The Labor Department announced Wednesday that inflation rose by 8.3 percent over the last year, hovering near a 41-year high. American hospitals are reportedly looking to increase their prices by up to 15 percent, in line with historical trends that have seen them raise rates by roughly double the prevailing inflation rate.
Hospital prices are already outrageous, regularly throwing patients into bankruptcy and financial ruin. Significantly increasing hospitals’ prices and negotiated rates will further burden healthcare consumers – including patients, employers, and unions – contending with broader economic instability.
Higher hospital prices also punish workers who experience higher healthcare premiums. They suppress and even lower real wages as employers are forced to pass along these increased coverage costs. Karen van Caulil, CEO of an employer healthcare coalition in Florida, told the Wall Street Journal: “Most of the employers have been unable to increase the wages of their workers for years primarily because of the increasing cost of healthcare.” This wage suppression comes at the worst possible time as inflation devalues workers’ paychecks.
Hospitals are justifying their higher prices by pointing to higher salaries for nurses. But this math doesn’t add up. Hospitals charge on average seven times their cost of care. Leaked hospital pricing data published in the Los Angeles Times revealed that area hospitals automatically applied a 675 percent markup to their expenses.
Nurses’ salaries only make up around 25 percent to 30 percent of hospitals’ costs. And their base pay increased by 9 percent over the last year. Even if the nurses’ compensation is (deservedly) rising in line with broader inflation, that’s no justification to significantly increase hospital prices. Hospitals are using nurses as a Trojan horse to further gouge American healthcare consumers and increase their already outrageous hidden markups.
Some hospitals claim “transparency” demonstrates that pricing is competitive. This rhetoric doesn’t reflect reality, as shown in a recent study by PatientRightsAdvocate.org which looked at how hospitals nationwide are complying with a federal hospital price transparency rule that took effect on Jan. 1, 2021. The order requires hospitals to publish their actual prices, including discounted cash and all negotiated insurance rates by payer and plan.
This information is necessary for consumers to identify high-quality, less expensive care and reduce hospital overcharging through choice and competition. Actual prices prevent hospital upcoding, erroneous billing, and financial fraud. They are needed to determine whether HCA’s rates are genuinely competitive as the company claims.
Consider the innovative employers across the country who have accessed real prices and saved 30 percent to 50 percent on their healthcare costs by steering their employees to price-transparent, less-expensive alternatives. These employers are sharing their savings with employees in the form of lower premiums and higher wages.
For instance, the Osceola School District in Central Florida has reduced its annual healthcare claims costs by nearly 30 percent, from $ 60 million to $ 44 million, in just two years by partnering with price transparent providers. These savings have resulted in teacher pay increases and more money for classrooms. When all hospitals comply with the law and post their real prices, many more employers can follow this district’s lead.
Hospitals fiercely resist posting actual prices because that would give their game away. Only by keeping patients in the dark can they get away with rampant price gouging. That’s why hospitals sued in district and appeals courts and heavily lobbied in a desperate attempt to block the price transparency rule. And that’s why they’re willfully breaking the law by refusing to comply with it today.
Before any hospital raises its prices, it should actually become compliant with the price transparency law. When consumers can access real rates, they can punish price hikes in the same way they do companies that raise prices in the rest of the economy: by taking their business elsewhere. Consumer empowerment and price transparent, competitive markets are the best way to reduce runaway prices in every area of the economy, especially in healthcare.
Cynthia A. Fisher is founder and chair of PatientRightsAdvocate.org