The Columns

National Media Feature Research by W&L's Bai on Extreme Markups by Hospitals

— by on June 10th, 2015

Ge Bai, assistant professor of accounting at Washington and Lee University, is lead author of a new study, “Extreme Markup: The Fifty US Hospitals With The Highest Charge-To-Cost Ratios,” that lists the 50 hospitals in the United States with the most extreme price markups. To date, more than 300 media outlets have written about the research.

The study was published June 8 in “Health Affairs” and was co-authored by Gerard F. Anderson, a professor in the Department of Health Policy and Management and the Department of International Health at the Johns Hopkins Bloomberg School of Public Health.

The researchers used Medicare cost reports from 2012 to show that these hospitals have markups approximately 10 times their allowable costs under Medicare. The study shows that one for-profit hospital system owns half of the 50 hospitals, 98 percent of the hospitals are for profit, 92 percent are owned by for-profit hospital systems and 40 percent operate in Florida.

Bai noted in media interviews that their research found that many hospitals charge 1,000 percent of their costs and that the effect trickles down to every single consumer, although it is worse for vulnerable populations, such as the uninsured and out-of-network patients. “It really plays an important role in the rise of overall healthcare spending,” she said.

Bai and Anderson claim that these markups are largely motivated by profit rather than the quality of service. They suggest that since patients find it difficult to compare prices and market forces fail to constrain hospital charges, federal and state governments may want to consider limiting the charge-to-cost ratio, setting a rate for all payers or mandating price disclosure in order to limit these hospital markups.

Outlets covering Bai’s research include: