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School Study: Public Outcry Over Huge Markups Some Hospitals Charge Patients Results in No Charge Reduction

October 04, 2016
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Widespread publicity that revealed the names of 20 Florida hospitals that markup patient charges by more 1,000% above costs did not lead to lower charges according to a study just released by the School’s Department of Health Sector Management and Policy. In fact, the study, published in the Journal of Health Care Finance, found those hospitals continued to increase their charges after they were named.

The Florida hospitals were among 50 U.S. hospitals found to have the highest markup of charges - markups averaging more than 10 times their cost – in research released nationally in mid-2015. Those findings received widespread media coverage and public scrutiny. This new University of Miami study compared the charges at the 20 Florida hospitals in the quarter one year before the media publicity to the charges in the same quarter following the publicity. The analysis found no evidence that the hospitals responded to the negative publicity with a reduction in charges. Rather, the study found, charges were significantly higher after the publicity than in previous quarters.

“As hospital charges continue to rise and the best answer to price transparency eludes policy makers and stakeholders, it is important to recognize that hospitals may not respond quickly to public exposure and these initiatives,” said Karoline Mortensen, associate professor of health sector management and policy at the School. “Perhaps the way to move the needle on this issue must include regular, public, transparent hospital check-ups over longer periods of time,” added Mortensen, who conducted the study with the School’s Steven Ullmann and Michael French, as well Tianyan Hu at Florida International University.

In addition to looking at charging behavior surrounding the 2015 report, the School of Business study analyzed other aspects of Florida’s highest cost-to-charge hospitals and found:

  • All are for-profits: The hospitals are geographically dispersed but belong to one of two for-profit health systems - 70 percent are part of the HCA health system, the largest health system in the state; 30 percent are affiliated with Community Health Systems. Only 1 of the 20 is a non-profit hospital. 
  • All are in urban areas: All 20 hospitals are affiliated with a health system located in urban areas, as are 88 percent of the other hospitals in the state. 
  • All but one received low quality ratings: Only one hospital received three or more quality stars, compared to 52 percent of the other hospitals in the state.
  • All are high-charge hospitals overall: These hospitals are not only high charge-to-cost hospitals, but also high charge hospitals in general.

“Patients might assume that paying more for hospital services at a higher markup indicates they would be getting better care,” said Mortensen. “Our research indicates that is not necessarily the case.” 

The University of Miami study can be found at: http://www.healthfinancejournal.com/~junland/index.php/johcf/article/view/93

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