Markup Medicine: How Hospitals Inflate the Cost of Care
- Duke Medical Ethics
- a few seconds ago
- 5 min read
Most Americans assume a hospital bill reflects the cost of care. Yet a new wave of reports reveals an unsettling truth: hospital prices are not only opaque but inflated to extremes. Recent findings show that the same knee replacement surgery can cost $12,870 in one hospital and $101,527 in another [1]. Without change, Americans will keep paying significantly more for the same care, and the vulnerable will continue to suffer.
What are price markups?
Hospitals do not all set prices the same way. A 2025 report from Trilliant Health analyzed data from nearly 2,700 hospitals and 3,500 surgery centers, uncovering ninefold price differences for identical procedures [1]. Even within a single state, hospitals often charge up to three times as much as their competitors. For consumers, the consequences are real: higher premiums, larger deductibles, and growing debt. Over the past quarter-century, health insurance premiums have risen nearly three times as fast as wages, driven in part by hospital pricing [1].
What’s most striking is the lack of correlation between price and quality. Trilliant found that hospitals ranked among the nation’s “best” often charged more but did not deliver better outcomes. Allison Oakes, the company’s chief research officer, explained that the industry has long treated pricing as “a well-protected secret.” Even as federal transparency laws require hospitals to publish negotiated rates, many still either obscure or withhold them. Without transparent pricing, patients remain powerless to choose affordable care.[1]
A system built on markups
Unfortunately, the practice of overcharging is hardly new. A Johns Hopkins Bloomberg School of Public Health study found that the 50 hospitals with the highest markups billed patients more than 1,000% above Medicare-allowed costs [2]. In one Florida hospital, that meant charging $1,260 for every $100 of actual cost. The researchers, Gerard Anderson and Ge Bai, called it a form of legalized price gouging. “They charge these prices simply because they can,” Anderson said [2].
In North Carolina, a state analysis of 140 hospitals found similar variance across 16 common “shoppable” services: an automated urinalysis that carried a median commercial price of $28.80 versus Medicare’s $2.36, a 1,120 percent median markup [5]. A CT scan of the brain averaged $1,167 commercially compared to $108 for Medicare, and an MRI of a leg joint cost $1,897 versus $229 for Medicare [5].
Of the top 50 hospitals with the steepest markups, 49 were for-profit institutions, and nearly half were owned by just two corporate chains: Community Health Systems and Hospital Corporation of America [2]. The victims of these inflated rates are not limited to the uninsured, though they are most affected.
Around 30 million Americans without insurance are charged the full sticker price, leading to bankruptcies, damaged credit, and avoidance of care. Privately insured patients are not spared either. Hospitals use inflated rates to negotiate higher reimbursements from insurance companies, which then pass the cost on to employers and workers through higher premiums.
Why markups persist
Several factors keep hospital prices high. When a few large hospital systems control most of the market, competition is reduced. These large hospitals can thus charge more. Rules like North Carolina’s Certificate of Need laws, which govern how many facilities can operate, often make it difficult for new hospitals to open. Additionally, weak enforcement of price-transparency rules allows hospitals to hide important numbers, such as negotiated commercial rates and realistic cash prices. The North Carolina report found that only about half of hospitals disclosed commercial rates for the selected services and less than half disclosed cash prices, making shopping for care effectively impossible for many patients. [4]
Who pays and who suffers
The burden of hospital prices isn’t shared equally. Insurance may protect some patients, but high hospital costs still lead to higher premiums and lower wages. Employers who pay for coverage pass those costs back to workers through higher deductibles. Patients without insurance or who go out of network are affected most—they can be charged the full sticker price, face debt collection agencies, or even be sued. In North Carolina alone, hospitals filed more than 7,500 lawsuits over medical debt in recent years, substantiating how pricing opacity can quickly lead to financial and legal harm [4,5].
Transparency is necessary but not enough
Price transparency rules adopted at the federal level aimed to force hospitals to publish machine-readable files of standard charges and consumer-friendly price lists. In practice, compliance has been inconsistent, and enforcement has been weak. Even when price files exist, they can be hard to interpret, incomplete, or formatted in ways that make direct comparison difficult. Furthermore, research shows that simply revealing prices will not fix the problem. People who are sick cannot shop around, and in areas where a few hospitals dominate, insurers have little power to push prices down [2,4].
A practical takeaway
Efforts to address hospital markups are in motion. States like Colorado and Texas have enforced stronger price transparency laws, preventing hospitals from collecting medical debt if they fail to disclose prices [4]. In North Carolina, lawmakers are considering the Medical Debt De-Weaponization Act, which would give the state attorney general authority to enforce transparency rules and penalize hospitals that refuse to comply. The bill passed unanimously in the Senate, but remains stalled in the House [4].
Treasurer Folwell argues that these reforms are essential to protect the solvency of the State Health Plan, which faces a $24 billion unfunded liability. Without price relief, its federal reserves could fall below required thresholds within two years [4]. The state’s proposed budget would require hospitals to cut $125 million in costs for the plan—roughly 8% of its projected hospital spending. Hospitals have resisted, lobbying against reforms that would expose their prices to public scrutiny.
Patients can rarely solve these structural problems, but others can make a difference. Employers who buy coverage should demand price transparency and incorporate price data into network design. State governments should demand hospitals earn their tax breaks and access to public programs by proving they help their communities and share clear prices. Regulators can also enforce the rules more strictly, so hospitals that hide their prices do not continue to benefit from it.
Designed by: Esha Kalikiri
Reviewed by: Ashley Gutierrez-Torres
References
[1] Alltucker, K. (August 19, 2025). A $101,000 knee replacement? Why some hospitals charge far more than others. USA TODAY. https://www.usatoday.com/story/money/2025/08/18/why-hospital-charges-prices-vary-cost/85656566007/.
[2] Bai, G., & Anderson, G. F. (June 8, 2015). Some hospitals marking up prices more than 1,000 percent. Johns Hopkins Bloomberg School of Public Health. https://publichealth.jhu.edu/2015/some-hospitals-marking-up-prices-more-than-1000-percent.
[3] Brinder, B. (May 8, 2024). State Treasurer Folwell Releases Report Finding North Carolina 340B Hospitals Overcharged State Employees for Cancer Drugs, Reaped Thousands of Dollars in Profits Per Claim. North Carolina Department of State Treasurer. https://www.nctreasurer.gov/news/press-releases/2024/05/08/state-treasurer-folwell-releases-report-finding-north-carolina-340b-hospitals-overcharged-state.
[4] North Carolina State Health Plan for Teachers and State Employees. (August 16, 2023). North Carolina Hospitals: Extreme Price Markups, Failures in Transparency for Shoppable Hospital Services. North Carolina Department of State Treasurer. https://www.shpnc.gov/what-the-health/nc-hospital-price-transparency-report.
[5] North Carolina State Health Plan for Teachers and State Employees. (August 16, 2023). Hospital Price Transparency Report. North Carolina Department of State Treasurer.