Many of us have faced the high costs of hospital care. Yet the inflated prices for chemotherapy drugs revealed in a recent investigation by the Observer and The News & Observer of Raleigh were stunning nonetheless.
Markups were sometimes more than 50 times the sales price. 50 times!
Whats worse, these exorbitant charges are occurring at nonprofit N.C. hospitals that get deep discounts on the drugs while posting annual profits in the hundreds of millions of dollars with billions in reserves. Thats maddening.
So we welcome the intervention of U.S. Sen. Chuck Grassley. Grassley has asked three of North Carolinas largest hospitals to provide information about their use of a federal discount drug program that aimed to pass along savings to patients but that hospitals are using to subsidize their bottom lines.
Carolinas HealthCare System officials acknowledged that their prices reflect a practice known as cost-shifting, in which hospitals charge more for some services to make up losses in others. Carolinas HealthCares Carolinas Medical Center was one of three hospitals Grassley sent letters to (the others were Duke University Health System and UNC Hospitals).
Losses often come when hospitals treat the uninsured and poor. Carolinas Medical Center spent about 5.5 percent of its budget on charity care in 2010 a larger percentage than most N.C. hospitals.
We understand and appreciate the juggling act hospitals must undertake. We also understand and appreciate that these hospitals provide other cancer services insurers dont cover, and that they provide free care to many financially needy cancer patients. All of that is commendable.
But given the profits being made Carolinas HealthCare, the nations second-largest public hospital system, has had annual profits exceeding $300 million the past three years and has more than $2 billion in investments and $1 billion in property something stinks about these huge price markups. As one patient told our reporters, It seems almost predatory.
And these price inflations are coming at time when large hospitals are gobbling up the less expensive competition. After the Medicare Modernization Act of 2003 cut reimbursement to private doctors for cancer drugs and private insurers cut their reimbursements too, the number of oncology practices in doctors offices dramatically declined. With that change, prices shot up because patients were charged based on the hospital fee schedule.
Patients are coming out the losers in this dynamic. Too many are delaying or forgoing care sometimes with tragic consequences. Others are going bankrupt trying to pay their treatment bills.
Some things must change. The federal government can help by ensuring that nonprofits that participate in the discount drug program pass on the savings to patients as intended. A GAO report last year on the 340B program found the program had inadequate oversight.
Additionally, hospitals must be more transparent about their pricing structure. Patients need to know how much theyll be charged for drugs and procedures and how much it actually cost the hospital for those things. They should have the ability to compare hospital costs and services.
Lastly, we dont begrudge hospitals the ability to cover losses and have money in reserve. Thats good business. But nonprofits are called that for a reason. They get big tax breaks and are obligated to provide services to the poor and uninsured. As they make huge profits and hold big war chests, they shouldnt be sticking it to patients with massive markups on life-saving drugs. Thats wrong. It needs to stop.