Investigation Finds Gap Between Hospital Expenditures, Billing
Between September 2008 and October 2009, California hospitals charged health insurers an average of 53% more than the amount they reported that it cost them to provide services to insured patients, according to a Sacramento Bee investigation.
State law requires California hospitals to submit annual reports to the Office of Statewide Health Planning and Development on:
- The amount they spent to provide medical services to insured patients;
- The amount they billed insurance companies; and
- The total amount they collected from insurers.
For the investigation, the Bee analyzed data that 300 California hospitals submitted to OSHPD between September 2008 and October 2009. Investigators calculated the difference between the amount that hospitals said they charged insurers and the amount they said it cost them to provide services.
The Bee found that the 300 hospitals collected a total of $25 billion from health insurers between September 2008 and October 2009, an increase of more than a third since 2005.
The investigation also found that hospitals charged insurers an average of 53% more than their reported service costs, up from a 40% gap in 2005.
In addition, the Bee found large variations in the gap among different hospitals and hospital systems. During the study period, investigators found that the difference between the amount charged and the amount spent was:
- 127% at Sutter Medical Center;
- 57% at UC-Davis Medical Center; and
- 35% at Kindred Hospital in Folsom.
Possible Effects of Rising Costs
The rise in hospital costs might be contributing to recent increases in health insurance premiums, the Bee reports.
Hospitals and insurers directly negotiate discounted rates, and hospitals have different price structures for each insurance network they join.
According to the Bee, hospitals could be charging insurers for capital improvements, new technology and other expenses not directly related to care. Such costs eventually could get passed along to consumers in the form of higher premiums.
Efforts To Increase Access to Pricing Data
Last year, the California Medical Association and the California Hospital Association helped defeat a bill (SB 196) that aimed to provide consumers with more access to medical cost information. The measure would have barred hospitals and physicians from prohibiting insurers to reveal their pricing information to consumers.
Last month, lawmakers introduced a similar bill (AB 2389). The Assembly Health Committee is scheduled to consider the new measure in May.
Jan Emerson, a spokesperson for the California Hospital Association, said hospitals already comply with state regulations that require them to furnish price information upon request (Caina Calvan/Reese, Sacramento Bee, 4/18).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.