Hospital price data reveals wide variation in facility fees
Larger, for-profit hospitals charged patients higher facility fees for emergency care than not-for-profit hospitals, a new study found.
High-acuity patients who went to for-profit emergency departments were charged an average of $1,218 more for cash price facility fees than not-for-profit providers, according to an analysis of 2021 data from more than 1,600 hospitals.
There was a similar trend among hospitals with more than 250 beds and those that were system-affiliated, which charged an average of $826 and $311 more for high-acuity emergency care, respectively, in cash price facility fees than not-for-profit and independent hospitals, the study published last week in the peer-reviewed Health Affairs found.
It is the first national analysis of cash prices for ED facility fees using data that must be reported as a result of the 2021 price transparency law, the authors said.
“If this is a profit maximization story, the effects may be somewhat harmful. It could be discouraging the uninsured or underinsured from seeking emergency care when they need it,” said Morgan Henderson, lead author of the study and a principal data scientist at The Hilltop Institute at the University of Maryland, Baltimore County.
Every emergency department charges facility fees, which are flat rates that cover overhead for providing around-the-clock care, specialized equipment, licensing fees and other costs. Facility fees are unregulated, so hospitals can charge whatever they want.
The uninsured and underinsured would have to pay cash prices for services that hospitals offer at a discounted rate. Those insured by health plans or through their employers pay a negotiated rate based on a hospital’s list price, which has little bearing on the cost or quality of the procedure, research shows.
Hospitals were required to post machine-readable, consumer-friendly files of the rates they negotiate with payers, gross charges and discounted cash prices for 300 “shoppable services” on Jan. 1, 2021. A fraction of hospitals fully complied with the law in the early days of implementation as many facilities would rather pay the fines.
Fewer than 37% of hospitals reported as of Sept. 29 all five levels of ED facility fee cash prices they charge patients and the facility fees list prices they bill insurers and employers, researchers found. Hospitals that published facility fees were more likely to belong to a health system and to have at least 100 beds.
“The good news is once hospitals do start to comply more fully, the IT technology is there to retrieve and analyze the pricing data,” said Glenn Melnick, a healthcare economist and policy professor at the University of Southern California.
For-profit hospitals’ relatively higher facility fees may be explained by their locations, which are often in areas that have a higher cost of living, he added.
Facility fees for both the cash and list prices varied significantly, according to the study. The median cash price for facility fees ranged from $161 to $1,097 in 2021 and the corresponding list price ranged from $263 to $1,847. Hospitals located in high-poverty areas charged an average of $450 less in cash price facility fees compared with those in more affluent communities, the study found.
Cash-pay patients should try to avoid for-profit hospitals’ emergency rooms, particularly those operated by large, system-affiliated hospitals in wealthy areas, said Ge Bai, an accounting and health policy professor at Johns Hopkins University.
“Federal and state policymakers should seriously enforce hospital price transparency—21 months after the implementation of the hospital price transparency rule, only about one-third of hospitals disclose cash price for ER visits,” she said. “This low compliance status is preventing patients and payers from comparison shopping.”
The Centers for Medicare and Medicaid Services hopes price transparency leads to more visits to lower-priced hospitals, which would pressure competing facilities to lower their prices. But it is unrealistic to expect patients to shop around for care in an emergency situation and unlikely that hospitals would significantly adjust their ED facility fees, Henderson said.
“Hospitals are subject to the forces of supply and demand and they retain such an amount of cultural authority and market power in certain cases that they may be immune to pressure steering people from expensive to cheaper hospitals,” he said.
Federal and state authorities could use Medicare facility fee reimbursement rates as a benchmark to regulate facility fee cash prices at, for instance, a 1.5 multiple, researchers said. Regulators could potentially set facility fee cash prices at the second lowest negotiated rate. Whatever framework is used, the guidelines should factor in hospital and local market conditions, researchers said.