Hospital Markup in Head and Neck Cancer Surgery in the US

Marked variation in hospital costs and payments is a target for health care reform efforts. Limited data exist to explain variability in prices for head and neck surgical procedures.

To characterize variations in hospital price markup for head and neck cancer surgery, and examine associations with market concentration and hospital for-profit status.

In this cross-sectional study, the Nationwide Inpatient Sample was used to identify 150 275 patients who underwent head and neck cancer surgery for a malignant upper aerodigestive tract neoplasm from 2001 to 2011. The markup ratio (charges to costs) was modeled as a continuous and categorical variable. Hospital market concentration was evaluated using a variable-radius Herfindahl-Hirschman Index from the 2000, 2003, 2006, and 2009 Hospital Market Structure files. Data were analyzed from May 2019 to July 2019.

Multivariable regression was used to evaluate associations between hospital and patient variables and hospital markup.

There were 150 275 patients (mean [SD] age, 61.8 [12.6] years; 104 974 [70.0%] male) from 2001 to 2011 for whom hospital market information was available. Hospital markup ratios ranged from 0.8 to 8.7, with a mean markup ratio of 2.8 (95% CI, 2.7-2.9). Hospitals in the lowest markup ratio quartile had a mean markup ratio of 1.8 (95% CI, 1.8-1.9), while hospitals in the top markup ratio quartile (extreme markup) had a mean markup ratio of 4.1 (95% CI, 4.0-4.2). Extreme markup hospitals were more often large (77.5% vs 66.6%), private for-profit hospitals (19.0% vs 1.3%), and were less likely to be high-volume hospitals (21.0% vs 9.4%) or in competitive markets (64.4% vs 82.0%). Postoperative complications occurred more often in extreme markup hospitals (22.7% vs 17.1%). On multivariate analysis, a significantly higher markup was associated with private, for-profit hospitals (47.9%; 95% CI, 33.3%-64.2%), hospitals in the West (25.5%; 95% CI, 12.6%-39.8%), Hispanic race (9.8%; 95% CI, 4.4%-15.5%), prior radiation therapy (5.3%; 95% CI, 1.3%-9.4%), comorbidity (3.5%; 95% CI, 1.7%-5.4%), and complications (2.8%; 95% CI, 0.3%-5.4%). Hospital market concentration modified the association between hospital for-profit status and markup, with higher markups in for-profit hospitals in moderately concentrated and concentrated (less competitive) markets.

In this cross-sectional study, there was wide variation in hospital markup for head and neck cancer surgery, with a 4-fold increase in charges relative to costs in 25% of hospitals. Variations in surgical price were primarily associated with hospital profit status. These data suggest that greater transparency is needed to address disparities in hospital pricing.