Research: What Happens When Hospitals Are Publicly Shamed Over Prices? Not So Much.

Sep 28, 2016
Originally published on September 29, 2016 6:25 am

About a year ago, the journal Health Affairs published a study of the top 50 American hospitals with the highest cost markups, based on what the hospitals were charging compared to what Medicare would actually pay for services.

Twenty of the top 50 hospitals were in Florida.

That dubious list garnered all sorts of local and national media attention. And one researcher at the University of Miami’s business school took notice: Dr. Karoline Mortensen wanted to know how all that very public shaming might influence hospital charges.

Mortensen and her colleagues examined what happened with those hospitals’ charges after so much negative publicity. Her study, Does Media Attention Highlighting Hospitals with High Charges Lead to Charge Reductions?, has been published in the Journal of Health Care Finance

Mortensen sat down with Health News Florida to talk about why she thought the charges might change and what she actually found:

Mortensen discussed other observations that came out of the study, too:

  • On common characteristics of the hospitals with the highest markups:

They are associated with one of two [hospital] systems—and systems have been found consistently to charge higher fees to patients than non-system-affiliated hospitals.

They are almost all for-profit, which also doesn't surprise us because they can get away with charging higher. They have their stakeholders that they have to respond to and they're looking for increases in profits and revenues.

But when we looked at quality—we used the relatively controversial Centers for Medicare and Medicaid Services star ratings, which are consumer reports of patient satisfaction—we found that these 20 hospitals were far less likely to be rated three stars or above in the CMS ratings than the other hospitals in the state.

So if you're just looking at correlations here, paying significantly more for the care you're receiving is not associated with higher quality.

  • On consumer cost transparency efforts like PriceCheck:

We assume that those perhaps steer patients to price-shop, comparison-shop when it comes to these services.

But that probably won't have an effect on the hospitals actually considering what to charge particular patients. They're already taking that into account when they set their chargemaster. They're looking around at what other hospitals are charging. So they know what their competition is doing.

  • On the role of the chargemaster:

A chargemaster is a sort of a secret book where each hospital delineates the prices for all of the services that they provide inpatient and outpatient.

This is what you read about in Bitter Pill in Time magazine a few years ago—$1,000 for an aspirin, that secret list where insurers then negotiate with the hospital from.

You have insurers engaging in negotiation, but you don't have uninsured patients engaging in negotiation. You don't have out-of-network providers engaging in negotiations. So there are some patients who are actually paying the chargemaster prices.

… This sort of true price is like a unicorn. You don't really know what the actual charge was to a particular patient.

So the chargemaster is the best thing that we have to measure, but these chargemaster prices have not garnered a lot of policymaker attention because people are convinced that these aren't actually the prices. But the more recent study by Bai and Anderson is suggesting that they are highly correlated with hospital revenues, so they are something we should keep an eye on.

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