Emergency Room Charges: Some Hospitals Raking In Record Profits

May 27, 2012, 10:30AM. By Gordon Gibb

Raleigh, NCInflated emergency room charges and other high costs incurred by patients could be a sign of a bigger issue amongst some of the more profitable hospitals, according to a five-part series recently published by The News & Observer of Raleigh, North Carolina. The news outlet discovered that not only are some hospitals making huge profits partially on the backs of patients, their not-for-profit status means they also escape paying income, property or sales taxes.

Many smaller, rural hospitals are just barely getting by, and others are operating in deficit. But any patient who has had recent cause to dispute a medical bill might be alarmed to learn of the profits some hospitals are making, all the while increasing fees and costs to the patient.

The newspaper investigation found that Duke University Health System, which owns three hospitals in North Carolina, reported an operating profit of $190 million for 2011, according to the report. Factor in revenue generated from a $1.5 billion investment portfolio, and the profit rises to $542 million.

For anyone who may have recently balked at, say, the emergency room cost for a procedure, should note that we're talking not mere revenue but profit—the money left over after expenses.

Hospital officials counter—as they did in the report—with their need to mark up prices for procedures or pharmaceuticals for those patients carrying private insurance in order to offset losses incurred from treating patients without insurance, or those who rely on Medicare or Medicaid.

For most patients however, an inflated emergency room bill is a bitter pill to swallow when considering the already high cost of carrying private health insurance—the latter an increasing profit resource for hospitals. The rising costs of hospital care to private insurance in turn drives up premiums.

One Observer reader commenting on the investigative series in the publication's 'Letters' section made the observation that a single, 500 mg. menformin [sic] pill available to the letter writer via Medicare wholesales for 18 cents per pill, which is marked up to 76 cents retail.

Compare that with a price of $16.28 charged by a hospital for a single pill. This, in all likelihood from a not-for-profit hospital, which escapes the requirement to pay property, income or sales taxes of any kind.

Another example of hospital overcharging—especially to health insurance carriers—is revealed in a letter to the editor published by Tulsa World (4/13/12). The writer noted that a single X-ray taken at a hospital "with no radiologist reading the film," was billed by the hospital at a rate of $293. The reader, after the fact, found that the same X-ray could be acquired elsewhere for a flat fee of $42 provided it was not put through an insurance provider.

It should be noted that the Observer investigation found that no fewer than 25 executives employed by public and nonprofit hospitals in the state of North Carolina enjoyed total compensation packages in excess of $1 million each, in 2010 or 2011, according to the report.