How Much Should Health Care Cost?

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December 2017

There is no standard for how much insurers should pay for physician services

There is no standard for how much health care services should cost nationally, so it is difficult to determine if and how much hospitals and clinics overcharge. Insurers do not reimburse the full charges and health care bills may be inflated to adjust for the reduced reimbursement.

This study compared Medicare reimbursement to billed services. Medicare provides health insurance for the elderly and reimburses hospitals with predetermined and fixed prices. These reimbursements are called “allowed charges.” Allowed charges were used as a proxy for the true price of health care services.

To determine the excess markup of health care services, this retrospective study analyzed Medicare Part B claims submitted in 2013. The study included services provided by 12,337 emergency physicians and 57,607 internal medicine physicians who were affiliated with thousands of hospitals. Markup was defined as the ratio of charges billed to Medicare compared to Medicare allowable charges. The study then compared markup between hospitals and between specialties.

The study determined that services delivered by emergency physicians were billed at 4.4 times the allowable Medicare payment, while services delivered by internists were billed at 2.1 times the allowable Medicare payment. Hospitals ranged greatly in terms of markup, with emergency services varying from 1 to 12.6 times the allowable amount. For-profit hospitals, hospitals with a high proportion of uninsured patients, and hospitals in the Southeast had greater markups.

The findings of this study must be put in context to understand its implications. This study used Medicare allowed prices as a proxy for health care prices, which represents a significant limitation. Medicare reimbursements have increased less than the inflation rate since the mid-1990s and may significantly undervalue true health care costs. In order to understand the findings of the study, we need to make health care costs more transparent. The Fair Health claims database (www.fairhealth.org), for example, is dedicated to gathering independent and unbiased health care cost information. The nation should employ databases like this to advocate for less arbitrary reimbursement by insurance companies and to promote healthcare billing that is consistent with true cost.


ARTICLE: Xu T, Park A, Bai G, et al. Variation in Emergency Department vs Internal Medicine Excess Charges in the United StatesJAMA Intern Med. 2017;177(8):1139-1145.

ABSTRACT
IMPORTANCE: 
Uninsured and insured but out-of-network ED patients are often billed hospital chargemaster prices, which exceed amounts typically paid by insurers.
OBJECTIVE: To examine the variation in excess charges for services provided by emergency medicine and internal medicine physicians.
DESIGN, SETTING, AND PARTICIPANTS: Retrospective analysis was conducted of professional fee payment claims made by the Centers for Medicare & Medicaid Services for all services provided to Medicare Part B fee-for-service beneficiaries in calendar year 2013. Data analysis was conducted from January 1 to July 31, 2016.
MAIN OUTCOMES AND MEASURES: Markup ratios for ED and internal medicine professional services, defined as the charges submitted by the hospital divided by the Medicare allowable amount.
RESULTS: Our analysis included 12,337 emergency physicians from 2,707 hospitals and 57,607 internal medicine physicians from 3,669 hospitals in all 50 states. Services provided by emergency physicians had an overall markup ratio of 4.4 (340% excess charges), which was greater than the markup ratio of 2.1 (110% excess charges) for all services performed by internal medicine physicians. Markup ratios for all ED services ranged by hospital from 1.0 to 12.6 (median, 4.2; interquartile range [IQR], 3.3-5.8); markup ratios for all internal medicine services ranged by hospital from 1.0 to 14.1 (median, 2.0; IQR, 1.7-2.5). The median markup ratio by hospital for ED evaluation and management procedure codes varied between 4.0 and 5.0. Among the most common ED services, laceration repair had the highest median markup ratio (7.0); emergency medicine physician review of a head computed tomographic scan had the greatest interhospital variation (range, 1.6-27.7). Across hospitals, markups in the ED were often substantially higher than those in the internal medicine department for the same services. Higher ED markup ratios were associated with hospital for-profit ownership (median, 5.7; IQR, 4.0-7.1), a greater percentage of uninsured patients seen
(median, 5.0; IQR, 3.5-6.7 for ≥20% uninsured), and location (median, 5.3; IQR, 3.8-6.8 for the southeastern United States).
CONCLUSIONS AND RELEVANCE: Across hospitals, there is wide variation in excess charges on ED services, which are often priced higher than internal medicine services. Our results inform policy efforts to protect uninsured and out-of-network patients from highly variable pricing.

PMID: 28558093


EMRA + PolicyRx Health Policy Journal Club: A collaboration between Policy Prescriptions and EMRA

As emergency physicians, we care for all members of society, and as such have a unique vantage point on the state of health care. What we find frustrating in our EDs – such as inadequate social services, the dearth of primary care providers, and the lack of mental health services – are universal problems.

As EM residents and fellows,  we learn the management of myocardial infarctions and traumas, and how to intubate, but we are not taught how health policy affects all aspects of our experience in the ED. Furthermore, given our unique position in the health care system, we have an incredible opportunity to advocate for our patients, for society, and for physicians. Yet, with so many competing interests vying for our conference education time, advocacy is often not included in the curricula.

This is the gap this initiative aims to fill.  Each month, you will see a review of a new health policy article and how it is applicable to emergency physicians.

Erica Goldstein

Erica Goldstein

Erica Goldstein is a student at NYU School of Medicine and the Wagner School of Public Service. She intends to pursue a career in emergency medicine.
Erica Goldstein

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