Extreme Differences Found In Hospital Fees

Lawrence LeBlond for RedOrbit.com
What would you expect to pay to have your appendix removed if so needed? $1,500? $182,000? How about any amount in between? A new study shows that hospital charges are all over the map when it comes to such procedures, and most people are left in the dark when it comes to medical costs, reports ABC News.
Researchers of the study, published Monday in the Archives of Internal Medicine, found wide variations in charges for medical procedures even among appendectomy patients treated at the same hospital.
One such procedure, performed on Augustin Hong, a then-34-year-old financial professional living in San Francisco, cost a staggering $60,000. Hong, who went to the ER with severe abdominal pain, was diagnosed with acute appendicitis, and subsequently had his appendix removed by doctors.
Hong had not worried too much about the cost of the procedure because he had health insurance. But that all changed when the bills started to arrive. “That´s when I got nervous,” said Hong, who is now 36.
In all, Hong was charged $59,283, including $5,264 for the doctors. According to the Healthcare Blue Book, that figure is six times the fair price for an appendectomy in Northern California ($8,309, which includes a four-day admission).
“My initial thought was, it was a good thing I had insurance,” said Hong. But he soon realized the hospital was not in his insurance network. And while the insurer agreed to pay more than half of his bill, Hong was still left with a $23,000 bill.
The researchers, as well as other healthcare experts, said the results aren´t unique to California and show the system is definitely broken.
“There´s no method to the madness,” said lead author Dr. Renee Hsia, an emergency room physician and researcher at the University of California, San Francisco. “There´s no system at all to determine what is a rational price for this condition or this procedure.”
The inconsistencies seen in patient bills can be partly explained by differences in amount of care needed and where the treatment took place. The researchers note that some patients may have needed more costly procedures, including multiple imaging scans, or perhaps longer hospital stays. Some patients may have been treated without the need for surgery, though most had appendectomies, and some were sicker and needed more intensive care.
After reviewing charges from more than 19,000 patients, the UCSF researchers found that the cost for treatment of uncomplicated appendicitis, the same disease Hong had, ranged from $1,529 to $182,955.
“We expected to see variations of two or three times the amount, but this is ridiculous,” Hsia told the New York Times. “There´s no rhyme or reason for how patients are charged or how hospitals come up with charges.”
“There´s no other industry where you get charged 100 times the same amount, or 121 times, for the same product,” she said.
Hsia, who is an ER doctor herself, said she has no idea what the hospital charges are for various procedures. When patients ask her, she has to tell them she doesn´t know. “It´s heartbreaking for me” to know people can be bankrupted by medical bills, she said, when “so many are struggling to get by already.”
Hospital charges appear on patients´ bills, but they often bear no relation to the discounted fees that insurers usually end up paying. Still, some patients do get stuck paying the retail price. These include those who are uninsured, and those with high-deductible plans or limited coverage. But even those who are fully insured, like Hong, can get stuck paying full retail price.
Some providers who have already agreed to discounted payments from insurers may still try to bill insured patients for additional fees, a practice called balance billing.
Hong´s misfortunes, as it turned out, was that he sought out emergency care closest to his home. And while the hospital was not part of his insurance network, nobody informed him of this, even though he provided his insurance card and had to wait 30 hours for surgery, plenty of time to be transferred to another hospital within his insurance network.
Hsia and colleagues found huge variations in price, even within the same county. In Fresno County, for instance, the researchers found the smallest range of charges, but there was still a difference of $46,204 between the highest and lowest hospital appendectomy charge.
They found that for-profit hospitals tended to charge more than county hospitals, and charges increased with a patient´s age. Charges were also higher from Medicaid patients and the uninsured. And those with other health problems like diabetes and congestive heart failure were charged even more.
Hsia noted that the patient whose appendectomy cost $182,955 also had cancer. But that patient did not receive cancer treatment during the hospital stay in which her appendix was removed.
And after reviewing all the cases and accounting for individual variations in health, the researchers were unable to explain a third of the variations in cost differences.
The wide range in hospital prices isn´t limited to appendectomy. Researchers from the University of Pittsburgh in 2007 posed as patients trying to get pricing information from hospitals in advance of a procedure, which is a right under California state law. They found that hysterectomy charges ranged from $3,500 to $65,300 and gallbladder removal charges ranged from $2,700 to $36,000. A colonoscopy screening might cost anywhere from $350 to $5,805.
Fewer than one-third of the 353 hospitals that were queried responded for pricing information. And those that did often did not provide all the information requested or say whether physician fees were included, said Dr. Ateev Mehrotra, an assistant professor of medicine at University of Pittsburgh School of Medicine and a RAND policy analyst who was the senior author of that study.
“In the past decade, there has been an aggressive push to make the patient a more active consumer who shops around for care,” Mehrotra said according to Times reporter Roni Caryn Rabin. “The question is, can they do it?”
It´s not likely, he believes. “The current process does not facilitate that by any means. It´s a crazy process. If we want consumers to play this role, we need to fix this system,” Mehrotra added.
Until that happens, consumers will continue to struggle with hospital charges that can seem completely arbitrary.
Hsia, whose research was supported by the Robert Wood Johnson Foundation and the National Institutes of Health, said there´s “no standard in the United States for reasonable prices or reference pricing … If you go to a hospital, they can charge you whatever they want. Negotiated rates are trade secrets.”
“No one is protected,” Hsia tolc ABC News. “Even with insurance, it is a crazy and secret system.”
“Consumer empowerment can only occur if prospective patients actually have easy access to user-friendly, reliable information,” Princeton economist Uwe Reinhardt explained in his 2006 article, ℠The Pricing of U.S. Hospital Services: Chaos Behind a Veil of Secrecy.´
California started to require hospitals in 2006 to publish average charges for common procedures. Despite this ruling, charges were rarely posted on hospital websites, making the information difficult to obtain. Furthermore, published charges rarely reflect negotiated payments.
Some websites, however, have cropped up allowing consumers to search for the average prices of common procedures and services via ZIP codes. And a few hospitals and insurance companies have made treatment cost estimators available to help patients prepare for hospital procedures and their costs.
Despite these efforts, patients still have relatively few options and are left without valuable information. It´s a fact which Hong can attest to.
“Before you get sick, for young people especially, it would help to spend a few minutes to figure out which hospitals near you are covered by [your] insurance,” he told ABC News. “That would have saved me a lot of sleepless nights and thousands of dollars.”

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