Johns Hopkins Finds 2,000% Markups Common Among Hospitals

Monday, September 12, 2016 | 0

Hospitals are setting prices for some services at more than 20 times their actual cost, simply because they are in a position to do so, according to a study by Johns Hopkins University published in the journal Health Affairs.

Johns Hopkins reported that in 2013, markups for hospital services ranged from 1.8 for inpatient general care to 28.5 for a CT-scan and 23.5 for anesthesiology. Generally, the more complicated the procedure, the higher the markup.

“We realize that any policy proposal to limit hospital markups would face a very strong challenge from the hospital lobby,” Dr. Gerard Anderson, a researcher at the Johns Hopkins Bloomberg School of Public Health, said in a press release. “But we believe the markup should be held to a point that’s fair to all concerned — hospitals, insurers and patients alike.”

According to the study, hospitals with strong market power, either through system affiliations or by dominating a regional market, were more likely to set high markups. The study looked at data from all Medicare-certified hospitals with more than 50 beds.

The study found that hospitals' average charge-to-cost ratio across all departments was 4.32. Government-run hospitals had the lowest average markup, at 3.47. Nonprofit hospitals marked up charges an average of 3.79, and for-profit hospitals 6.31.

The study's authors, Ge Bai of the Johns Hopkins Carey Business School, and Gerard F. Anderson of the Johns Hopkins Bloomberg School of Public Health, said one solution to high markups would be to improve transparency by requiring hospitals to provide a benchmark rate, such as what Medicare would pay for the same services, on medical bills. Hospitals could also be required to disclose total charges as a separate line item on their annual income statements.

"Mandatory disclosure on medical bills and financial statements will be an important step toward markup transparency," Bai said.