America’s “best” hospitals charge high drug price markups
A new rule from the Centers for Medicare and Medicaid Services (CMS), which went into effect January 1, 2021, requires hospitals to publish their payer-negotiated prices for all items and services. Before this rule, the prices that hospitals negotiated with insurers were kept secret. Although not all hospitals are complying with the rule, the data we do have shows that hospital prices can be even extremely variable and arbitrary. For example, one woman’s radiation treatment for cervical cancer cost her $2,728 with insurance, but she could have paid $1,651 if she had a different insurer.
As hospitals’ insurer-negotiated prices have become more visible over the past year, researchers have been able to use this data to compare prices for certain services, not only among hospitals but among insurers within the same hospital. In a recent article in JAMA Internal Medicine, researchers at the Harvard Medical School looked at what the 20 top hospitals on the US News & World Report ranking charged for ten high-cost drugs delivered in hospitals. Most of these infusion medications are for cancer or autoimmune diseases.
They found that some of these hospitals typically charged two or three times what Medicare paid for the drugs examined. Rush University Medical Center charged the least for these drugs, with their median price 69% more than Medicare’s payment limit. At the other end of the price spectrum, Mayo Clinic Hospital-Arizona typically charged 244% more than what Medicare would pay.
However, the prices for these drugs within hospitals also varied widely. For cancer drug Keytruda, patients at the Cleveland Clinic could pay as low as 100% of Medicare’s payment limit, or more than 400%, depending on their insurance. For immunosuppressive drug Remicade, prices at the University of Michigan Health System ranged from 100% of Medicare’s payment limit to nearly 900%, depending on the insurer.
Interestingly, the price for patients using cash rather than insurance for Remicade at the University of Michigan was actually much lower than the price that many of the insurers negotiated. However, that’s not always the case. At Massachusetts General Hospital and Brigham and Women’s Hospital, patients using cash rather than insurance typically paid about 300% of what Medicare paid, compared to about for patients with commercial insurance who paid about 200% what Medicare paid.
Having these negotiated prices publicly available is extremely helpful for patients and policymakers to understand how the market for infusion drugs works (or rather, doesn’t work…) However, compliance with the rule is still a huge issue for transparency. The authors of the JAMA Internal Medicine study note that only five of the 20 US News hospitals had insurer-negotiated prices available for all of the ten drugs examined. Nine hospitals did not have insurer-negotiated prices for any of the ten drugs. And these aren’t random drugs — they’re the drugs that Medicare Part B spends the most money on each year. For this data to be most useful, hospitals — particularly large wealthy hospitals with the resources to gather these data — need to comply with the rule.