June 10, 2014
No Straight Answer For Surgery Costs
Rebekah Eliason for redOrbit.com - Your Universe Online
For most products, consumers have access to a wealth of data and information to guide them in a purchasing decision. When it comes to health care, especially the price of surgical procedures, information is nearly impossible to find.According to a new study from the University of Iowa, the quote for prostate cancer surgery varied between 100 hospitals by a 13-fold range. When comparing prices, the team found a wide range of $10,100 to $135,000 as a price estimate with an average of $35,000, which is more than twice as much as the Medicare reimbursement.
Out of the 100 hospitals, only 10 provided cost estimates for anesthesia and the surgeon, which are both essential elements in the pricing of surgical procedures. Only three hospitals were willing to give a hard copy of the charges.
“Such variability in pricing can produce significant confusion for consumers who are accustomed to the rules of free-market economics, which equate higher fees with higher quality,” write the UI researchers, in the journal Urology. “Unfortunately, in health care, this has not been found to be true.”
Prostate disease is an enormous health concern in the US and accounts for 28 percent of cancer diagnoses in men. According to the American Cancer Society, approximately $12 billion is spent each year for the treatment costs of prostate disease. Government figures estimate 138,000 prostate surgeries are performed yearly. Although the disease is common and surgeries are commonly performed, it is still difficult to find an accurate price quote.
According to Bradley Erickson, assistant professor in urology at the UI and corresponding author of the study, this is partly due to the system itself since what hospitals charge for a procedure does not reflect actual costs.
He explained that the hospital quote is similar to the opening salvo of a negotiation with the health insurance provider. When this is the case, the higher the hospitals quote the more negotiation room and potential for high reimbursement.
“These (hospital) charges don’t mean anything,” Erickson notes. “There’s no weight behind them.”
Essentially this means that consumers are provided with inflated figures putting them “at a significant disadvantage,” according to Erickson. Also, consumers have no access to how well a hospital performs prostate cancer surgeries since they only divulge the data to government agencies.
That lack of transparency is “a huge problem,” Erickson says. “It doesn’t really incentivize any place to improve outcomes, because no one is holding us individually accountable for it.”
Erickson noted that under the new Affordable Care Act, the inability to find accurate pricing may be worrisome to health-care consumers who may face higher deductibles. “We’re not ready for it (pricing transparency), because most hospitals can’t tell you how much they charge,” he says. “And the ones that do aren’t based on reality.”
This study on prostate cancer surgery costs follows a similar study by UI published last year regarding the price for hip replacement, in which they found that estimated costs ranged from $11,100 to $125,798.
The findings also agree with findings from the Centers for Medicare and Medicaid Services.
The authors from the University of Montreal and Harvard Medical School write in a separate editorial comment, “The discrepancy in pricing highlights the substantial incongruity between the actual costs of a surgical procedure and the hospital charges. It would be highly implausible that the exact same procedure is 13 times more expensive to deliver at one hospital relative to another.”