Most St. Louis hospitals charge above ‘fair price,’ business group says

LADUE — Most hospitals in St. Louis are charging businesses and health insurers above a benchmark that a national business group considers a “fair price” for medical services, according to a new report Monday from a coalition of St. Louis employers.

The findings in the report from the St. Louis Area Business Health Coalition underscore the continued pressure rising health costs put on businesses and consumers. And it makes clear that the market leader in St. Louis, BJC HealthCare, is also the most expensive health care provider.

“Hospital prices make up the largest cost for employer-sponsored insurance plans and contribute to the unaffordability of health care for many in our community,” Laurel Pickering, president and CEO of the BHC, said in a statement accompanying the report’s release.

In total, St. Louis hospital patient revenue has risen 51% from 2013 to 2022, while the St. Louis consumer price index has risen just 19% in that time and Missouri wages have risen 29%. National health care expenditures as a whole rose 56%, and the country spends far more on health care than other advanced economies.

St. Louis hospital costs outpace inflation

Those costs are born by all workers and businesses. Insurance companies have raised Missouri premiums 49% from 2013 to 2022, according to the report.

The report uses data made available in recent years under new federal rules and new metrics to quantify which hospitals in the region are charging private payers the most. Health care providers typically charge more to private insurance than the government pays via Medicare. The report uses 2018-20 data from the Rand Corp., a national think tank, to quantify how much more local hospitals are charging to private payers than Medicare pays them for the same services.

Then, the BHC found which hospitals were charging private payers more than twice what Medicare reimbursed them, the top of a range that the National Alliance of Healthcare Purchaser Coalitions considers a “fair price.”

St. Louis hospital industry report

The most expensive system, according to those metrics, was BJC HealthCare, the market leader in St. Louis. Its flagship, Barnes-Jewish Hospital, charged private insurers over three times what Medicare paid it for the same services, the report said. Only two rural Hospital Sisters Health System facilities, in Breese and Greenville, were higher.

In fact, all of BJC’s hospitals were found to charge above the “fair price” of 200% of Medicare reimbursement, according to the BHC report.

On average, BJC charged commercial payers 292% of what Medicare paid it for those services, well above the 183% of Medicare rates it would need to charge to “break even” if those charges were applied to every service the hospital performed, the report’s authors found.

“This demonstrates that these hospitals are charging higher rates for care to commercial payers not out of necessity to break even and that these higher rates are resulting in excess profits,” they wrote.

In all, 17 out of 29 hospitals measured in the report charged above the “fair price” benchmark. St. Luke’s in Chesterfield charged at about twice Medicare, as did Mercy Hospital St. Louis. SSM’s St. Mary’s in Richmond Heights and St. Joseph’s in St. Charles also charged above the twice Medicare, the report found.

Hospitals tend to argue government insurance plans — Medicare for the elderly and Medicaid low-income people — don’t pay enough to cover costs, and they negotiate higher payments from insurers to make up for nonpayment from uninsured people, unpaid bills and payments from the government plans.

BJC, St. Luke’s and SSM did not respond to a request for comment.

All but one of Mercy’s hospitals were within the fair price range, and the system’s St. Louis-area hospitals charged 188% of Medicare rates in aggregate.

“Mercy is proud to be the lowest-cost, highest quality health care provider in St. Louis and other regions we serve,” a Mercy spokeswoman said in a statement. “Our ability to remain profitable while costing less than our competitors demonstrates how quality care can be the driving force for financial sustainability and is a model for the future of health care.”

However, the report found Mercy, too, was charging more than it needed to cover its costs. If it charged 92% of its Medicare rates for every service provided, it should break even.

But Mercy said the hospital-focused report did not take costs from physicians and other settings from its “fully integrated health care delivery system” into account. Mercy “strives” to provide affordable care “while maintaining a financial balance” that allows it to expand access to care, including in underserved communities.

“This is a challenging goal to achieve in the face of for-profit insurance companies squeezing out every dollar possible to turn enormous profits for the benefit shareholders, leaving employers, consumers and health systems to shoulder the burden of health care costs,” the system said.

Hospitals charging above 'fair' price

SSM hospitals on the whole also charged just less than twice what Medicare paid, though that system’s St. Louis hospitals would only need to charge 119% of its Medicare rates to cover its costs. St. Luke’s two hospitals charged insurers 198% of Medicare, though it needed to charge 130% of Medicare.

“Just by virtue of putting a report out like this, it starts a conversation around cost,” Pickering said in an interview. “That’s a conversation that we want to have. We want to understand. The employers want to know what they’re buying, and they certainly want to understand why they’re paying more at some places compared to others.”

The BHC report said continued growth in health care spending is “unsustainable,” but Pickering said there are some glimmers of hope. The new data the government forced hospitals and health systems to begin releasing in recent years about the varying rates they charge different payers has added transparency to the opaque health care market.

“The good news is that there is so much more data and information around cost that is available now,” she said. “Employers in particular and health plans can now have more information when it comes negotiation, and by having more information when it comes to negotiation, there’s obviously more opportunity to bring prices down.”

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View life in St. Louis the week of July 7, 2024

View life in St. Louis through the Post-Dispatch photographers' lenses. Edited by Jenna Jones.

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