Hospitals Charge More than Double What Physicians’ Offices Charge for the Same Services
Have you ever wondered why hospitals are buying up physician practices? Behind all the chatter about Accountable Care Organizations (ACOs) and Value-Based Purchasing (VBP) and who knows how many other TLAs (three-letter acronyms) lies something much more elementary: Arbitraging the price differences between doing a procedure in a physician’s office versus in a hospital. New research has quantified the differences:
Average hospital outpatient department prices for common imaging, colonoscopy and laboratory services can be double the price or more for identical services provided in a physician’s office or other community-based setting, according to a study from the nonpartisan, nonprofit National Institute for Health Care Reform (NIHCR).
The average hospital outpatient department price for a basic colonoscopy, for example, was $1,383 compared to $625 in community settings, according to the study. For a routine blood test — a comprehensive metabolic panel — the average price in hospital outpatient departments was triple the price — about $37 compared to $13 in community settings.
Not surprising, but a perfect example of inefficiency in the healthcare market. The primary purpose of hospitals was never to replace the more “routine” services provided by physicians in their offices. And the fact that Obamacare, particularly through the Medicaid expansion, encourages people to visit the ER for a broader range of services only exacerbates the problem. http://healthblog.ncpathinktank.org/puzzle-of-the-day-medicaid-expansion-and-unavoidable-emergency-department-visits/
If you give them health insurance, they will come… Then just jack up the prices. It’s a great scam for everyone but consumers.
What puzzles me is not that hospitals charge more. If someone is willing to pay the higher fees, why aren’t private practices charging more?
Are these simply fictitious list prices that don’t reflect what insurers actually reimburse? Or do insurers actually reimburse at different levels depending on where the procedure was performed?
What hospitals and/or physicians charge and what is paid can be vastly different, depending on insurance contracts, etc. This is the biggest problem particularly with hospital reimbursements. Hospitals have a “chargemaster”
system which is like understanding ancient Sumerian. The bottom line is, they charge more because they can. Like any other service however, if consumers(patients) are paying directly, they can shop around for better prices. Insurance companies just make contracts for percentage reductions, based on supposed volume.
“Hospitals have a “chargemaster” system which is like understanding ancient Sumerian.”
Maybe this is where health care reform should have started. Make the reimbursement and billing system easy to understand and not opaque.
See Stephen Brill’s article in Time from 2013 “Bitter Pill- Why Medical Bills are Killing Us.”
I think private practices are having a hard enough time getting patients to come rather than go to an ER. If prices were higher in a practice, it was just exacerbate the problem.
As we’ve said in the past, under the perverse incentives of bureaucratic, third-party payment, too much innovation is wasted on attempts to maximize revenue against reimbursement formulas.
“Hospitals Charge More than Double What Physicians’ Offices Charge for the Same Services”
This is a perfect example as to why price transparency is deeply important in health care reform.
When there is a demand to ERs, like there is after Medicaid Expansion, they have the opportunity to charge more and benefit from the situation.
When a hospital network buys a physician practice that practice may become a hospital outpatient facility. There are reports of people having to pay what the physician charged for, say, a needle breast biopsy, plus the hospital feel. See http://ctmirror.org/hospitals-buy-medical-practices-patients-face-thousands-dollars-new-charges/
So much for notions that hospital centered integrated care networks will lower expenditures and yet another reason why any legitimate health reform needs to demolish Medicare price regulations.
Why is it that surprising that any product or service coming from a 75,000 square foot business and all that attached overhead would be more expensive than a 1,200 square foot business. Goto a huge brand new car dealership with a 5 story parking garage and price a car. Then goto a small used car lot and price the same car to see which is cheaper.
See the articles from Public Integirty.org 12/20/2012 and the Boston Globe (3/11/2013) by Liz Kowalczyk on efforts to combat this price gouging.
A very few insurance companies are exposing these charges to patients before they get care.
But nowhere near enough.
I have said for years in my writing (and John Graham agrees) that we need binding arbitration to deal with price gouging.
Bob Hertz
The Health Care Crusade
A hospital is bound by EMTALA to treat any emergency patient regardless of ability to pay. Doctors don’t have such a legal obligation. Furthermore, hospitals cost of treatment can run into the millions whereas doctors could never dream of spending that mind of money on a patient. Look at a NY Times article several years back about how they treated an illegal immigrant brought to their doors with no ability to pay and then were sued for their kindness – “In Florida, Martin Memorial, a nonprofit hospital, spent $1.5 million to care for Mr. Jiménez. The costs especially mounted because of a conundrum faced by the hospital. As a condition of receiving Medicaid and Medicare money, the hospital was required to care for Mr. Jiménez until it could properly discharge him under federal law.” I guarantee that Medicare and Medicaid didn’t cover all these costs nor the $30,000 flight for the comatose patient to be sent back to his home country of Guatemala nor the legal fees that his family sued them for his repatriation into his country of origin. Paying patients subsidize the losses of non- paying patients through your so called exorbitant, price gouging fees. Let’s not pile on hospitals without at least mentioning all the pro bono work they do too.
We should look at hospital bad debt as a percent of revenue va a doctors office vs Amazon. See how much each entity writes off to get a better idea of why businesses price their services as they do.
Note to Big Truck Joe:
thanks for the insight.
However I am of the opinion that hospitals spend very little extra money taking care of anyone unless they need rare drugs
The nurses are already on the payroll The rooms and building are already on the budget.
When an uninsured person fails to pay, the hospital does not recover its fixed costs.
maybe this is the same thing but I doubt it.