States with the Highest Hospital Markup

How to Read the States with the Highest Hospital Markup Ranking

This ranking aggregates state-level totals from the CMS Medicare Provider Utilization and Payment Data release, which captures every Part B Fee-for-Service claim submitted by physicians, non-physician practitioners, and suppliers under Medicare during the published service year. State assignment uses the provider's primary practice address on the National Plan and Provider Enumeration System (NPPES) registry at the time of submission. Beneficiaries who receive care in a different state (e.g., a snowbird treated in Florida by a winter-resident specialist) are billed under the rendering provider's state, which can shift state-level averages in destination-medicine and border-crossing scenarios.

The figures shown are unweighted state averages across procedure codes: each CPT or HCPCS code with at least the CMS-required minimum service volume contributes its state-specific average Medicare allowed amount to the state's overall average. Higher-volume codes (evaluation visits, common imaging, routine lab draws) carry more weight in moving the mean than low-volume specialty codes, but no per-code volume weighting is applied — that calculation requires the underlying claim count, which the public CMS file releases with a privacy floor that suppresses codes with fewer than 11 services to a single beneficiary per provider per code per year.

State differences in Medicare payment do not equal differences in cost-of-care or quality-of-care. Medicare applies three locality adjustments to every code: the work GPCI (geographic practice cost index for physician work), the practice-expense GPCI (overhead, including rent, staff salaries, and utilities), and the malpractice GPCI (professional liability premiums). High-cost-of-living regions — coastal California, the New York metro, the District of Columbia, Hawaii, and Alaska — score above 1.0 on practice-expense GPCI and so receive higher payments for the same work. Low-cost-of-living regions score below 1.0 and receive proportionally less. This is by design: the locality system attempts to keep Medicare reimbursement neutral to where the provider practices, holding work and quality constant.

Markup ratios — the relationship between submitted charges and Medicare allowed amounts — are a separate statistic. Hospitals and physician groups set chargemaster rates independently of what any payer reimburses; the chargemaster is a list price used primarily for out-of-network billing, secondary payer coordination, and patient-responsibility calculations under Hospital Price Transparency. Medicare's allowed amount is statutory. The gap between the two reflects business practice in chargemaster maintenance, not the actual cash flow between insurer and provider. States with high markup ratios tend to have larger numbers of hospital-based physician groups and academic medical centers, which traditionally maintain higher chargemasters relative to community-practice groups.

For verification of these aggregations against the source dataset, see the official CMS Medicare Provider Charge Data portal. The CMS data dictionary lists every column in the source file, including provider NPI, the submitting specialty taxonomy, the place of service code, and the count of distinct beneficiaries served — fields used to filter and aggregate the values shown here. For per-procedure detail at the state level, drill into any state in the table above to see the most expensive and least expensive procedures specific to that state's claims data.

Year-to-year movement in any state's position on this ranking can come from three mechanisms. First, the procedure mix in the state can shift — a hospital opening or closing, a specialty practice expanding, or a population aging into more procedural care all change the underlying distribution of billed codes and therefore the state mean. Second, the Medicare Physician Fee Schedule conversion factor — the dollar multiplier Medicare applies to relative-value units to produce payment amounts — is updated annually by CMS through the Federal Register rulemaking process. Conversion-factor changes move every state's average in the same direction, so a state's rank can stay stable even when its absolute average shifts. Third, the locality components (work, practice-expense, and malpractice GPCIs) are periodically rebased to reflect updated regional input cost data. Rebasing can shift rankings even without any underlying change in the procedure mix or provider count.

For consumers using this ranking, the most actionable insight is comparative rather than absolute. If you live in a state ranked high on Medicare allowed amounts and are scheduled for an elective procedure, requesting a Good Faith Estimate under the No Surprises Act remains the most reliable way to obtain an enforceable cost commitment before service. Hospitals are required to provide the estimate at least three business days before scheduled care, and a final bill exceeding the estimate by more than $400 is subject to patient-protected dispute under federal law. For comparison shopping between hospitals within a state, the Hospital Price Transparency Rule requires posting of negotiated rates and discounted cash prices in a machine-readable file — though completeness and accessibility vary by institution and have been the subject of CMS civil monetary penalty actions for non-compliance.