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‘Outright Price Gouging’: Outpatient Cancer Care Costs Vary Wildly

By Jack O'Brien  
   February 20, 2018

A recent data analysis of more than 3,000 hospitals found that chemo infusion and radiation treatment often cost between twofold and sixfold above what Medicare pays. 

Large-scale medical centers have inflated outpatient oncology treatment costs substantially above what Medicare typically pays, and their markups vary wildly, according to an American Journal of Managed Care (AJMC) report released over the weekend.

AJMC investigated the widespread practice by prestigious medical institutions of marking up oncology treatment prices at the financial detriment of patients paying out-of-pocket or with private health insurance.

The study reviewed billing records from more than 3,000 hospitals in 2014 to calculate a markup ratio compared to the Medicare allowable amount. The ratio was based against every $100 spent by Medicare for the same specialty service.

Of the data collected at nonprofit medical centers, pathology had the highest ratio at 4.1:1, or a markup of $310, followed by radiology and radiation oncology at 3.7:1 and 3.6:1, respectively. Due to these markup prices and specialty services, the study estimates cancer treatment costs can vary from $50,000 to $500,000.

“Unwarranted price markups contribute to the skyrocketing cost of health insurance and out-of-pocket costs to patients,” said Martin Makary, MD, MPH, the paper’s senior author who also serves as a cancer surgeon and professor of health policy at the Johns Hopkins University School of Medicine. “We found some cancer centers bill fairly while others engage in outright price gouging of insurers, patients and their employers. Hospital differences in quality or charity care do not account for these dramatic price differences.”

Large-scale hospitals “use higher chargemaster pricing to ‘anchor’ negotiations and gain higher reimbursement from insurers,” the AJMC report states. This pervasive activity ultimately leads to higher out-of-pocket healthcare costs for patients and affects their decision-making process when seeking treatment, according to the authors.

A growing trend of markup prices has been further compounded by narrower insurance network options and high deductibles faced by consumers, according to the report. As many as 8% of patients see out-of-network oncology specialists, facing them with significantly higher treatment costs.

The authors stated that, in their opinion, it is “unethical” for nonprofit health systems to put cancer patients into “household bankruptcy” due to overinflated costs above the Medicare allowable amount. The study’s authors called for transparent pricing legislation to ensure protections for cancer patients seeking treatment.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

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