NC hospitals inflate prices and lack transparency, says new state health plan report

Some North Carolina hospitals are inflating the prices for health care services and failing to meet federal price transparency laws, according to a new report from Johns Hopkins.

State health plan representatives, led by Republican treasurer Dale Folwell, contacted researchers from the Johns Hopkins Bloomberg School of Public Health, one of the nation’s top public health schools, to initiate the investigation, which was published Monday. Researchers analyzed the prices of 16 services for 140 hospitals in North Carolina. Services included mammographies, colonoscopies and more.

Here’s a look at some of the top-line findings from this report:

Inflated pricing

Under current federal rules that started on January 1, 2021, hospitals must publicly post the price for all the services they offer and provide patients with an out-of-pocket cost estimator tool or payer-specific negotiated rates for at least 300 services.

The prices posted must include those negotiated with insurers, whether through commercial or government programs, and what they charge cash-paying customers. Medicare payment rates for services are set by the government, while commercial insurers negotiate prices with providers.

Using data compiled under this federal rule by the Turquoise Health Database, the Johns Hopkins report found that North Carolina hospitals levy price markups of up to 1,120% on routine care and basic services. This markup is the difference between the most and least affordable group of hospital prices.

North Carolina hospitals also inflated median commercial prices by more than 700% of Medicare rates for some common services, according to the report. For example, the median price of a complete blood test costs just over $58 with commercial insurance and $6.79 with Medicare Advantage, the report says.

Some of the highest markups between commercial and Medicare rates were for radiological services such as computed tomography (CT) scans and magnetic resonance imaging (MRI) scans, according to the report. The median commercial price for an MRI scan was $2522 while the median Medicare price was $368.76. The median cash price was $2,304.50.

Hospitals also charged uninsured patients, or those paying cash, more than 150% of Medicare rates.

Lack of transparency

Noncompliance with federal price transparency rules in North Carolina was common, with an average disclosure rate of 51% for commercial negotiated rates and 42% for cash prices, according to the report.

Only five hospitals disclosed commercially negotiated rates for all 16 services, and just one hospital disclosed cash prices for all 16 services, the report says. The federal transparency rules passed during the Trump administration and reinforced by the Biden administration allow the federal government to monitor hospitals’ noncompliance, issue warnings, impose penalties and more. To date, 14 hospitals across the nation have received monetary penalties, all in the millions of dollars.

Despite this, many hospitals are not in compliance. A 2023 report by Patient Rights Advocate, a non-profit health advocacy organization, found that only 24.5% of 2,000 hospitals it reviewed across the nation were fully complying with the hospital transparency rule.

Meanwhile, a KFF analysis found that transparency data shared by hospitals “are messy, inconsistent and confusing, making it challenging, if not impossible, for patients or researchers to use them to compare prices across hospitals or payers.”

Policy issues

Price disparities can be fixed with policy provisions, such as limiting hospital consolidation so that patients have more options, and “certificate of need” law reform, the report suggests. CON laws place limits on what hospitals, clinics and other health care facilities can be built across the state.

This year, under the state’s Medicaid expansion deal signed into law in late March, top lawmakers in the House and Senate agreed to allow construction or expansion of certain facilities without a certificate of need from the state Department of Health and Human Services. The facilities would include those that provide inpatient treatment of behavioral health problems and chemical dependence, as previously reported by The News & Observer. Detractors of CON say it increases costs and artificially reduces the availability of health care, while those in favor, including hospitals, say it helps keep costs down by limiting expensive projects.

In terms of transparency, the report suggests lawmakers require large providers to post price information, as stipulated in the De-Weaponization Act, which is stuck in the House, and is frequently pushed for by Folwell, who is running for governor in 2024. Folwell has consistently criticized hospitals and their practices, including recently for their medical debt collection practices.