Jaw-dropping disparity in nation's hospital charges

May 10, 2013 

Outrage over the soaring costs of health care will no doubt be stoked by Wednesday's release of the prices patients are charged for various procedures and treatments in hospitals. The $18 baby aspirin hospitals dispense is chump change compared with big-ticket bills.

The disparities in average hospital charges and payments are startling and unsettling, but this precedent-setting transparency arms patients and their families with consumer pricing information previously unavailable on such a broad scale.

One of the most glaring examples of the steep variations on the national level can be found with the inpatient costs connected to joint replacement: $5,300 at an Ada, Okla., hospital and $223,000 at one in Monterey Park, Calif. What reasonable justification can there be for this extreme cost difference?

Can there be any wonder why hospitals fought long and hard to keep medical costs secret?

The Obama administration pulled that cloak down with cost details from 3,300 hospitals across the country, including Blake Medical Center, Manatee Memorial Hospital and Lakewood Ranch Medical Center.

The 2011 statistics list both the average hospital charges and Medicare reimbursement payments on the 100 most common hospital treatments and procedures.

Commercial health insurance companies negotiate payments with hospitals and do not pay the full amount hospitals charge just like Medicare. But uninsured and underinsured patients get socked with drastically higher hospital bills -- an appalling indictment of the nation's hospital industry.

The tremendous price variations are difficult to comprehend -- and explain, even accounting for such variables as different patient conditions upon admission and whether a hospital has higher capital costs or is a teaching institution.

The president and chief executive of the American Hospital Association could only state that variations are a "byproduct of the marketplace, so all parties must be involved in a solution."

Indeed.

Rich Umbdenstock went on to pinpoint the problem: "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."

The disparities among the three Manatee County hospitals are not as dramatic as some national comparisons but are still striking.

For a pulmonary embolism, the average charge was $22,750 at Lakewood Ranch, $27,000 at Manatee Memorial and $36,800 at Blake. For a major joint replacement, the charges were $64,000 at Blake; $76,400 at Lakewood Ranch, and $80,800 at Manatee Memorial.

For one of the permanent cardiac pacemaker implant categories, Blake charged $70,100 and Manatee Memorial $90,400. For a major small and large bowel procedure, Blake charged $162,000 to Manatee Memorial's $136,500. Lakewood Ranch did not perform either procedure.

These numbers show the value of the information to consumers as they finally find clarity on their financial exposure and shop for the best deal. This was the intent behind the release of the statistics, according to Health and Human Services Secretary Kathleen Sebelius.

But the bigger picture highlights a health care system in critical need of a reality check. Hospitals should be held accountable for charges that appear outlandish in comparison with the marketplace.

Proposed federal legislation that requires hospitals to list charges for public review and provide patients with out-of-pocket cost estimates is a good start. Competition among hospitals for patients should drive the market down.

The United States spends a higher percentage of its gross domestic product on health care every year than any other country, according to the World Health Organization. Costs must be contained.

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