California hospitals levy charges by more than five times above their costs, a substantial driver of the growing health care crisis for patients and families, according to a new study from National Nurses United.

The Covid-19 pandemic, which continues to surge, and the uncertainty of the Supreme Court decision on overturning the Affordable Care Act exacerbate the harmful impact of hospital pricing practices to patients.

Nationally, U.S. hospitals average $417 for every $100 of their costs, a markup that has more than doubled over the past 20 years. California’s average 506 percent charge-to-cost ratio means that California hospitals on average charge $506 for every $100 of their costs. The full study, based on Medicare cost reports for 4,203 hospitals in fiscal year 2018.

“Nurses see the direct consequence of skyrocketing costs,” said NNU and California Nurses Association President Zenei Cortez, RN. “We see the patients and families who are unable to afford the high prices, who skip needed medical care, even lifesaving treatment, due to the high costs, or endure financial ruin due to the high prices.”

Surveys have found that 78 percent of adults have avoided hospital visits and 51 percent have skipped medical care due to the cost, and four in 10 adults have been unable to pay a medical bill. Last year, 137.1 million people in the United States reported struggling with medical debt.

High hospital charges also drive up Covid-19 treatment costs. One study found that average charges for a Covid-19 patient requiring an inpatient stay can range from $42,486 with no or few complications to $74,310 with major complications.

A Commonwealth Fund survey found that 68 percent of respondents said that “potential out-of-pocket costs would be very or somewhat important in their decision to seek care if they had symptoms of the coronavirus.”

If the ACA is thrown out by the Supreme Court, the 23 million people in the United States who either buy insurance through the ACA exchanges or are covered by the expansion of Medicaid would lose coverage, the New York Times recently reported.

Further, as many as 133 million people under age 65 who have preexisting conditions, plus the 11 million people, and counting, infected by Covid-19, would all once again be subject to insurance denial for coverage, and higher out-of-pocket costs.

The rise in charges coincides with growing hospital mergers and acquisitions by large systems. The result is increased market concentration, which facilitates their ability to demand higher payments from insurance companies, not savings for patients as hospital systems often claim.

A recent study comparing Northern California, which has a more concentrated market, to the less concentrated Southern California region found that Northern California hospital prices were 70 percent higher for inpatient care and 17 to 55 percent higher for outpatient services.

In some cases, the NNU study notes, hospital systems have used their market power to raise prices to a degree that violates antitrust laws. In 2019, for example, Sutter Health in Northern California was sued by the state attorney general for illegally using its market dominance to stifle competition and drive up prices for its medical services. In the end, Sutter agreed to end its most anti-competitive practices and paid $575 million to settle the case.

High charges – a direct impact on patients

Hospitals sometimes maintain that the charge master price, essentially a list price to bargain over reimbursements from insurers, does not reflect how much insurers actually pay.

However, a 2017 study found that for each additional dollar increase in a list price, insurers paid an additional 15 cents to hospitals. Hospital executives have conceded that the goal of the charge master is profitability. And when insurers pay more, their cost generally is passed along to employers, their workers, or individual patients in higher premiums, deductibles, and co-pays.

Uninsured patients have the least negotiating power when slammed with the full charge, a major reason why medical bills have sparked a huge leap in medical debt lawsuits. Once the hospitals win a favorable court judgment, they often file liens against patients’ homes, or garnish their bank accounts or wages. Increasingly, hospitals sell the debt to bill collectors who hound patients, yet another reason medical debt is a leading cause of personal bankruptcy.
As in so many other areas of society, there is a racial disparity in the impact of the high charges. In 2019, Latinx and Indigenous people were three times, and Black people nearly twice, as likely to be uninsured as white people. Similarly, 19 percent in communities of color compared to 15 percent for whites had medical debt in collections.

Hospital partnerships with other health care industry sectors, such as physician staffing firms, result in surprise “out-of-network” medical bills, and supplemental charges such as “trauma” or “facility” fees, which intensify the crisis for patients.

Zuckerberg San Francisco General Hospital has nearly doubled its facility fees over the last 10 years. In 2010, the emergency room fees at the hospital ranged from $287 to $6,118. In 2019 the fees ran as high as $11,958, more than double the average amount charged by other San Francisco hospitals. Zuckerberg General has also taken advantage of excessively high trauma fees. In 2016, the hospital charged a couple $15,666 in trauma fees for an ER visit that included no tests beyond a basic examination by a physician, which found the patient to be in good health. The national average for trauma fees was $3,968 at the time.

While some hospitals claim they will lower charges for some patients, or mitigate the burden through charity care, hospitals have steadily reduced the amounts of financial assistance and charity care offered to patients around the country. California hospitals have for years fought legislative efforts to hold them more accountable in the provision of charity care.

Medicare is the most effective system at limiting price gouging through its bulk purchasing power to set the price it will pay. “The most viable solution to slowing the growth in hospital charges and the continued inflation of hospital prices, is to bring all health care purchasers together, under a public, nationwide single-payer plan,” the report notes.

“Nurses understand the best protection for our patients is through Medicare for All, as other countries have proven,” said Cortez. “Medicare for All will ensure coverage for every person in the United States, end medical bankruptcies, medical debt lawsuits, and the health insecurity faced by our patients who make painful choices regularly about whether to get the care they desperately need.”