Hospitals still using chargemaster markups to improve revenue

Editor's Note

Since Medicare adopted its prospective payment system in 1985, many hospital executives and economists have suggested that the hospital chargemaster (list of prices for all hospital procedures and supplies) is irrelevant. However, in this study, researchers found that hospitals are systematically adjusting their charge-to-cost ratios (ie, chargemaster price divided by Medicare-allowable cost) to increase their patient care revenue.

The average ratio ranged from 1.8 to 28.5 across patient care departments, and for-profit hospitals had a 2.30 and 2.07 higher charge-to-cost ratio than government and nonprofit hospitals, respectively.

The authors note that policy makers might consider developing policy tools that improve markup transparency to protect patients from unexpectedly high charges for specific services.

1Ge Bai (gbai{at}jhu.edu ) is an assistant professor in the Johns Hopkins Carey Business School, in Baltimore, Maryland. 2Gerard F. Anderson is a professor in the Department of Health Policy and Management and the Department of International Health at the Johns Hopkins Bloomberg School of Public Health, in Baltimore.