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Related Experiment Videos

The precarious pricing system for hospital services.

Christopher P Tompkins1, Stuart H Altman, Efrat Eilat

  • 1Schneider Institute for Health Policy, Heller School for Social Policy and Management, Brandeis University, Waltham, MA, USA. tompkins@brandeis.edu

Health Affairs (Project Hope)
|January 13, 2006
PubMed
Summary

Hospital charges have significantly increased relative to payments received over 25 years, impacting uninsured patients. This shift reflects changes in healthcare payment systems and pricing strategies.

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Area of Science:

  • Health Economics
  • Healthcare Management
  • Public Health Policy

Background:

  • The ratio of hospital gross revenues to net revenues has risen from 1.1 to 2.6 over 25 years.
  • This trend indicates a shift from cost- and charge-based to fixed payment systems.
  • Hospitals have increased charges to compensate for changes in payment structures.

Purpose of the Study:

  • To analyze the evolution of hospital revenue ratios over the past 25 years.
  • To understand the impact of changing payment systems on hospital pricing.
  • To examine the consequences for vulnerable patient populations, particularly the uninsured.

Main Methods:

  • Analysis of historical hospital financial data (gross vs. net revenues).
  • Examination of trends in healthcare payment systems (cost-based, charge-based, fixed payments).

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  • Assessment of hospital pricing strategies and their effects on different payer groups.

    • Main Results:

    • The average hospital charge-to-payment ratio has surged from 1.1 to 2.6 in 25 years.
    • Sharp increases in charges have been used to generate revenue from remaining charge-based payers.
    • This practice disproportionately burdens uninsured individuals.

    Conclusions:

    • The changing landscape of healthcare payments has led to increased hospital charges.
    • Protecting the uninsured from inflated pricing requires careful consideration of regulatory approaches.
    • Hospital pricing regulation is complex and intertwined with issues like cross-subsidies and market forces.