.
He argued that fairer and more transparent pricing practices are needed.
“Well first of all, we need to ask hospitals to do a better job providing estimates when estimates are requested,” he said. “A hospital and a doctor cannot predict a complicated course of care. But they can answer the question, ‘if I end up having this straightforward procedure or service done, how much would it cost?’”
“And we probably need a kinder system that simply asks, is it worthwhile to get something done?” he added. “And if so, can we help you get the procedure done?”
The AHA stresses that some hospitals are working to address these issues.
“Hospitals recognize that the billing system is complex and are both working to make bills more patient-friendly, as well as demonstrating a significant commitment to making care more affordable,” AHA officials told Healthline in a statement. “We are working with a broad spectrum of industry stakeholders to provide guidance and tools for more meaningful and transparent price information and pledge to work with patients, engage them to answer questions about bills, provide financial counselling, and develop a billing process that is clear, concise, and correct.”
To protect patients across the country, Makary believes a national approach is needed.