mead cohen berger shevtsova garfinkle michta grygiel blankenhorn
You Won't Believe How Far This Hospital Chain Went to Inflate Prices

Scandalous hospital pricing procedures have been on the map since last year’s Time magazine piece by Stephen Brill, but the NYT yesterday offered a striking account of a particularly egregious example of hospital price-gouging. Health Management Associates, a Florida hospital chain, is being sued for inflating its profits. The article describes a publicly displayed score card that rewarded doctors for admitting more patients who came the ER. More:

The lawsuits describe a wide-ranging strategy that is said to have relied on a mix of sophisticated software systems, financial incentives and threats in an attempt to inflate the company’s payments from Medicare and Medicaid by admitting patients like an infant whose temperature was a normal 98.7 degrees for a “fever.” […]

Federal regulators have multiple investigations into questionable hospital admissions, procedures and billings at many hospital systems, including the country’s largest, HCA. Community Health Systems, the Franklin, Tenn., company from which H.M.A. hired its former chief executive in 2008, faces similar accusations that it inappropriately increased admissions. Community is in discussions with federal regulators over a settlement regarding some of the accusations.

This story should be seen against the background of increasing hospital power in our system, which the ACA may be facilitating. We’re used to treating the insurers and big pharma as the main health care villains, but it’s clear that hospitals are a central driving force of the system’s dysfunction. Price inflation is often unintentional, or simply caused by rational responses to perverse incentives, but in this case a hospital chain deliberately set out to encourage overtreatment and other abuses. We need to shift our health care system’s center of gravity away from hospitals as quickly as prudence allows.

Features Icon
show comments
  • Fat_Man

    Obamacare treats the demand side. The problem is the supply side. Not enough doctors, too much monopolization by hospitals, too many regulations preventing patients from getting care and advice.

  • Maynerd

    Obamacare has directly fomented hospital merger mania. Individual hospitals are scared to death of lower reimbursement combined with the high capital expenditures on mandated pricey EMR’s (electronic medical records). The safe play is to merge and get “too big to fail”. Size also gives leverage vis a vis insurers, suppliers, and the exchange products as well.

    The downward spiral of our health care system continues unabated.

  • Andrew Allison

    “We’re used to treating the insurers and big pharma as the main health
    care villains, but it’s clear that hospitals are a central driving force
    of the system’s dysfunction.” It’s not clear at all! As the following sentence points out “Price inflation is . . .
    simply caused by rational responses to perverse incentives. The fact that a hospital chain deliberately set out to encourage overtreatment
    and other abuses is just such a response.

    As the immediately preceding “feed” points out, hospitals receive on average just 37% of what they bill insurance companies. The rational response is to make the bill as high as possible. The solution is to establish realistic reimbursement and make the cost the same regardless of how it’s paid (Medicare, Private insurance, or self-insurance). The mechanism to establish costs already exists: it’s called Medicare.
    The same argument applies not just to big pharma and insurers. Why is the cost of drugs four-or-more times higher in the US than, e.g. Canada? Because somebody is willing to pay! Why did the insurance companies conspire to create the ACA monstrosity? Because they (mistakenly, as it happens) saw it compelling millions of new customers!

  • ljgude

    I have been screeching hysterically here at The American Interest about America’s double expenditure rate for healthcare from well before Brill’s excellent article. Because Healthcare costs of 16% of GDP are twice the OECD average no reform that fails to address the cost problem can possibly succeed. The ACA limits increases to 17.5% of GDP by 2017. That is open admission that no attempt was made to reduce costs. I am an American living outside the system in Australia. Here everyone is covered and we pay a levy on our income tax to support our public system which is free to all. But we also have an OPTIONAL private system with private health insurance companies and private hospitals. I pay, at 71, about $2000 a year with a once a year deductible of $250 for hospitalization which covers me fully. Choice of Doctor, private room, bla bla bla. If I was presented with a $12,000 deductible Bronze Plan at way more than $2000 a year I, and every other privately insured Australian would drop their insurance in a Melbourne Minute and rely on the public system which we always have access to, and the insurance companies as well as the private hospitals would be out of business overnight.

© The American Interest LLC 2005-2016 About Us Masthead Submissions Advertise Customer Service