New government data showing the amounts U.S. hospitals’ charge Medicare for certain procedures confirm what consumer groups have suspected for years: hospitals, even in the same or nearby communities, can charge wildly different amounts for the same procedures.
In Ohio, for example, the average charge to implant a permanent pacemaker in 2011 ranged from a high of $74,996 at Ohio State University Hospitals to a low of $27,178 at Mercy Medical Center in Canton in 2011 — a whopping $47,818 difference, according to figures released Wednesday by the Centers for Medicare & Medicaid Services.
Locally, Good Samaritan Hospital billed Medicare an average of $63,762 for the same pacemaker surgery in 2011, while Springfield Regional Medical Center charged $46,796, on average, or a difference of $16,966, CMS reported.
The trend can be seen across a variety of the most common inpatient surgeries, including artery bypass and stenting, intestinal procedures and hip and knee replacements, according to the data from more than 3,000 U.S. hospitals that receive Medicare Inpatient Prospective Payment System payments.
The average hospital charge for major joint replacement or reattachment of a lower extremity with major complications was $95,469 at Atrium Medical Center in Franklin, compared to $80,200 at Kettering Medical Center, for example.
Health and Human Services Secretary Kathleen Sebelius announced the data release as part of an initiative to make hospital charges more transparent to consumers.
“Currently, consumers don’t know what a hospital is charging them or their insurance company for a given procedure, like a knee replacement, or how much of a price difference there is at different hospitals, even within the same city,” Sebelius said. “This data and new data centers will help fill that gap.’’
Local hospital officials say the wide range in charges for the same procedures can be attributed a number of factors, including patient mix, utilization rates, even the extra cost of running teaching hospitals, which give recent medical school graduates the opportunity to acquire on-the-job training.
“We provide a lot of medical education in our health system, and that is a piece of it,” explained Diane Ewing, a spokeswoman for Premier Health Partners, which operates Atrium, Good Samaritan and Miami Valley hospitals. “There are so many factors that go into what we charge for procedures that you can’t attribute it to one thing, there are multiple factors that go into it.”
Treating patients with higher health risks is also a contributing factor to the prices hospitals charge, said Kettering Health Network spokeswoman Elizabeth Long.
“Comparing treatment charges is never going to be apples-to-apples because each case is different,” Long said. “For example, some patients are sicker and have more co-morbidities (underlying chronic health conditions). The length of stay has an effect on the cost, as do the equipment, materials and supplies used to treat the patient.”
But the charges are also tied to the way Medicare, the government health care program for the elderly and disabled, reimburses hospitals for performing surgeries and other procedures, said Bryan Bucklew, president and chief operating officer of the Greater Dayton Area Hospital Association.
Medicare, which covers about half of Ohio hospitals’ billing, sets reimbursements at a flat rate for each procedure regardless of whether it costs more to perform the surgery at one hospital versus another.
The highest average Medicare reimbursement in Ohio for a single procedure was $64,473 in 2011, while the highest charge was well over $220,000, according to the CMS data.
Consequently, many hospitals mark up charges for procedures at hospitals where providing care is more costly to collect a reimbursement closer to the cost of care, Bucklew said.
“It’s a formula based on a charge master list,” Bucklew said, referring to the list of procedures every hospital has with pre-coded prices that determine what hospitals will charge for items and procedures. “They (hospitals) know if Medicare is only going to reimburse at 60 percent of the charge, and they need to cover their costs, that charge is generally going to be at least 60 percent more than the cost of that procedure in order to get that reimbursement from Medicare.”
The practice is not illegal, but it can have devastating financial consequences for people with no insurance who unknowingly seek treatment at more expensive hospitals and can be hit with the full price of the hospital charges, said Miami University economics professor John Bowblis, who specializes in health care.
Bowblis compared the hospital charges to the sticker price of a car.
“For the typical person who is on Medicaid, Medicare or private insurance, the sticker price has absolutely no meaning because your insurance company has negotiated a steep discount from the price,” he said. “However, if you’re uninsured, because you don’t have the negotiating power, you’re going to be charged sticker price, and it’s up to you to negotiate a discount from sticker price.”