Imagine you’re rushed into an emergency room with a heart problem. The doctor says you need an electrocardiogram to check your heartbeat. You ask about the price — and no one can give it to you.
Turns out you might end up paying anywhere between $18 and $317 for the test, depending on the hospital and your insurance. And if you happen to be uninsured or a minority patient, you’re more likely to end up getting dinged with a higher hospital bill.
Welcome to the arcane and arbitrary world of billing practices at US hospitals today, as detailed in a new JAMA Internal Medicine study. The researchers, from the Johns Hopkins School of Public Health, uncovered wild variation in the charging practices of hospital emergency rooms, and found that vulnerable patients — uninsured people, minority groups — are more likely to be hit with the highest bills.
These charging practices aren’t the result of evil schemes on the part of hospital billing departments. Instead, they’re set by hospital “chargemasters” — computer software that adjusts the prices for hospital services with the goal of hitting certain profit targets. The prices are based on expected collection rates, and tend to fluctuate day to day. They’re also pretty random, the researchers found, but trend toward minorities and the uninsured getting gouged the most.
Hospitals charge on average 340 percent more than what Medicare will pay for services
Few people pay the total amount on a hospital bill because most of us have some form of insurance that covers the costs minus a negotiated discount that’s worked out between the hospital and the insurance company.
But people who wind up in hospitals without insurance, or at hospitals outside their insurance network, don’t have the benefit of that discount. That means patients end up getting stuck with the sticker price.
“These people are sometimes the victims of price gouging in a marketplace that lacks a lot of transparency,” said Martin Makary, a professor of surgery at the Johns Hopkins University School of Medicine and the study’s senior investigator.
In the study, the researchers dove into Medicare billing records for 12,000 emergency medicine doctors working at 300 hospitals in all 50 states. They examined the bills emergency rooms were producing and compared them with what Medicare was paying for the same services. (They assumed that if hospitals would accept Medicare patients and the prices their coverage will pay for, then those prices must be adequate to cover the cost of services.) They also parsed the characteristics of the populations the hospitals were serving and whether they were run as for-profit ventures, along with other features.
The markups they discovered were staggering. Overall, patients were being charged 340 percent more than what Medicare pays, meaning emergency medicine physicians bill $4 billion overall for the same services Medicare would pay only $898 million for. The markups ranged anywhere from $100 to $12,600 per service, depending on the hospital, with an average markup of $420.
For a doctor’s interpretation of electrocardiograms, Medicare typically paid $16, while different emergency departments typically charged $95 on average. Yet a patient could be charged anywhere from $18 to $317, the researchers wrote. Laceration repairs had the highest average price markup, while the cost of interpreting CT scans varied the most across the country.
For-profit hospitals, and those located in the Southeastern and Midwestern US, charged the most in their emergency departments.
Most damning, though, the highest price markups were happening in emergency departments that served larger uninsured and African-American and Hispanic populations. One potential reason, the researchers wrote: These hospitals sometimes have a high proportion of costs they have to eat because lower-income patients can’t pay their bills — so they may be trying to make up for those losses by increasing the hospital charges.
Hospital price gouging is part of America’s health care cost crisis — but there are ways to avoid it
Part of the health care cost crisis in America is high drug prices. Another part of it is inappropriate or excessive care. There’s also the administrative burden health providers face dealing with multiple insurance payers. “But part of it is actually a practice that we refer to as price gouging,” Makary said. And charging 340 percent over the Medicare allowable rate is price gouging.
“One of the biggest problems in health care today is the cost crisis,” he added. “With increased attention on insurance premiums, it’s important to understand that when insurance companies are overcharged, those excess costs get passed on in the form of higher premiums the following cycle.”
Makary wants people to know that emergency room prices vary. He urges patient to contest hospital bills by asking for discounts using a few approaches: Patients can ask to pay the Medicare allowable rate, the same rate as an in-network person would pay (if you’re paying out of pocket), or ask for an itemized bill to ensure all the services rendered were necessary. Patients can also contest any contract if they were required to sign it at a point of distress.
Elisabeth Rosenthal, the author of the new book An American Sickness, about the cost of American health care, also suggests avoiding a private room, refusing unnecessary equipment, and identifying the people who come by your bedside and writing down who they are (or asking a family member to).
But to really fix the pricing problem, we need systems level change: Hospitals should start routinely disclosing what they charge, like every other market does, so patients aren’t left operating blindly, Rosenthal told Vox in an interview.
“Patients and the doctors who treat them have to know what things cost, and hospitals and drugmakers have to be way more upfront about their charges,” she said. “Doctors who practice in those hospitals tell me they can’t even see the chargemaster. Laws could change that. In some other countries, price lists and estimates are the norm.”
“If we had fair and honest pricing,” Makary added, “patients could make a decision about choosing to go to an expensive hospital and a less expensive hospital. We wouldn’t have the games of in-network and out-of-network price gouging.”