California Nurses Association: High Hospital Charges Major Factor in Skyrocketing Premium Rates.

OAKLAND, Calif. -- High markups in charges over costs by hospitals and other sectors of the healthcare industry help explain the continuing double digit rise in both employer-sponsored health insurance and Medicare premiums reported in recent days, the California Nurses Association said today.

Employer premiums increased an average of 11.2% this year, according to a Kaiser Family Foundation survey, the fourth consecutive year of double digit premium hikes. Separately, Medicare officials announced a 17% jump in Medicare premiums.

CNA this week issued a comprehensive report that documents that the nation's hospitals marked up their charges over their costs by an average of 232% and that the 100 most expensive hospitals put an average sticker price of 673% over their costs -- meaning the average top 100 hospital would bill $673 for a patient's case where the actual costs were $100.

The findings cite pricing practices of 4,100 U.S. hospitals based on federal cost reports with aggregated data for over 30 million patient discharges in fiscal years 2002-2003 filed for all patient services and other financial categories. The research is contained in the second annual report on charges by the Institute for Health and Socio-Economic Policy. It lists the nation's most expensive hospitals, and the most expensive in every state.

"Outlandish high charges are pricing more people out of access to needed medical care every day," said CNA President Deborah Burger, RN. "The Kaiser report and Medicare increases illustrate a consequence of the high charges. It's long past time for our policy makers and elected leaders to take action to protect patients and consumers."

HMOs and pharmaceutical firms are also driving up costs, said Burger. HMOs exploit high hospital charges to squeeze employers and individuals with high premiums. Profits of the 50 largest HMOs surpassed $7 billion in 2003, a 188% increase over their 2000 profits. Drug companies have been shown to mark up their prices over costs for the active ingredients of name brand drugs such as Prozac and Xanax by as much as 225,000% and 570,000%, respectively.

Other report highlights:

--Hospitals that charge the most tend to make the most profits or net income. The hospitals ranked in the top 10% of markups on charges reported an average of $14.8 million in profits.

--Hospitals that are part of systems and large hospitals tend to have higher markups on charges than independent and small hospitals. For-profit hospitals had the highest average sticker prices, a 351% markup, while government hospitals had the lowest average charges of 185% over their costs.

--Contrary to the argument that an unfettered market reduces costs, Maryland, the most highly regulated state on healthcare in the U.S., had the lowest state average markups on charges over cost with no effects on profitability; about two thirds of Maryland hospitals were profitable, right at the national average.

The report is on the CNA website, www.calnurse.org. Contact: Charles Idelson, 510-273-2246.