Hospital Markup in Head and Neck Cancer Surgery in the US

Importance: Marked variation in hospital costs and payments is a target for health care reform efforts. Limited data exist to explain variability in prices for head and neck surgical procedures. Objective: To characterize variations in hospital price markup for head and neck cancer surgery, and examine associations with market concentration and hospital for-profit status. Design, Setting, and Participants: In this cross-sectional study, the Nationwide Inpatient Sample was used to identify 150275 patients who underwent head and neck cancer surgery for a malignant upper aerodigestive tract neoplasm from 2001 to 2011. The markup ratio (charges to costs) was modeled as a continuous and categorical variable. Hospital market concentration was evaluated using a variable-radius Herfindahl-Hirschman Index from the 2000, 2003, 2006, and 2009 Hospital Market Structure files. Data were analyzed from May 2019 to July 2019. Main Outcomes and Measures: Multivariable regression was used to evaluate associations between hospital and patient variables and hospital markup. Results: There were 150275 patients (mean [SD] age, 61.8 [12.6] years; 104974 [70.0%] male) from 2001 to 2011 for whom hospital market information was available. Hospital markup ratios ranged from 0.8 to 8.7, with a mean markup ratio of 2.8 (95% CI, 2.7-2.9). Hospitals in the lowest markup ratio quartile had a mean markup ratio of 1.8 (95% CI, 1.8-1.9), while hospitals in the top markup ratio quartile (extreme markup) had a mean markup ratio of 4.1 (95% CI, 4.0-4.2). Extreme markup hospitals were more often large (77.5% vs 66.6%), private for-profit hospitals (19.0% vs 1.3%), and were less likely to be high-volume hospitals (21.0% vs 9.4%) or in competitive markets (64.4% vs 82.0%). Postoperative complications occurred more often in extreme markup hospitals (22.7% vs 17.1%). On multivariate analysis, a significantly higher markup was associated with private, for-profit hospitals (47.9%; 95% CI, 33.3%-64.2%), hospitals in the West (25.5%; 95% CI, 12.6%-39.8%), Hispanic race (9.8%; 95% CI, 4.4%-15.5%), prior radiation therapy (5.3%; 95% CI, 1.3%-9.4%), comorbidity (3.5%; 95% CI, 1.7%-5.4%), and complications (2.8%; 95% CI, 0.3%-5.4%). Hospital market concentration modified the association between hospital for-profit status and markup, with higher markups in for-profit hospitals in moderately concentrated and concentrated (less competitive) markets. Conclusions and Relevance: In this cross-sectional study, there was wide variation in hospital markup for head and neck cancer surgery, with a 4-fold increase in charges relative to costs in 25% of hospitals. Variations in surgical price were primarily associated with hospital profit status. These data suggest that greater transparency is needed to address disparities in hospital pricing..