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19 CFO / FINANCE Study: Chargemaster Prices Have 'Limited Relationship' to Hospital Quality at Best By Morgan Haefner A lthough hospitals' chargemasters may reflect strategic business deci- sions, they do not have a significant relationship with quality of care provided, ac- cording to a Health Affairs study. Chargemasters can seem arbitrary in the bill- ing process, since prices for services are oen set more than three times what hospitals are paid for administering care. However, re- searchers uncovered a positive relationship be- tween higher prices and higher payments, with the relationship causal in some cases. Specif- ically, from 2002 to 2013, list prices marked a dollar higher were associated with an addi- tional 15 cents in privately insured payment. e study authors, Michael Batty, an econo- mist at the Federal Reserve Board in Wash- ington, D.C., and Benedic Ippolito, an econ- omist at the American Enterprise Institute in Washington, D.C., measured list price varia- tion using inpatient Medicare Provider Uti- lization and Payment Data from CMS across 3,230 U.S. hospitals between 2003 and 2014. To study how list prices influenced payments, researchers also analyzed California's Office of Statewide Health Planning and Develop- ment data between 2002 and 2013. Here are four key takeaways from the study. 1. e clearest example of a causal relation- ship between high list prices and revenue was found in payment differences among the uninsured in California prior to the state's fair pricing law, according to the researchers. Before the law was implemented in 2007, an additional dollar in list price was associated with an increase in payments of about 20 cents from uninsured patients. Aer the law was instated, the association was statistically insignificant, the authors said. 2. While an association existed between high list prices and higher payments, the authors did not find a significant association between high list prices and higher quality. at is, when list prices were compared with 30-day readmission rates, "the relationship between list price and readmission rate for all payer types was indis- tinguishable from zero," according to the study. 3. Researchers found certain hospital de- scriptors were strong indicators of higher chargemaster prices. Large urban, for-profit hospitals that were also part of a system had list prices 360 percent higher than their ru- ral, small nonprofit and independent coun- terparts. 4. While researchers found payer mix did not have a significant affect on list prices, the se- verity of the illnesses treated in a certain case- mix was associated with higher list prices. "Although we make no claims about whether list prices are set in a way that maximizes hos- pital revenue, we found that they did appear to reflect systematic hospital-level pricing de- cisions and were related to payments (causal- ly in at least some cases), but did not have a systematic relationship to care quality. Over- all, these findings are consistent with certain hospitals' increasing list prices as part of a strategy to generate revenue, and they suggest that list prices do play an important role in some cases and should not be ignored," the study authors concluded. n 10 Largest US Health Systems Ranked by 2016 Revenue Change By Laura Dyrda N ine out of the 10 largest health systems in the U.S. reported revenue increases from 2015 to 2016. LifePoint Health reported the largest increase at 22 percent and Community Health Systems was the only sys- tem in the top 10 to report a decrease. The health systems reported financial results for the calen- dar year ending on Dec. 31, unless otherwise noted. Percent changes are approximations based on calculations from the health system's reported revenues. In some cases, the revenue was rounded in the financial report. Here is the revenue increase or decrease for the 10 largest health systems in the U.S.: 1. LifePoint Health (Brentwood, Tenn.): 22 percent in- crease ($6.3 billion, up from $5.2 billion) 2. Trinity Health (Livonia, Mich.)*: 14 percent in- crease ($16.3 billion, up from $14.3 billion) 3. NewYork-Presbyterian Healthcare System (New York City): 8.82 percent increase ($7.4 billion, up from $6.8 billion) 4. Ascension (St. Louis)*: 6.62 percent increase ($21.9 billion, up from $20.5 billion) 5. Kaiser Permanente (Oakland, Calif.): 6.43 percent in- crease ($64.6 billion, up from $60.7 billion) 6. Tenet Healthcare (Dallas): 5.3 percent increase ($19.6 billion, up from $18.6 billion) 7. Catholic Health Initiatives (Englewood, Colo.)*: 4.88 percent increase ($15.9 billion, up from $15.2 billion) 8. HCA Holdings (Nashville, Tenn.): 4.57 percent in- crease ($41.5 billion, up from $39.7 billion) 9. Dignity Health (San Francisco)*: 1.61 percent in- crease ($12.6 billion, up from $12.4 billion) 10. Community Health Systems (Franklin, Tenn.): 5.15 percent decrease ($18.4 billion, down from $19.4 billion) n *Indicates the health systems reported fiscal year ending June 30.