America's 100 Most and Least Expensive Hospitals
June 11, 2003
Contact: Charles Idelson, 510-273-2246, 415-559-8991 (pg/cell) or the IHSP at 510-267-0634.
h2. New Study Links High Hospital Charges to Higher Profits
The full 48-page report and summary graphs and charts are available on the CNA website at http://cna.igc.org/top200
The nation's most expensive hospitals are also the hospitals which are racking up the highest average profits, according to a comprehensive new research report by the Institute for Health and Socio-Economic Policy (IHSP) commissioned by the California Nurses Association.
Included in the report is a listing of the 100 most expensive and 100 least expensive hospitals, based on just released federal cost reports with aggregated data for millions of patient discharges in fiscal years 2000-2001 filed for nearly 4,300 U.S. hospitals.
Surveying all hospital charges for all in-patient and out-patient services and other financial categories, the nation's 100 most expensive hospitals mark up their gross charges an average of 525% over their costs, a significant contributor to skyrocketing health care costs that are pricing increasing numbers of families out of health care coverage, according to CNA and the IHSP.
For the first time ever, the report also documents a direct correlation between high hospital markups over costs and higher hospital profits or net income. The 100 hospitals with the highest average gross charges also had the greatest average profits, while the bottom 100 on average reported financial losses.
Additionally, the report found links between high charges and the growing corporatization in the health care industry. Only five hospitals in the Top 100 were not part of hospital chains, while 69 of the nation's least expensive 100 hospitals were not system affiliated.
Size also matters. The larger a hospital as measured by average number of beds, the higher the markup on gross charges over cost, the report found.
Troubled Tenet Healthcare dominates the expensive list, owning the top 14 slots, and 64 of the top 100. Doctors Medical Center in Modesto, Ca., placed first with a sticker price of 1,092% above its costs on hospital services. That means Tenet Doctors would bill $10,920 for a patient's case where the costs were $1,000. Nearby Doctors Hospital of Manteca was the next highest with average markups of 920%.
HCA - The Healthcare Company ranked second among the top 100 with eight hospitals, followed by Saint Barnabas Health Care System, a New Jersey-based chain with four hospitals in the top 100. Overall Tenet's hospitals averaged gross markups of 477% over costs. Of some 280 U.S. hospital chains, only Crozer-Keystone, a small system in the Philadelphia area, had a higher average markup than Tenet for its hospitals, with a charge to cost ratio of 585%.
"These numbers, and the wide chasm in billing practices, suggest that some hospitals, particularly those that command large market share, may be inflating gross charges to make windfall profits or net income, while many other smaller facilities are struggling simply to keep the doors open," said IHSP director Don DeMoro.
Following previous reports by the IHSP/CNA and others, some hospital executives have said that high gross charges were unrelated to net income, DeMoro noted. "This data, reported by the hospitals themselves, identifies a direct association between what the hospitals charge and their bottom line."
Some hospitals have also contended that their charges are fixed by Medicare or other payers, but a report by the California Public Employees Retirement System earlier this year found that Blue Cross, which administers claims for CalPERS, paid Tenet almost three times more for bypass surgery than it paid to non-Tenet hospitals in California.
CNA President Kay McVay, RN, said the huge markups in hospital bills "drive up overall health care costs for everyone. Patients and consumers are being priced out of our health care system. When we see growing numbers of uninsured and underinsured families, and double digit health care premium increases that encourage employers to drop or reduce health benefits, these outrageous markups are a major contributor to our national health care crisis."
"While Tenet is not the only offender, these numbers clearly demonstrate that Tenet's pricing practices encourage other hospitals in the same markets to jack up their prices as well," said McVay. For example, the highest ranking non-Tenet hospital on the list, Sutter Health's Memorial Hospital in Modesto, Ca., with an average 597% markup, competes with two nearby Tenet hospitals, Doctors Modesto and Doctors Manteca - the top two among the top 100.
Three states, California, Florida and Pennsylvania accounted for about 64% of the top 100. All three states are dominated by corporate hospital chains. By contrast, New York State, with 194 hospitals in the data set, 188 of which were non-profits, had a statewide average charge-to-cost ratio of 181%, significantly below the national average of 206%.
Tenet's dominance on the current list is notable for other reasons. Previous reports on Tenet's billing practices have been on earlier years of public data. Tenet has said in investor conferences that it's most aggressive pricing strategy did not go into effect until after 2000. "This is the first year of federal data that reflects the effect of the increase with Tenet facilities so far above other hospitals in gross charges," DeMoro said.
The full 48-page report and summary graphs and charts are available on the CNA website at http://cna.igc.org/top200