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Hospital Pricing

By June 29, 2021Commentary

If you read this blog for a few years pre-pandemic, you would notice the entities whose behavior I don’t think much of.  Large hospital/health systems, especially not-for-profit ones are in that category.   Although supposedly non-profit, many of them make far more money than for-profit hospitals.  They pay their executives exorbitant salaries and compensation packages, which is completely inconsistent with a non-profit mission.  And they don’t deliver the amount of charity care that they should.  They have been gobbling up doctors’ practices and other providers, and when they do so, they raise prices.  Health care costs more largely because of these large, dominant non-profit health systems.

This research is just another example of their abusive practices.  (Axios Study)   It finds that many of these health systems apply incredible mark-ups to their actual cost of delivering service.  Now, to be fair, the authors of the study don’t seem to understand full cost of delivering a service, and they don’t seem to understand that a hospital’s list price is not what they typically are paid by a health plan or by Medicare or Medicaid.  But list price is what a self-pay patient would be charged.  And these markups are so staggering that even if they were only half as much it would be an incredible ripoff.

Chippenham Hospital in Richmond, Va., has a 13 times markup, not 13%, 13 times the cost.  Sunrise Hospital in Las Vegas, is at a much more reasonable 12.9 times.  All but one of the top ten hospitals in terms of markup are in double digits, and the tenth is 9.9 times cost.  Nine of the ten are for-profit, but the non-profits below this group aren’t much better.  And if you looked at actual reimbursements from health plans, the non-profit hospitals are usually the highest cost.

A lot of the excessive profits made by these health systems go into marketing–all those billboards you see and TV and radio ads you hear.  This should be banned, it just adds more to the cost of health care.  And next time you see or hear one of those ads about how wonderful these providers are, just remember how they are fleecing you with no regard for the economic or social effects.

Join the discussion One Comment

  • guest says:

    A good supplement to your post is the StarTrib’s yearly “The Nonprofit 100” article.

    When sorting the top 100 list by CEO compensation, these are the top 10 results:

    1. Fairview Health Services CEO: 3.6 million
    2. Mayo Clinic CEO: 2.8 million
    3. HealthPartners Inc.CEO: 2.4 million
    4. Allina Health System CEO: 2.1 million
    5. Medica CEO: 2 million
    6. Essentia Health CEO: 1.7 million
    7. Blue Cross and Blue Shield of Minnesota CEO: 1.7 million
    8. Children’s Minnesota CEO: 1.5 million
    9. CentraCare CEO: 1.5 million
    10. North Memorial Health CEO: 1.3 million

    All top 10 are health care organizations.

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