The actual cost of hospital care became a lot clearer for consumers on Wednesday when the Obama administration released the average prices charged by more than 3,000 U.S. hospitals for the 100 most common medical procedures.
The 2011 data, which shows wide cost variations at hospitals across the country – and in the same city or geographic area – raise questions about how treatment prices are determined and why the information has been so hard to get in the past.
The findings are available on the Department of Health and Human Services website, www.hhs.gov, at the so-called “chargemaster rates,” or internal price lists that hospitals typically charged uninsured patients and those who pay out of pocket. Rates paid by private insurers and public health plans like Medicare and Medicaid are typically much lower.
The cost information is being released for the first time with the intent to “save consumers money by arming them with better information that can help them make better choices,” said Health and Human Services Secretary Kathleen Sebelius.
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“When consumers can easily compare the prices of goods and services, producers have strong incentives to keep those prices low,” Sebelius said. “Hospitals that charge two or three times the going rate will rightfully face greater scrutiny. And those that charge lower rates may gain new customers.”
Inpatient charges to treat heart failure in Denver hospitals, for instance, ranged from a low of $21,000 to a high cost of $46,000, while the same procedure ranged from $9,000 to $51,000 at hospitals in Jackson, Miss. Inpatient costs related to joint replacement ranged from $5,300 at a hospital in Ada, Okla., up to a high of $223,000 at a hospital in Monterey Park, Calif.
That kind of price disparity puzzled Jon Blum, director of the federal Centers for Medicaid and Medicare Services. He said the cost variations could possibly reflect the health status of the patient, whether a hospital charges more because it trains future doctors, and even whether a hospital has higher capital costs that are passed on to patients.
But Blum added: “Those reasons don’t seem very apparent to us.”
He said the charges “don’t seem to make sense to us from a consumer standpoint. There’s no relationship that we see to charges and the quality of care that’s being provided.”
In a statement, Rich Umbdenstock, president and CEO of the American Hospital Association, said the hospital price lists were a part of the health care system that urgently needs updating. He said variations in the prices were a “byproduct of the marketplace, so all parties must be involved in a solution, including the government.”
“The complex and bewildering interplay among ‘charges,’ ‘rates,’ ‘bills’ and ‘payments’ across dozens of payers, public and private, does not serve any stakeholder well, including hospitals,” Umbdenstock said in the statement. “This is especially true when what is most important to a patient is knowing what his or her financial responsibility is.”
Even though more than 40 states require or encourage hospitals to make their charges and payment rates public, the hospital association supports federal price transparency legislation sponsored by Rep. Michael Burgess, R-Texas. Burgess’ proposal would require state Medicaid plans to ensure that states would pass laws requiring hospitals to make their charges readily available to the public and to provide information about patients’ estimated out-of-pocket costs.
Umbdenstock said it would create antitrust risks for hospitals to share rate information negotiated by insurers.
Additional hospital cost data, possibly on outpatient charges, will be made public in the future, Blum said, as part of the Obama administration’s health care overhaul goal of increased medical cost transparency and savings. The agency will provide this and other data to different organizations that collect, analyze and publish health pricing data.
Correction: A previous version of this story misspelled the name of Jon Blum.