Explaining Hospital Charge Variation for Members of America’s Essential Hospitals: The Role of Mark-ups and Underlying Costs

In a changing healthcare environment in which providers are under increasing demands to demonstrate their value, providers with above-average prices are likely to face increased scrutiny.  In this study, we examined three research questions: How do the average charges for patients at America’s Essential Hospitals (AEH) member hospitals compare to other hospitals?; To what extent are these charge differences driven by differences in underlying costs?; What factors cause cost differences between AEH hospitals and other hospitals and among AEH member hospitals? We found that higher charges among AEH member hospitals are explained by higher costs, which in turn are explained by the intensive services these facilities provide and the environment in which they provide them.  If other hospitals operated under similar circumstances, the data suggests the costs would be similar, and the charges would be even higher than the current average charges among AEH members.

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