A study showing wide disparities in hospitals’ charges for outpatient cancer care has prompted Johns Hopkins researchers to call for standardized prices for the services.
The team also expressed concern that the cost of Medicare patients’ services was often two to six times what Medicare allows. This means patients must pay the difference or have private supplemental health insurance, the team said.
They based their study on what the hospitals billed Medicare, the government health insurance program for older Americans.
The team called for fair and transparent pricing of cancer-related services such as chemo or radiation to protect patients from unpredictable financial burdens at a time when they are most vulnerable.
Their report, “Variation in Markups on Outpatient Oncology Services in the United States,” was published in the American Journal of Managed Care.
“We found some cancer centers bill fairly, while others engage in outright price gouging of insurers, patients and their employers,” Dr. Martin Makary, a professor of health policy at Johns Hopkins, said in a press release. “Hospital differences in quality or charity care do not account for these dramatic price differences,” added Makary, the study’s senior author.
Makary’s team analyzed 3,428 hospitals’ Medicare billing records for 2014. They compared the billings with the amount Medicare allows for each service. If the billing is higher than the amount allowed, someone has to pay the difference — and in many cases, it’s the patient.
The goal of the study was to see if price markups are causing healthcare inflation and financial harm to patients.
In preparing the study, the team categorized hospitals by size, prestige, whether they were profit-making or nonprofit, whether they were in a city or rural location, and whether they were affiliated with a university.
The team calculated a price markup ratio for each cancer specialty service in a hospital. They defined it as the ratio of the billed charges to the amount Medicare allows.
For example, a markup ratio of 4 meant that for a service with an allowable Medicare amount of $1,000, the hospital was charging $4,000 — or three times what Medicare allowed.
The 3,248 hospitals represented all 50 states. Sixty percent had fewer than 200 beds, 19 percent were for-profit, 37 percent were affiliated with a university, and 2 percent were considered prestigious.
Markup ratios for some kinds of specialty services were much higher than for others, the researchers found. In radiology, the median markup ratio was 3.7. In hematology and oncology services it was 2.3, in medical oncology 2.4, in pathology 4.1, and in radiation oncology 3.6.
Another finding was higher markups for medical oncology services at for-profit hospitals, and for radiology and pathology services at prestigious hospitals.
The results appeared to support claims that large hospital chains and prestigious hospitals use higher prices to try to obtain leverage in negotiations aimed at obtaining higher reimbursement from insurers, the researchers said.
When this occurs, price markups contribute to healthcare cost inflation, the team said. It also leads to patients facing higher out-of-pocket costs, which may affect their care decisions, the team added. The differences reflect a critical disparity in cancer care, they contended.
Another cost-related problem is that patients who are forced to go out of their health insurance network end up paying much higher bills. As insurance choices narrow, the chance that patients will face these kinds of high out-of-pocket costs increases, the researchers said.
“The victims of price variation are the out-of-network patients who do not realize they are paying double, triple or quadruple what insurers pay for the identical services,” Makary said.
From a moral perspective, it is unethical for non-profit medical centers to force cancer patients into bankruptcy proceedings because their medical bills are much higher than the amount Medicare has set for the services, the researchers said.
Some states are drafting legislation to protect patients in these situations. Among other things, it would prevent collection agencies from charging patients for the portion of the bill that exceeds what the highest-paying insurance company will cover.