Hospitals with the widest difference between the cost of their services and what they charge patients and their insurance carriers are mostly for-profit, investor owned and located in large metropolitan areas. They also have significantly worse patient outcomes compared with lower-cost hospitals, new UCLA research finds.
These "high-markup hospitals" (HMH), which comprised about 10% of the total the researchers examined, charged up to 17 times the true cost of care. By contrast, markups at other hospitals were an average of three times the cost of care.
The findings will be published September 24 in the peer-reviewed JAMA Surgery.
"Hospital prices affect everyone: patients, families, employers, taxpayers, and government programs, and when hospitals charge excessively, these costs ripple across the health system.," said study lead Dr. Sara Sakowitz, a surgery resident at Massachusetts General Hospital and researcher at the David Geffen School of Medicine at UCLA. "Patients may be stuck with high out-of-pocket bills, sometimes leading to financial toxicity or even medical bankruptcy. For those with insurance, inflated prices translate into higher monthly premiums and deductibles, which affect families, employers, and taxpayers alike."
Higher prices do not translate to higher quality or better care, she said. "In fact, patients at the highest markup hospitals faced greater complications and readmission rates. This raises concerns about fairness, transparency, and accountability in the health care system, particularly in the current era of value-based care."
The researchers examined data from the 2022 Nationwide Readmissions Database (NRD) for hospital expenditures at nearly 2000 US hospitals that performed four major elective surgeries: abdominal aortic aneurysm repair, colectomy, coronary artery bypass grafting, and hip replacement. Of those hospitals, 196 were high-markup facilities. About 362,400 patients were treated at the hospitals, with 42,600 (12%) of them at high-markup centers.
They found that the high-markup patients had about 45% greater odds of developing cardiac, respiratory, infectious, or kidney complications. They also faced a 33% greater risk of being readmitted for a non-elective reason within 30 days of their initial treatment.
Of particular significance, the study links pricing data to patient outcomes, Sakowitz said.
"Patients treated at these high-markup hospitals didn't experience better outcomes; in fact, they often did worse," she said. "In other words: the most expensive hospitals were frequently the lowest-value hospitals."
The study does have some limitations that could affect the results. The NRD is a nationally representative dataset, but the researchers could not access hospitals' comprehensive pricing list for supplies and services they provide, and as a result did not have information about negotiated agreements or discounts between hospitals and insurance providers. While the researchers did not have details to examine the geographical variation of high-markup hospitals, previous investigations have found that the 50 hospitals with the highest markup ratios were located in 13 states, 76% of which were in the south. The research team also did not have data on hospitals' fixed, variable or outpatient costs.
There is a need for more research into why patient outcomes are worse at high-markup hospitals, Sakowitz said. In addition, policies need to be developed to address price transparency and regulation. Currently only Maryland and West Virginia regulate hospital pricing.
"Patients rarely know what a surgery will cost ahead of time, nor do they have the tools to compare hospitals on both price and quality," she said. "And in urgent situations, they often don't have a choice of hospital at all. That means it's not realistic or fair to expect patients to 'shop smart' for surgery in a system that lacks transparency.
"Requiring public, standardized reporting of hospital markups and linking those reports to outcomes would be a first step. Ultimately, this is about building a health care system that is fairer, safer, and more accountable to the people it serves."
Study co-authors are Dr. Syed Shahyan Bakhtiyar, Dr. Yas Sanaiha, Dr. Amulya Vadlakonda, Troy Coaston, and Dr. Peyman Benharash of the Cardiovascular Outcomes Research Laboratories in the Department of Surgery at UCLA. Bakhtiyar are also affiliated with the University of Utah.
