Since the hospital chargemaster data became published online over the past few years, hospital executives and economists suggested they aren't representative of hospital prices and are "irrelevant," according to a Health Affairs article. The article authors gathered data 2013 Medicare to examine trends, showing hospitals do consider chargemaster price "an important way to enhance revenue."
The study authors found:
1. A one-unit increase in the charge-to-cost ratio is associated with higher patient care revenue per adjusted discharge. The charge-to-cost ratio is the chargemaster price divided by Medicare-allowable cost, and the one-unit increase was linked to $64 higher patient care revenue per adjusted discharge, according to the report.
2. Hospitals systematically adjust the charge-to-cost ratios, according to the report. Average ratios across patient care departments were 1.8 to 28.5.
3. For-profit hospitals reported a charge-to-cost ratio at 2.3 higher than the non-profit hospitals and 2.07 higher than the government hospitals. The average charge-to-cost ratio for each type of hospital in 2013 was:
• Government: 3.47
• Nonprofit: 3.79
• For profit: 6.31
4. The hospitals with more of their patients uninsured reported an average 4.91 ratio, compared with a ratio of 2.71 for hospitals with the low or median proportion of uninsured.
5. The hospitals that were affiliated with health systems reported a 4.76 average ratio, higher than independent hospitals, which reported a 3.54 ratio.
6. When the hospital had regional power, the ratio was 4.56, compared with 4.16 for hospitals that didn't have regional power.
7. There was correlation between the charge-to-cost ratio and these factors:
• Uninsured patients
• Hospital system affiliation
• Regional power
8. The study authors suggest policy makers "consider developing additional policy tools that improve markup transparency to protect patients from unexpectedly high charges for specific services." The results suggested hospitals use mark ups to maximize revenue, according to the report.