All but five of the100 hospitals with the highest price markups in 2018 were for-profit hospitals, and 53 of them were owned by HCA Healthcare, according to a prominent nurses union.
The report released Monday, the latest in a periodic analysis by the registered nurses’ union National Nurses United, used hospitals’ Medicare cost reports to calculate the ratio between hospitals’ charges and the cost of providing care, or their charge-to-cost ratios. The average ratio, it found, more than doubled between 1999 and 2018: from 200% to 417%.
Nashville-based HCA, an investor-owned giant that has been enormously profitable in 2020 despite the COVID-19 pandemic, had an average charge-to-cost ratio of 1,043% in 2018, among the highest in the country, the report found.
In a statement, HCA noted that the amounts patients pay are more reflective of their insurance than hospitals’ charges.
As the report itself states, “These charges are known as the charge master prices. Few patients pay the charge master price. Rather, the importance of the charge master price is that it establishes a baseline for negotiations between hospitals and health insurance companies over reimbursements.”
Insurers pay a percentage of those charges and then ultimately pass them onto patients in the form of higher premiums, co-payments or deductibles, said Jean Ross, NNU’s president.
“It affects us as we care for patients,” she said. “Many patients should come in much sooner but they don’t because of their finances. Many of them are not uninsured, they’re simple under insured or it costs too much to use the insurance policy that they have. And that affects their health.”
Community Health Systems had the second highest number of hospitals on the top 100 list: 18. Seven of Tenet Healthcare Corp.’s hospitals were on the top 100 list.
For-profit hospitals’ CCRs averaged 671% in 2018, compared with the 417% national average, according to the report. Not-for-profit hospitals, by contrast, averaged 377%, while government hospitals averaged 276%.
The reason that markups are so much higher at for-profit facilities is because they have to earn enough profit to hold on to their investors, said Ge Bai, associate professor of accounting and health policy and management at Johns Hopkins University.
“If you’re HCA, you have to compete to retain the shareholders,” Bai said. “But the investors are facing almost an unlimited number of options on the equity market. They can sell your stock immediately and buy another company’s stock.”
Bai examined the 50 hospitals with the highest CCRs for a 2015 Health Affairs study and reached a very similar conclusion to that of NNU. Of the 50, 49 were for-profits and many were owned by HCA.
On the flip side, most of the hospitals with the lowest CCRs are independent hospitals. Out of 100 hospitals with the lowest CCRs in 2018, 64 were independently owned and 36 were part of systems. Just two were for-profit facilities, the report found.
Independent hospitals don’t have as much bargaining leverage as those owned by health systems, so they don’t get much benefit from charging exorbitant prices, Bai explained.
“If you’re independent and charge high, the payer might not care because you are independent,” she said. “You are expendable.”
Of the top 100 CCR hospitals, 40 are located in Florida. Another 14 are in Texas. Eight are located in Alabama and seven in Nevada.
Chip Kahn, CEO of the Federation of American Hospitals, a trade group that represents for-profit hospitals, argued that charge-to-cost ratios are irrelevant because insurers pay negotiated rates and Medicare and Medicaid pay rates set by the government.
What really matters is the payment-to-cost ratio, he said. Kahn couldn’t immediately provide data on that metric, but said it’s comparable across the different types of hospitals.
As for why the for-profits have higher CCRs, Kahn said it might be because they tend to have lower costs and are better at managing resources.
HCA’s statement said that Medicare and Medicaid pay below the cost of providing care, and its hospitals offer discounts and charity care for under-insured and uninsured payments.
NNU has been very critical of hospitals’ responses to the pandemic, accusing them of failing to invest in adequate personal protective equipment stockpiles, leading to shortages and rationing throughout the pandemic. The union has led multiple protests and has filed a federal complaint against 17 HCA hospitals to that effect.
NNU’s Ross said the union has reported on hospitals’ charges for years, and the problem contributes to the supply and staffing issues that are coming to a head now.
“Our education to the public, what we tell you, it’s not politicized, regardless of what it might seem to some people,” she said. “We tell you the facts just like scientists do. This isn’t something new with the pandemic.”
But Kahn said he thinks the report is reflective of the union’s agenda to try and drum up publicity.
“It’s sort of sad that at the time that everyone is so stressed, they should add another level of stress by this sort of barrage of data and complaints that really have very little merit.”