Collecting in Healthcare Monthly Journal Source: The Academy of Healthcare Revenue
Uninsured Charged More, According to Study
A study published in the May/June 2007 issue of Health Affairs entitled “From 'Soak The Rich' To 'Soak The Poor': Recent Trends In Hospital Pricing” has made a concerning finding: in 2004 (the most recent year with complete available data), the rates charged to uninsured and other “self-pay” patients for hospital services were often 2.5 times what most health insurers actually paid and more than three times the hospitals’ Medicare-allowable costs. The study’s authors define self-pay as the uninsured, international visitors, patients insured by health plans that do not have a contract with the hospital—most typically HSAs—in which the patient receives care, patients covered by automobile insurance, and patients covered by workers’ compensation.
The gap between what self-pay and insured patients pay has grown significantly since the 1980s, and with increasing rapidity since the year 2000. The Health Affairs study is unique in that it examines hospital pricing from the perspective of the self-pay patient as opposed to the majority of studies on the topic, which have generally explored pricing issues from the hospital perspective.
The pricing strategies that led to the cost gap between insured and self-pay patients have caused negative repercussions for many patients and providers. Numerous healthcare providers have been sued over their pricing policies, and many patients have encountered financial distress when faced with unmanageable healthcare bills.
The study measured the cost gap using two ratios: charge-to-cost (or the relationship between the actual prices charged to self-pay patients for services and Medicare-allowable costs) and gross-to-net revenue. According to the study’s authors, hospitals’ charge-to-cost ratio and gross-to-net revenue have grown significantly since 1984. Since Medicare payments have covered less of the costs of care in recent years, and since providers have been struggling to collect revenue that is generated (thus the growing gap between gross and net revenue), many hospitals have had to increase their charges to uninsured patients in order to make up for these shortfalls. The graph below illustrates the increases in ratios between U.S. hospitals’ charges to costs and the ratio of gross-to-net revenues from 1984 through 2004.
The result of lawsuits and national attention focusing on healthcare providers’ pricing practices has led to a renewed drive on the part of providers to re-examine their financial assistance policies and their processes for identifying patients who may need assistance in paying their healthcare costs. Additionally, many healthcare organizations have revisited their chargemasters and pricing policies for uninsured and underinsured individuals. However, with federal legislation focusing on healthcare pricing for the uninsured being considered (not to mention several states’ moves in that direction), hospitals’ voluntary efforts in this regard may soon no longer be sufficient.
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