Variation in Emergency Department vs Internal Medicine Excess Charges in the United States
By Tim Xu, MD, MPP; Angela Park; Ge Bai, PhD, CPA; et al
JAMA Internal Medicine, May 30, 2017
From the Introduction
Patients presenting to different emergency departments (ED) can face widely varying charges for similar care. Hospitals use chargemasters (list of services and their charges) to compile each patient’s bill, but the actual payment depends on the patient’s insurance type and network status. In-network patients and their insurers usually pay discounted amounts, whereas uninsured and out-of-network patients may be liable for the full hospital charges. In 2012, the 50 hospitals in the United States with the highest markups charged patients at least 9.2 times what the Medicare program would pay for care.
In this study, we used physician payment data from the Centers for Medicare & Medicaid Services to study the variation in markups on ED professional services and in relation to markups in internal medicine. We also examined the association between the level of markup and the characteristics of the hospitals and their patient populations.
From the Results
Nationwide, services provided by emergency medicine physicians to Medicare Part B fee-for-service beneficiaries totaled $4 billion in charges and $898 million in Medicare-allowable amounts, representing an overall markup ratio of 4.4 (340% excess charges). By contrast, the overall markup ratio for all services provided by internal medicine physicians was 2.1 (110% excess charges). Markup ratios for common ED services varied widely by procedure code and hospital.
By hospital, the aggregated markup ratio for all ED services ranged from 1.0 to 12.6; the aggregated markup ratio for all internal medicine services ranged from 1.0 to 14.1. Greater ED markup ratios by hospital were associated with for-profit status, greater uninsured population, African American and Hispanic patient populations, and location in the southeastern United States. These associations between markups and hospital characteristics were not present for internal medicine services.
From the Discussion
In this national study of hospital pricing practices in 2013, we found wide variation in excess charges for ED services relative to what Medicare would have paid. Moreover, ED services were generally priced higher than those in the internal medicine department for the same services within a given hospital. Emergency departments with the greatest markups were more likely to be for-profit and serve larger uninsured populations. These findings reinforce the recent interest among states in protecting patients from excess medical charges.
In addition to uninsured patients, insured but out-of-network patients can become subject to chargemaster prices. In the course of negotiations between insurers and physicians over payment rates, patients of physicians who remain out of network may receive a balance bill for the difference between the chargemaster price and the amount paid by the insurer. Out-of-network care can also result from hospitals outsourcing ED and other physician services to private contractors who are not part of the hospital’s insurer network.
Using national Medicare payment data, our study demonstrates the wide variation in the prices EDs charge patients for medical services, which can vary between 1.0 and 12.6 times the Medicare-allowable amount by hospital. Moreover, we found that hospitals typically charge patients more for similar services when performed by an ED physician compared with an internal medicine physician. In this context, the ongoing trends of uninsurance, hospital consolidation, and narrowing insurance networks since implementation of the Affordable Care Act are poised to increase the potential for patient financial harm in the years to come. Now, more than ever, protecting uninsured and out-of-network patients from highly variable hospital pricing should be a policy priority.
By Don McCanne, M.D.
We have long recognized the injustices of emergency department patients being charged higher rates if they are uninsured or if the physicians providing the care are not in the networks of the patients’ insurance plans. This study adds to our understanding by quantifying the extra costs faced by the patients. These charges typically are 4 times Medicare-allowable rates for the emergency physician and as much as 12 times for the hospital.
These unjust excessive charges would not exist in a well designed single payer system – an improved Medicare for all. Patients would benefit by the elimination of cost sharing, and the professionals and institutions would be paid based on legitimate costs and fair margins. Everyone would benefit except insurers and providers who currently gouge.