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From Health Law Daily, January 8, 2014

Despite ACA limits, some hospitals charge over 10 times their actual cost for services

By Harold M. Bishop, JD

National Nurses United (NNU), the largest union and professional association of registered nurses in the United States, has released data showing that hospital charges in the U.S. continue to escalate at an alarming pace and that 14 of the most expensive hospitals in the U.S. charge more than 10 times their actual cost for medical services. The NNU study also states that hospitals “are not the only culprits in the healthcare industry. Excessive prices are a feature of nearly every sector in the privately run healthcare industry, including pharmaceuticals, medical suppliers, insurance companies, medical labs, outpatient clinics, and others.” The increase in hospital charges has occurred, according to NNU, despite enactment of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). In fact, hospital charges recorded a 22 percentage point increase from fiscal year 2010-2011 to fiscal year 2011-2012. According to NNU nurses, these escalating hospital charges “are a reminder of an ongoing hole in the ACA, which has few provisions to effectively curb price gouging.”

Failure to implement ACA provisions. NNU notes that while the ACA permits the Internal Revenue Service to revoke the tax-exempt status of a hospital if it charges financial aid patients more than the average amount paid by Medicare or private insurers, the Obama administration has failed to promulgate the regulations necessary to implement these ACA provisions due to opposition by the hospital industry. According to NNU co-president Jean Ross, RN, “the lesson here is that the critical work of real healthcare reform is far from complete. As long as our health continues to be held hostage by hospitals and other corporations more focused on profits than care, Americans will be at risk.”

IHSP data. The data released by NNU was obtained through research conducted by the Institute of Health and Socio-Economic Policy (IHSP), the research arm of NNU. The IHSP research includes charts containing the following information: (1) the top 100 most expensive hospitals in the nation by state; (2) the most expensive hospitals in the nation in alphabetical order by state; and (3) the average charge to cost ratio by state.

Key findings. According to NNU, the key findings from the IHSP research include the following:

  • 14 U.S. hospitals charge more than $1,000 for every $100 of their total costs (a 1,000 percent markup), with Meadowlands Hospital Medical Center in Secaucus, NJ heading the list with a charge to cost ratio of 1,192 percent.

  • The 100 most expensive U.S. hospitals have a charge to cost ratio of 765 percent and higher – which is more than double the national average.

  • Six of the nine most expensive hospitals are part of two big chains, Community Health Systems, Inc. and Health Management Associates which are currently pursuing a controversial merger that critics charge would further drive up prices.

  • For-profit hospitals continue to dominate the list of those with the highest charges. For-profit corporations average charges of 503 percent of their costs.

  • By contrast, the average charge ratios for government-run hospitals are just 235 percent of their costs.

  • Public oversight or regulation seems to help constrain excessive pricing. For example, Maryland, a highly regulated state, has the lowest average charges of all the states (140.18 percent) among its 10 most expensive hospitals.

In addition, the IHSP data indicates that New Jersey (583.01 percent) and Florida (555.36 percent) have the highest average charge to cost ratio of the 55 states and U.S. territories in the study. California (450.89 percent) is third on the list, Illinois (345.33 percent) 13th, and New York (263.86 percent) finished 31st. It is also interesting to note that Florida has 8 of the 15 most expensive hospitals in the country and 30 of the 100 most expensive hospitals.

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