Over the last ten years, healthcare costs for employers have continued to skyrocket. When AMPS looked at data over the last decade, we found that hospitals are charging 5, 6, 7 times more than they were charging ten years ago.
This drastic increase in billed charges must be at least partially due to hospitals’ cost of doing business increasing, right?
AMPS looked at cost data from the 5,500 or so hospitals in the country over the last ten years and found that a hospital’s cost of doing business has remained amazingly flat. The cost of doing business today at most hospitals is the same as it was ten years ago… sometimes even lower.
Hospitals are playing the Chargemaster game.
Chargemasters list the thousands of hospital procedures, services, medications, evaluations, equipment and drug supplies on one major list. Each item is given a code and a price. Each hospital has its own chargemaster—no two are the same.
When a patient goes to the hospital, each service, procedure or medication’s code is used to generate the patient’s bill. Hospitals aren’t under the pressures of the free market. They can price services and procedures however they wish, and they can make changes to the chargemaster as they see fit.
As PPOs put pressure on a hospital to reduce their costs or provide bigger discounts, the hospitals simply adjust the Chargemaster relative to what they want to yield at the end of the day. Sure, a hospital will gladly give you a 50% discount… just don’t ask off of what.
As a result, employers are getting bigger and bigger discounts, yet healthcare costs keep going through the roof for employers, year after year.
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