US Hospitals Are Still Using Chargemaster Markups To Maximize Revenues (original) (raw)
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PloS one, 2016
In 2013 the United States spent $2.9 trillion on health care, more than in any previous year. Much of the debate around slowing health care spending growth focuses on the complicated pricing system for services. Our investigation contributes to knowledge of health care spending by assessing the relationship between charges and payments in the inpatient hospital setting. In the US, charges and payments differ because of a complex set of incentives that connect health care providers and funders. Our methodology can also be applied to adjust charge data to reflect actual spending. We extracted cause of health care encounter (cause), primary payer (payer), charge, and payment information for 50,172 inpatient hospital stays from 1996 through 2012. We used linear regression to assess the relationship between charges and payments, stratified by payer, year, and cause. We applied our estimates to a large, nationally representative hospital charge sample to estimate payments. The average amo...
Hospital `profits' : The effects of reimbursement policies
Journal of Health Economics, 1982
This paper provides a theoretical and empirical analysis of the eff't of mst-based reimbursement (CBR) on hospital costs and charges. It takes issue with previous analyses which have treated CBR as paying economic costs plus a markup , and have concluded that the markup is too small to significantly distort hospital decision-making. The basic thesis here is that if reimbursement is based on costs, accounting costs become a price to cost-paying patients, and will be optlmlzed to maxim& revenue. A hospital serving both cost and charge-paying (private) patients can set two price schedules. Accounting profits (ratio of charges to costs) are not a measure of economic profit but of relative prices to these two groups of patients. In the absence of constraints from regulation or patient co-payment, the optimum level of accounting costs would be infinite. In practice, the Medicare reimbursement formula links allowable costs to charges received from charge-paying patients. This formula creates incentives for the hospital to raise charges above the single-prim profit-maxim& g monopoly level. This inflationary effect of the Medicare formula does not presuppose that Medicare pays less than full cost. The emplrlcal analysis of hospital laboratory costs and charges generally supports the predictions; for other departments, the conclusions are consistent but more tentative because of data limitations. Overall, evidence suggests minimal cross-subsidy between cost and chargepaying patients. Comparisons of cost and charge levels in for-profit, voluntary non-profit and government hospitals are presented, but it is emphasized that inferences about relative efliciency and profitabiity cannot be drawn from accounting data, given the inantives created by CBR.
Private insurers pay widely varying prices for inpatient care across hospitals. Previous research indicates that certain hospitals use market clout to obtain higher payment rates, but there have been few in-depth examinations of the relationship between hospital characteristics and pricing power. This study used private insurance claims data to identify hospitals receiving inpatient prices significantly higher or lower than the median in their market. High-price hospitals, compared to other hospitals, tend to be larger; be major teaching hospitals; belong to systems with large market shares; and provide specialized services, such as heart transplants and Level I trauma care. High-price hospitals also receive significant revenues from nonpatient sources, such as state Medicaid disproportionate-share hospital funds, and they enjoy healthy total financial margins. Quality indicators for high-price hospitals were mixed: High-price hospitals fared much better than low-price hospitals did in U.S. News & World Report rankings, which are largely based on reputation, while generally scoring worse on objective measures of quality, such as postsurgical mortality rates. Thus, insurers may face resistance if they attempt to steer patients away from high-price hospitals because these facilities have good reputations and offer specialized services that may be unique in their markets.
Evidence Of Cost Shifting In California Hospitals
Health Affairs, 2006
We used 1993-2001 data from private hospitals in California to investigate whether decreases in Medicare and Medicaid prices were associated with increases in prices paid for privately insured patients. We found that a 1 percent relative decrease in the average Medicare price is associated with a 0.17 percent increase in the corresponding price paid by privately insured patients; similarly, a 1 percent relative reduction in the average Medicaid price is associated with a 0.04 percent increase. These relationships imply that cost shifting from Medicare and Medicaid to private payers accounted for 12.3 percent of the total increase in private payers' prices
The Growing Difference Between Public And Private Payment Rates For Inpatient Hospital Care
Health Affairs, 2015
The difference between private and public (Medicare and Medicaid) payment rates for inpatient hospital stays widened between 1996 and 2012. Medical Expenditure Panel Survey data reveal that standardized private insurer payment rates in 2012 were approximately 75 percent greater than Medicare's-a sharp increase from the differential of approximately 10 percent in the period 1996-2001. E xpenditures for hospital care in the United States are projected to exceed $1 trillion for the first time in 2015, 1 and debate is intensifying over pricing transparency, provider and insurer competition, and differences between private and public payment rates. The stakes involved are high, and there are stark examples of variations in payment rates across hospitals and geographic areas. 2-6 However, there is limited evidence on how payment rates for privately insured patients compare to those for patients covered by Medicare and Medicaid, or on how payment rate differences have changed over time. We examined amounts paid per inpatient hospital stay in the period 1996-2012 for patients whose primary payer was private insurance, Medicare, or Medicaid. Payment rates were adjusted for inflation and standardized across patient and stay characteristics. We found that payment rates for privately insured patients exceeded those for Medicare and Medicaid beneficiaries throughout the study period, but the difference widened rapidly in the latter half of the period (Exhibit 1). In 2012 private insurers' payment rates for inpatient hospital stays were approximately 75 percent greater than Medicare's payment rates-a sharp increase from the approximately 10 percent differential in the period 1996-2001.
Uncompensated care: hospitals' responses to fiscal pressures
Health Affairs, 1995
This DataWatch examines the impact of hospital competition, the Medicare prospective payment system (PPS), and MediCal selective contracting on the provision of uncompensated care by private hospitals in California during 1980-1989. It finds that hospitals subject to more intense competition and greater fiscal pressure from Medicare and MediCal reduced their provision of uncompensated care relative to hospitals facing less pressure from these sources. We estimate that had hospitals not been subjected to increasing price competition from growth of managed care plans and financial tightening in public programs, they would have provided 36 percent more uncompensated care than was actually provided in 1989.
We use a panel of hospitals from Washington state to examine the impact of government reimbursement on a provider's costs. We find that providers change their relative patient mix when Medicare and Medicaid lower reimbursement rates. On a percentage change basis, the magnitudes of these changes are small; however, the overall economic impacts are quite large. Additionally, our findings indicate that a number of other factors significantly influence a provider's costs, including patient demographics, initial illness severity and input market conditions facing the firm. We thank two anonymous reviewers for their helpful comments. We also thank William Greene for valuable econometric advice when making revisions to this manuscript. Remaining errors are our own.
The changing effects of competition on non-profit and for-profit hospital pricing behavior
Journal of Health Economics, 1999
Has the nature of hospital competition changed from a medical arms race in which hospitals compete for patients by offering their doctors high quality services to a price war for the patients of payors? This paper uses time-series cross-sectional methods on California hospital discharge data from 1986-1994 to show the association of hospital prices with measures of market concentration changed steadily over this period, with prices now higher in less competitive areas, even for non-profit hospitals. Regression results are used to simulate the price impact of hypothetical hospital mergers. q