It’s the Money Stupid: Hospitals Cost to Charge Ratio

Health Affairs studied the cost to charge ratio in U.S. hospitals.  They found:

the average ratio of hospital charges for services (gross revenues) to payments received (net revenues) has grown from 1.1 to 2.6. This reflects a transition from predominantly cost- and charge-based payment systems to regulated and negotiated fixed payments. Hospitals have been able to squeeze additional revenues from remaining charge-based payers and services by sharply increasing charges, negatively affecting the uninsured.

Note that in the U.S. those least able to pay, i.e. those without health insurance are charge more, many times more in some instances, than those with insurance.

While most public and private health insurers do not use hospital charges to set their payment rates, uninsured patients are commonly asked to pay the full charges, and out-of-network patients and casualty and workers’ compensation insurers are often expected to pay a large portion of the full charges. Because it is difficult for patients to compare prices, market forces fail to constrain hospital charges.

The Washington Posts lists the hospitals and discusses the issue:

All but one of the facilities are owned by for-profit entities and the largest number of hospitals — 20 — are in Florida.


Understanding hospital pricing and charges is one of the most frustrating experiences for consumers and health-care professionals. It is virtually impossible to find out ahead of time from the hospital how much a procedure or stay is going to cost. Once the bill arrives, many consumers have difficulty deciphering it.

Medicynical Note:  Our money driven non-system of health care emphasizes revenue over health care quality, efficiency and value.  Overcharging patients is the norm and frankly the daily goal of hospital CFO’s.  Hiding the cost until the presentation of the bill is a little like the Mad Magazine cartoon from the fifties…Great Moments in Medicine.  While satire, it does represent the reality of American health care today. 



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