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National Park Medical Center on List For High Markups

4 min read

An official with National Park Medical Center in Hot Springs last week blasted a report that said the hospital had one of the highest price markups in the country.

National Park was ranked No. 15 on the list of hospitals that charged an average of more than 10 times the Medicare-allowed costs in 2012, and it was the only Arkansas in the 50 on the list. The average hospital charged 3.4 times the Medicare-allowable cost that year, according to a study of Medicare cost reports by Gerard Anderson of the Johns Hopkins Bloomberg School of Public Health of Baltimore and Ge Bai of Washington & Lee University of Lexington, Virginia. The report is in this month’s issue of Health Affairs, a peer-reviewed journal that covers health, health care and policy.

“There is no justification for these outrageous rates but no one tells hospitals they can’t charge them,” Anderson said in a news release. “For the most part, there is no regulation of hospital rates and there are no market forces that force hospitals to lower their rates. They charge these prices simply because they can.”

Bai told Arkansas Business that she would like to see state or federal officials legislate that no hospital can charge more than 300 percent of what Medicare would pay for a procedure. The charges weren’t likely to fall to the levels that Medicare allows unless the government steps in and passes laws to regulate the prices, Anderson said in the news release.

But Jerry Mabry, the president of the Arkansas market for Capella Healthcare of Franklin, Tennessee, which operates National Park, disagreed with the findings.

“It’s a new spin on an old story,” he told Arkansas Business.

He said the formula the researchers used — comparing charges to the cost to the hospital — “is completely flawed.” Mabry said the charges are actually a higher amount that no one pays. He said researchers should have zoomed in on the lower price that is actually paid after a number of discounts are applied.

“If you take payment levels and compare those to cost levels, then we’re right in the norm,” Mabry said.

Paul Cunningham, executive vice president of the Arkansas Hospital Association, said that the hospital pricing is complex, but agreed with Mabry that the payment level is what should be looked at.

“Most people agree, and have for a number of years, that charges are really meaningless,” he said. “You know right off you’re going to write off up to 50 percent or more of whatever you’re charging.”

The Uninsured

The researchers also agreed that many hospital patients don’t actually pay the full price that hospitals charge. But uninsured patients and those for whom National Park is an out-of-network provider are likely to be billed the higher-priced rate, the study said.

“Why would [hospitals] give discounts if they can just reduce the gross price in the first place?” Bai told Arkansas Business. “They expect some people to pay, clearly. Otherwise, why would they have the high price?”

Mabry said even uninsured patients and out-of-network patients at the 167-bed hospital don’t pay the full price; they automatically get a 60 percent discount.

“They can pay as low as zero percent based on economic circumstances of the patient,” Mabry said. “We wrote off $27 million last year, and those are uninsured discounts, uncompensated care or bad debt or charity care.”

For the fiscal year that ended Aug. 31, 2013, National Park had $87.3 million in net patient revenue and net income of $13.2 million, according to the latest Medicare cost report available to Arkansas Business. But Mabry said net income is before taxes, which the for-profit National Park has to pay. He said about half the net income went for taxes.

Reforming the System

Changing the billing system hospitals use wouldn’t be easy, Mabry said.

Mabry said it would be a “monumental” task to start off with a hospital bill at the price that reflects all the discounts.

“In order to change the methodology being used by hospitals for charge systems and costs systems and contractual systems, you’re essentially talking about national reform in the information databases with Medicare, with hospitals [and] with all of the other folks out there,” Mabry said.

Cunningham agreed that reforming the payment system for hospitals would be a huge undertaking.

“If they ever moved toward that, it’s not going to happen overnight,” he said.

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