Medical Costs Vary Greatly Between Hospitals
May 10, 2013

Medicare Report Reveals Cost Of Common Medical Procedures Varies Greatly

redOrbit Staff & Wire Reports - Your Universe Online

The amount that hospitals charge the US government for common inpatient procedures — and the amount that those medical facilities receive for services rendered — varies greatly, according to information released Wednesday by the Centers for Medicare & Medicaid Services (CMS).

“As part of the Obama administration´s work to make our health care system more affordable and accountable, data are being released that show significant variation across the country and within communities in what hospitals charge for common inpatient services,” CMS officials explained in a statement.

The information released includes “hospital-specific charges” for more than 3,000 American hospitals that receive payments for the 100 most common forms of diagnoses and treatments through Medicare´s Inpatient Prospective Payment System (IPPS) during the 2011 fiscal year.

The data contained within the report is “bizarre,” according to Forbes contributor Leah Binder. At one hospital, a pacemaker implant costs an average of more than $127,000, while another charges just over $66,000 for the same procedure, she explained. Furthermore, joint replacement surgery that costs over $223,000 in Monterey California, costs only $5,304 in Ada, Oklahoma.

Costs can even vary greatly within the same general area. In and around Los Angeles, it can cost between $17,000 and $70,000 to treat pneumonia, Chad Terhune and Ben Poston of the Los Angeles Times report.

Similarly, the New York Times reported that one Dallas hospital charged approximately $14,000 to treat simple pneumonia, while another nearby medical facility charges more than $38,000 to cure the ailment.

New York Times writers Barry Meier, Jo Craven McGinty and Julie Creswell also reported that an Orange Park, Florida hospital charged more than double ($91,000) what a Saint Augustine, Florida hospital ($40,000) did to perform the minimally invasive surgery required to remove a gallbladder.

“Government officials said that some of the variation might reflect the fact that some patients were sicker or required longer hospitalization,” Meier, McGinty and Creswell said. “Nonetheless, the data is likely to intensify a long debate over the methods that hospitals use to determine their charges.”

Also, as NPR´s Scott Hensley points out, the amount billed by the hospitals is not necessarily the amount they actually receive from Medicare, as both the government and private health insurers typically receive discounts. In fact, the New York Times said that some hospitals charge as much as 10 to 20 times what Medicare actually repays.

“This is evidence of an incredibly dysfunctional and arbitrary pricing system in healthcare,” Renee Hsia, an assistant professor of emergency medicine at the University of California San Francisco, told Terhune and Poston. “It affects us all because the insured pay for this through their premiums and the uninsured face the sticker price. People are really being hurt by this.”

“Everybody in the industry is so scared about what it would mean if all the pricing information was available,” added Suzanne Delbanco, the executive director of Catalyst for Payment Reform, a San Francisco-based advocacy group working for increased transparency in the healthcare industry. “Medicare is sending a message that American consumers have a right to know what's driving up their healthcare costs.”