Here are three things to know about Sen. Murphy’s comments.
1. Sen. Murphy, who serves on the Senate’s Health, Education, Labor and Pensions Committee, made his comments in a letter he sent July 27 to CEOs at the 50 hospitals or their corporate parents, according to the report.
That group included four hospitals in Alabama, California and Pennsylvania owned by Dallas-based Tenet Healthcare.
2. In the letter, Sen. Murphy told CEOs that he was reacting to an “alarming” study published in Health Affairs, according to the report. For the study, two researchers used Medicare cost reports to find the 50 U.S. hospitals with the largest difference between charges and Medicare-allowable cost in 2012. Researchers found that on average, hospital charges were 3.4 times the Medicare-allowable cost in 2012. This means when the hospital incurred $100 in cost, it charged $340. This markup has increased over time. In 1984, the average charge-to-cost ratio was 1.35, for instance. In 2004, it was 3.07.
“I understand that the healthcare industry is changing as reimbursements shift toward value-based care instead of volume, but charging a 1,000 percent markup to some of the most vulnerable patients defies logic,” the senator wrote, according to The Bristol Press. “Simply put, how can your hospital justify charging rates so high when other hospitals offer charity care but have lower markups?”
3. Sen. Murphy also said in the letter that since all but one of the 50 hospitals — or the hospital chains that own them — are for-profit institutions, their practice of inflating charges raises important questions about the different pricing practices at investor-owned hospitals and nonprofit hospitals, according to the report.
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