By Tara Fugate
MNA Strategic Researcher
Minnesota hospital charges are rising and have been for decades, but the difference between what hospitals charge patients and the amount hospitals need to deliver care is not often discussed. How much does it actually cost hospitals to provide care? The answer is: it varies. However, one thing is consistent across the state, every hospital included in a recent National Nurses United and Minnesota Nurses Association study charges more than the “cost” of delivering care. The “cost” of delivering care refers not only to direct labor and supply costs but also to administrative and general costs, such as maintenance and housekeeping.
The report shows that Minnesota hospitals charge patients on average, 212 percent more than it costs them to provide care. This study looks at a variety of sources, including 2016-2017 Medicare Cost Reports (2552s or MCRs) for each of the 111 hospitals included in the report, as well as data collected by the Bureau of Labor Statistics (BLS), the Center for Medicare and Medicaid Services (CMS), and the American Hospital Association (AHA). MCRs provide data on hospital charges and costs for a variety of services, both inpatient and outpatient. These charges are often referred to as chargemaster prices.* Most patients will not pay the base charge master price; however, it sets a starting point for negotiations between the hospital and insurance companies over reimbursement rates. While a patient may not pay the chargemaster price, it impacts the cost of care as those higher rates are often passed from the insurance company on to the patient.
The Charge-to-Cost Ratio (CCR) is a way to measure the relationship between hospital costs and charge master prices. If charges are higher than costs, the CCR will be higher than 100, if the charges are lower than costs, the CCR will be below 100 percent. The average CCR in 2016 for Minnesota hospitals was 212 percent. The lowest CCR of any MN hospital was 108 percent. In terms of dollar amounts, theoretically a procedure that cost $100 to provide was charged at $108 to the patient (on average). The highest CCR in Minnesota came in at 383 percent. Where a hospital falls in that range depends on several factors, but some notable takeaways from the report include:
- Hospitals with higher CCRs are mostly in larger metro areas, mainly the Twin Cities and Duluth
- Providers with high CCRs also tend to be part of larger healthcare systems, not independent hospitals.
- High CCR hospitals had a higher ratio of excess revenue over expenses (profit) than hospitals with lower CCRs
- Minnesota hospitals’ profit margins have steadily risen over the past 20 years, with little deviation from that upward trend.
- Hospital spending as a percentage of health expenditures has increased over the past 20 years from 27.7 percent to 33.8 percent
As CCRs and chargemaster prices climb, so do hospital revenues. With little to no community accountability for our not-for-profit hospitals, this trend will only continue. It’s time for Minnesota hospitals to stop focusing on the bottom-line and start focusing on patient safety and well-being.
*In a recent CMS rule change, charge master prices must be publicly available on all hospital websites, not just upon request or in MCRs.
Download the entire Charge-to-Cost Report here: https://mnnurses.org/issues-advocacy/issues/minnesotas-most-and-least-expensive-hospitals/