Hospital Charges Vary Wildly for the Same Services, Often Higher for Vulnerable Groups

In an analysis of Medicare billing records from 2,700 hospitals in 2013, the Journal of the American Medical Association (JAMA) found that emergency departments charged between 1.0 and 12.6 % higher prices compared to what Medicaid paid for the same treatments. The disparity between the fees paid by Medicare patients and other patients were especially high when performed by emergency medicine physicians (an average markup of 340 percent) compared to internal medicine physicians (an average of 110 percent markup). The higher markups for patients were more commonly seen in: (1) for-profit hospitals, (2) hospitals with a greater percentage of uninsured patients, and (3) location – with the Southeastern and Midwestern United States having the highest markups.

Unfortunately, these higher prices for the same services hit those with the least ability to pay – those that are uninsured or a member of a minority group. In short, insurance companies often “negotiate” the prices of hospital services. Therefore, when an insured person receives a procedure at a hospital – the insurance company will pay a lower pre-negotiated fee to the hospital, the insurer will then “kick in” their share of the payment, and the patient is left with a price that has been both negotiated lower and discounted by the insurance company’s payment. A person without insurance faces a different situation. First, they do not have an insurance company to negotiate lower prices for them. Instead, the hospital sets the rates (always higher than an insured person would pay). The hospital uses a complex algorithm with a goal of hitting certain profit targets, while also taking into account the expected collection rates of uninsured patients. This algorithm changes daily – therefore, an uninsured person is never exactly sure how much their procedure will cost.

This discrepancy tends to create much higher costs for those that are uninsured – generally persons of lower socio-economic means or members of minority groups. For example, the study by JAMA found that Medicare typically paid 16 dollars for a doctor’s interpretation of electrocardiograms. For uninsured patients, the average cost for the same procedure was 95 dollars – however this ranged from 18 dollars to an eye-watering 317 dollars. Unfortunately, these higher prices were common at hospitals that largely serve African-Americans and Hispanic Americans.

In order to avoid these expensive (and often unnecessary bills), JAMA has several recommendations. First, patients should ask to pay for the Medicare allowable rate. Second, a patient should ask for an itemized bill – to ensure that all procedures are approved and necessary for treatment of his or her condition. Third, a patient should “avoid a private room, refuse unnecessary equipment, and identify people who come by your bedside and write down who they are.” Lastly, and most importantly, patients should always ask for the price and necessity of each procedure beforehand. Until the laws change – to promote more transparency and prevent price-gouging, it will be up to the patient to look out for his or her self-interest at hospitals.


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