Americans pay higher prices for health care for a number of reasons. One is that some hospitals charge rates far higher than normal in the industry "because they can."
That's according to Gerard Anderson, a professor in health policy and management at Johns Hopkins Bloomberg School of Public Health, who co-authored a study that appeared Tuesday in the journal Health Affairs.
Anderson and Ge Bai, an assistant professor of accounting at Washington and Lee University, compared hospitals' so-called chargemasters -- lists of procedure codes and corresponding prices -- with the costs that Medicare would allow for the procedures. Using allowable charges under Medicare as a stand-in for costs, the researchers found that 50 hospitals, 46 owned by for-profit companies, had list prices for procedures with as much as a 1,260 percent markup, or 12.6 times the hospitals' costs.
The top four hospitals, with cost-to-charge ratios of 1,250 percent or 1,260 percent were North Okaloosa Medical Center (Florida), Carepoint Health-Bayonne Hospital (New Jersey), Bayfront Health Brooksville (Florida) and Paul B Hall Regional Medical Center (Kentucky). (See below for the entire list of 50.) Of the 50 hospitals, 20 operated in Florida. The greater Philadelphia area was another hotspot for high prices, according to Anderson.
"There are no market forces and no regulatory forces that keep the prices down," Anderson told CBS MoneyWatch. "Nobody is telling them that they can't. [The compiled information] hasn't been publicly available. They haven't been shamed."
While the markup over a baseline of costs found most often in the study was 240 percent, this group of 50 hospitals used markups ranging from 920 percent to 1,260 percent. In other words, if a surgery cost $10,000 to perform, these hospitals would charge anywhere from $92,000 to $126,000. The average markup (as opposed to the most common one) was 340 percent. In 1984, the average was 135 percent.
Relatively few people with traditional health insurance face the highest rates because insurance companies negotiate allowable payments. But if you're uninsured, you're commonly asked to pay the full rate, even if a hospital ultimately discounts a bill because a patient is poor.
But you don't have to be poor or even uninsured for the top rates to kick in. An insured person who has to get care outside of a plan's provider network could be slammed with much higher bills and an insurance policy that doesn't protect them.
In a workers' compensation cases or an accident outside of the workplace covered by a casualty policy, state law usually directs the insurance company to allow the person to go to any hospital, meaning there are no pre-negotiated rates.
"You pay higher premiums as a result," Anderson said.
As the paper noted, privately insured people might also pay higher rates as a result: "Hospitals with substantial market power can use the high markups as leverage with private insurers in price negotiations."
HCA responded with a statement saying in part, "Uninsured patients are eligible for free care through our charity care program or they receive our uninsured discounts, which are similar to the discounts a private insurance plan gets." However, that would not address the questions of other types of insurance nor of the effect of higher rates on negotiation with traditional health insurers.
Other owners of hospitals on the list, including Tenet Healthcare (THC) and Crozer-Keystone Health System, one of the few nonprofit operators that appeared, also stressed the discounts they give and claimed that looking at the charge-to-cost ratio was a limitation of the study.
In a statement, Community Health Systems wrote, "Medicare and Medicaid determine the rates they will pay for our services, and those rates don't always cover the cost of providing care." It also noted that "the study is based on data that is approximately three years old and that one-third of the CHS-affiliated hospitals on this list were acquired from HMA (Health Management Associates) two years after the reporting period."
When asked by MoneyWatch whether the rates had dropped, stayed the same or increased at the hospitals acquired from HMA, CHS did not respond.
Here's the list of 50 hospitals from the Health Affairs article: