High Prices At UPMC's Flagship Hospital Don't Tell The Whole Story
A right thumb splint officially costs $165 at UPMC’s flagship hospital; a pacemaker is more than $38,000. Recent analysis finds that prices for care at UPMC Presbyterian are some of the most inflated in the country, but critics say in many cases, it’s unlikely that "Presby" will bill that full amount.
In their study, Axios and Johns Hopkins University looked at data on the top 100 revenue-generating hospitals in the U.S. For each institution, it compared a hospital’s total costs to the charges listed in the American Hospital Directory. Presby ranks sixth for price markups, and first among nonprofits on the report’s list.
Profit margins, however, can be an indicator of more than simple price gouging.
“If a hospital makes high margins, that could be a sign that they are exercising bargaining power, it could be a sign that they're really well run and have low costs,” said Robert Town, health care economist at The University of Texas.
While Axios analyzed the data, the report is careful to not draw too many conclusions. When reached for comment, UPMC said that it “doesn’t recognize the data, which are not reflective of the entire UPMC system, making it difficult to use in any meaningful way.” And also that “data cited in this study are not reflective of the actual consumer experience.”
Town’s assessment of the data used in this analysis was that it’s “noisy,” meaning that it's rife with irregularities. However, he said he appreciates what Axois is trying to accomplish with this report, since industry data are opaque.
“It’s a tough nut to crack,” said Town, who specializes in how competition in health care affects patient costs, access and quality.
Part of the reason that reliable data is hard to find is that the “official” or maximum cost for a medical service is rarely what ends up on the bill.
Rand Corporation health policy researcher Chris Whaley said the cost of a medical procedure is a bit like a sticker price on a car. What’s actually paid is a negotiation; with health care, that negotiation is between the medical provider and insurance company.
“An unfortunate byproduct of the health care system in the U.S. is that people who pay this [price] ... are people who don’t have an insurance company behind them,” said Whaley.
The same can be said of underinsured patients.
UPMC said uninsured patients “are covered by some form of financial assistance.”
What’s notable about UPMC is that it is an “integrated health care system” where it provides both health care and medical insurance. Therefore, instead of negotiating prices, UPMC can simultaneously leverage both segments of its corporation to construct a strategy that attempts to boost enrollment of its health insurance plans.
Whaley said the high price tags at Presby, UPMC’s academic hub, might be an intentional strategy.
“If you have a price ... that’s especially in the clouds then that’s really a way to get people into an integrated system,” he said. “If you’re not a UPMC member and you want to go to a UPMC hospital, then you’re going to have to pay these prices that are really high.”
UPMC’s past total refusal to accept insurance from its main competitor Highmark Health resulted in a lawsuit brought by the state’s attorney general that went all the way to the Pennsylvania Supreme Court in 2019. UPMC, Highmark and the AG settled before a final decision was determined by the courts, with UPMC now accepting Highmark insurance.
Highmark insurance is also part of an integrated health system. Now that the rivals are accepting each others’ insurances, Whaley said the intense competition might end up benefiting consumers.
“I live in a market in northern California where hospitals and insurers tend to get along,” he said. “We’re now one of the most expensive markets in the country.”
That’s partly why U.T.’s Robert Town says more price transparency in health care might illuminate instances where medical and insurance entities are exploiting their market positions to command exorbitant prices.
“Shame can be a very powerful tool,” he said.