Americans Can’t Do 'Hospital-Owned' Scam Any Longer

We’ve never liked the idea, but we’ve always accepted that hospitals tend to overcharge for the things they sell that are outside their core businesses.

We understand that the hospital pharmacy will cost a little more because it provides convenience and allows patients to avoid making another stop at a standalone pharmacy. We don’t look for bargains in the hospital restaurant, but we understand the extra profits from these types of offerings help underwrite patients who can’t pay and other expenses.

The problem is that the government via Medicare and Medicaid also underwrites many of the services provided at or by hospitals, and hospitals are taking advantage of this … by buying medical practices and raising their prices to the higher hospital rate. 

Hospital systems are buying physicians’ practices and turning them into It’s become all-too-common for hospital systems to buy up physician practices and turn them into “hospital outpatient facilities.” We may not notice any difference in service – we continue to visit the same doctor in the same office. Only now we’re paying premium prices like we do at the hospital pharmacy and cafeteria. 

Many times, hospitals simply reclassify their neighborhood doctors’ offices as hospital-based settings in order to collect higher fees. 

At least on the pharmacy issue, most of us return to our neighborhood pharmacies after that initial hospital-filled prescription. But if we go back to the neighborhood chemotherapy or pre-natal care facility, we frequently find it has been purchased by a hospital and now charges those higher hospital rates.

Today, more than half of America’s physicians are employed by hospitals and health systems, and when physician practices are bought out by hospitals, prices increase by more than 14%. 

Worse, services that used to be accessible on an outpatient basis are more frequently being done in hospitals. Medicare patients’ use of non-hospital sources for chemotherapy declined by 14% from 2015 to 2021, and chemotherapy performed in hospitals increased by 21%, which means more than half of Medicare chemotherapy patients now receive their treatments in hospitals, where the prices are higher for no reason other than that’s what hospital pricing dictates. 

And it’s not just with chemotherapy patients. Nuclear cardiology, echocardiography and even routine office visits now are increasingly being paid out at higher hospital rates. These hikes are often substantial for even fairly common procedures – from $164 to $339 for the average ultrasound, $146 to $791 for a biopsy and $118 to $186 for a regular office visit.

What the government has done by agreeing to make substantially higher payments for healthcare performed in hospitals as opposed to that in outpatient facilities or physician’s practice is to incentivize hospitals to buy up outpatient facilities and medical practices. Further, no one but the hospitals themselves seems to think this is a good idea.

This is not a small problem. More than 100 million Americans say they have medical debt. Three-fifths of them say it is from a lab fee or diagnostic test – the very kinds of medical procedures that could be done outside hospitals and billed at the lower out-of-hospital rates. 

At the end of 2023, the House of Representatives passed a large package of health care reforms by a vote of 320-71. Included in the package were provisions to “equalize payment between hospital outpatient departments and doctors’ offices for administering medicines in Medicare, rein in some practices by pharmacy benefit managers, and codify health care price transparency rules.” This popular legislation sits in the U.S. Senate awaiting action.

It’s time for legislation that says Medicare and Medicaid – as well as private insurers and patients themselves – will pay the same amount for services regardless of whether they are covered in a hospital. A recent letter coordinated by Americans for Prosperity on this issue attracted signatures from across the ideological divide.

The Texas Public Policy Foundation, the Goldwater Institute, the John Locke Foundation, and others signed on in support of this measure. 

Congress is looking for measures that make it look effective and efficient. The budget negotiations ongoing now and in the future highlight the importance of saving money where we can. Here’s an idea that draws support from all quarters, would benefit all Americans and would reduce medical costs for all patients. 

Let’s not wait. Let’s end the hospitals-get-to-charge-extra phenomenon now. 

Brian McNicoll is a conservative columnist and freelance writer based in Alexandria, Va. He is a former senior writer for the Heritage Foundation and former director of communications for the House Committee on Oversight and Government Reform.