Let’s going shopping for surgery: New government data shines light on health care cost variations

May 8, 2013

Let’s going shopping for surgery: New government data shines light on health care cost variations

May 8, 2013

Let’s say you needed a pacemaker and you went to Uniontown hospital in Uniontown, Pennsylvania, the charge might be $20,000. If you went to Phoenixville Hospital near Philadelphia, the charge might have been $211,000. 

Hospitals list radically different charges “because they can,” says Gerard Anderson, director of the Johns Hopkins Center for Hospital Finance and Management. “Nobody’s been looking at their charges over the last 30 years.”

In the past, hospitals have kept their charges hidden, according to Peter Ubel , professor of Business Administration and Medicine, at Duke University. “If I’m negotiating prices with insurers, I don’t want people to know about it.”

Just because hospitals charge wildly different amounts doesn’t mean people pay those amounts. 

“Most of the prices you’re seeing aren’t what anybody is being charged,” says Ubel. “The vast majority of people come in with private insurer, and that insurer has negotiated a very different rate.”

New federal data show Medicare reimbursement rates are typically far below the listing price that hospitals charge. 

Click here to see the government’s data on hospital charges.

However, for the uninsured, Ubel says the variations in price have a significant impact — even after negotiating with a hospital; whether you’re billed for $10,000 or $100,000 could depend on what hospital you happened to be closest to when you had your heart attack. “There’s a lot of random, bad luck involved,” says Ubel.

Ateev Mehrotra, a professor of medicine at the University of Pittsburgh and RAND analyst who has focused on hospital billing, points to a more systemic problem of the disparate charges and their convoluted relationship with actual customer bills.

“The charges make it extremely difficult to shop for care because the numbers being provided to the patient don’t make any sense,” he says. In a 2007 study, Mehrotra had researchers pose as patients trying to get prices from hospitals before signing up for a procedure. The hospitals “wouldn’t tell us how much we’d actually get charged,” but rather gave only the official price for a procedure. 

Robin Gelburd, president of FAIRhealth, says shopping around is impractical sometimes because “healthcare consumers don’t always put on the hat as a negotiator, because you’re often catching them at a very sensitive time.” 

In an ambulance, for example.

FAIRhealth is a nonprofit that provides healthcare claims information to insurers and consumers. It came into being through a settlement agreement in a 2009 New York class action suit against insurance companies.

Secretary of Health and Human Services Kathleen Sebelius is announcing a federal grant of $87 million to the states to create “health-care-data-pricing centers” designed to improve pricing transparency.     

Gerard Anderson, with Johns Hopkins, says the Affordable Care Act “does create price transparency, but it won’t change the amount that Medicare pays, how much insurance companies who already have contracts with a hospital will pay.”

Gelburd, with FAIRhealth, says the “the chapter on cost has yet to be written.”

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