Billing Practices

Report Lists Hospitals Price Gouging Comp Payers

New research focuses on unchecked price mark-ups being billed to workers' comp payers across the country.
By: | July 6, 2015

“The 50 hospitals in the United States with the highest markup of prices over their actual costs are charging … workers’ compensation insurers more than 10 times the costs allowed by Medicare,” new research suggests. “It’s a markup of more than 1,000 percent for the same medical services.”

The statements are included in a new report developed by researchers at the Johns Hopkins Bloomberg School of Public Health and Washington and Lee University and published in the June issue of Health Affairs.

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The authors analyzed 2012 Medicare cost reports to determine a charge-to-cost ratio, which indicates the amounts by which hospitals are marking up charges above what Medicare agrees to pay for those with its government subsidized health insurance. They said that while most private health insurers negotiate lower rates for their patients, those who are uninsured as well as those receiving workers’ comp, auto insurance benefits, or out-of-network care are likely to pay close to the full rate.

The findings “show that the combination of a lack of regulation of hospital charges in the United States and no market competition is leading to price-gouging that trickles down to nearly all consumers, whether they have health insurance or not, and plays a role in the rise of overall health spending,” the authors wrote.

Of the 50 hospitals included on the list with the highest charge-to-cost ratios all but one are for-profit facilities. Twenty of the hospitals are in Florida, including the top one, North Okaloosa Medical Center. “This is also a state with a fee schedule based on a percentage of ‘usual and customary’ charges,” noted Joseph Paduda, principal of Health Strategy Associates and author of the ManagedCareMatters blog.

The costs of workers’ comp policies are higher in states with unregulated hospital charges since companies must pay the higher rates, according to the study. The authors said it is unlikely that charges will be reduced closer to that allowed by Medicare unless legislation mandates a maximum markup a hospital could charge a patient. There is currently no such federal law in place, although the report said Maryland and West Virginia set rates hospitals can charge for services.

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]