An analysis of recent Medicare billing records for more than 3,000 hospitals across the United States shows that charges for outpatient oncology services such as chemo infusion and radiation treatment vary widely and exceed what Medicare will pay by twofold to sixfold.
A report of the findings, published in the American Journal of Managed Care on Feb. 17, emphasizes the need for fair and transparent pricing of cancer-related medical services to protect patients from unpredictable financial burdens at a time when they are most vulnerable, according to researchers who conducted the analysis.
"Unwarranted price markups contribute to the skyrocketing cost of health insurance and out-of-pocket costs to patients," says Martin Makary, a cancer surgeon and professor of health policy at the Johns Hopkins University School of Medicine, and the paper's senior author. "We found some cancer centers bill fairly while others engage in outright price gouging of insurers, patients, and their employers. Hospital differences in quality or charity care do not account for these dramatic price differences."
For the study, Makary—who has published extensive research focused on health care costs and vulnerable populations—and his team obtained all Medicare billing records for 3,428 hospitals from all 50 states in 2014. They used the records to determine how much hospitals and their various departments that offer cancer-related outpatient services billed for those services compared with the Medicare allowable amount, the set amount Medicare will pay for a specific service.
For each oncology specialty service within a hospital, the researchers calculated a markup ratio, defined as the ratio of the billed charges relative to the Medicare allowable amount. For example, a markup ratio of 4.0 means that for a service with a Medicare allowable amount of $1,000, the hospital charged $4,000, or 300 percent over the Medicare allowable amount. Services included lab tests, PET scans, and chemo infusion and radiation services.
The research team found that of the 3,428 hospitals, specialty departments charged anywhere from a middle range of 2.4 to 4.1 times more than what Medicare paid for those services.
By that measure, radiology departments treating cancer patients charged an excess of 3.7 times more for services; hematology/oncology 2.3 times more; medical oncology 2.4 times more; pathology 4.1 more; and radiation oncology 3.6 times more.
"Cancer patients shouldn't be put into household bankruptcy just because a hospital inflates a bill well above what an insurance company would pay for the exact same service," Makary says.
"While Medicare is not the gold standard, it's a benchmark of the varying degrees of markups occurring in the market. More price transparency is needed to end the most egregious price gouging practices and ensure that cancer centers fulfill their moral and not-for-profit mission to communities."
Cancer care can cost $50,000–$500,000, depending on the services rendered and their local markup rates.
"The victims of price variation are the out-of-network patients who do not realize they are paying double, triple, or quadruple what insurers pay for the identical services," Makaray adds.
Other authors on this paper include Tim Xu, Michael Poku, Angela Park and James Taylor of the Johns Hopkins University School of Medicine.