Hospital Price Gouging Pandemic

HospitalMuch political discussion ensued regarding “bending the healthcare cost curve” during debate over the Affordable Care Act now known as Obamacare, yet overcharging by hospitals continues unabated to reach pandemic proportions. For those unfortunate enough to spend the night at the hospital, receiving the bill often causes extreme sticker shock. Hospitals come in three varieties: private for-profit, non-profit and publicly run. While many can rightly argue that the government rarely gets anything right, the government-run hospitals have the lowest bill markups of the three types.

Anyone noticing new hospital construction within the last few years must see the grandiose designs. The buildings have become palaces. To some degree, hospital administrators are responding to customer demand for user-friendly buildings. The patient and visitor experience is better than ever in regards to comfort and roominess. While the administrators appear to hear the requests regarding patient comfort, they turn a deaf ear as to cries of foul play with respect to patient billing.

According to a recent report, the 14 highest cost hospitals charged patients at a rate exceeding 10 times their cost. The average markup over costs at a for-profit hospital nationwide exceeds 500 percent. Government run hospitals have the lowest markup over costs at 235 percent. Given that the cost of new construction often exceeds $1.5 million per bed, the billing multiplier can lead to staggering patient invoices as part of hospital pandemic price gouging practices.

A North Carolina man was billed over $89,000 for an emergency room visit and one night stay at the Lake Norman Regional Medical Center, a for-profit facility owned by Health Management Associates. The largest slice of the bill was $81,000 for four vials of snake anti-venom medication available online for a low as $750 per vial. In another instance of over the top hospital bills, a California man was invoiced over $45,000 for an appendectomy in a Sutter Health owned hospital. While these are only two examples that were made public due to their extreme nature, many patients receive bills that defy belief.

Many hospitals report operating results in which revenues barely cover costs. To the extent a given hospital provides significant indigent care, such results are understandable. If the costs also include sizable administrator bonuses and outlandish design and construction costs for expansion, then the cost factor is unnecessarily overstated. Large non-profit hospital groups receive tax-free treatment for large bond issues for construction, yet operate with little government oversight regarding management practices. The CEO’s receive compensation consistent with large private companies, thus profiting handsomely from a non-profit environment.

Much of the problem with hospital billing practices lies in the lack of transparency. The patients cannot tell how they arrive at the billing amount, only that the bill must be paid. Many consumers of healthcare services at hospitals cannot comparison shop at the time they are admitted, so the hospital is free to charge as it sees fit. While Medicare and health insurers may pressure hospitals to reduce costs, those efforts are often unsuccessful. The suspicions regarding a hospital price gouging pandemic will likely continue until billing practices become more understandable for all.

Opinion by William Costolo

Sources:

Healthcare Finance News
Charlotte Observer
New York Daily News
Forbes

One Response to "Hospital Price Gouging Pandemic"

  1. tpMRS   May 15, 2014 at 6:49 am

    After 12 years working in a for-profit hospital, I can attest to managers and administrators receiving huge bonuses, while nurses, techs and other employees (which actually make the hospital run) received NO pay raises (and of course, no bonuses…)for several consecutive years because admin stated they weren’t making a profit. For-profit hospitals ALWAYS make a profit.

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