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Aches & Pains? It pays to shop around

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Above image credit: Recently released federal data indicates prices vary widely for medical procedures
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2 minute read

Considering a major joint replacement?

If you check into the University of Kansas Hospital, you might be charged more than $115,000. But if you go to Olathe Medical Center just 22 miles down the road, you’re apt to be billed just over $50,000.

Coping with renal failure? At Truman Medical Center, the bill is likely to add up to more than $14,000. But at Research Medical Center, a mere six miles distant, it’s more likely to come to $48,000.

Those are some of the striking – even random – disparities reflected in figures released this week by the Centers for Medicare & Medicaid Services (CMS). The data trove includes hospital charges in 2012 for the 100 most common inpatient procedures.

Different figures

The figures – the amounts hospitals bill for items and services – don’t reflect actual reimbursements, which are significantly lower since Medicare and commercial insurers negotiate prices down. Hospital executives, in fact, insist that the charges – which come from a master list know as a “chargemaster” – are irrelevant for that reason.

For example, the average Medicare payment to KU Hospital for joint replacement – the most common Medicare procedure – was $28,866, a far cry from its average charge. (Including payments from other sources, KU’s total reimbursement came to $29,771.) By contrast, Olathe Medical Center received $16,434 from Medicare for joint replacement (and $17,428 in all).

There are many reasons a hospital’s bills might exceed those of another. KU Hospital, for example, is a teaching hospital and incurs additional costs for those responsibilities. It’s also a Level 1 Trauma Center and provides tens of millions of dollars of uncompensated care, further driving up costs.

“You’re paying for surgeons who are not only top in what they’re doing, but they’re teaching other doctors to be doctors,” says Jill Chadwick, a spokesperson for KU Hospital. “You’re paying for the ability to keep every type of knee joint or hip replacement on the shelf, in the back, in the surgical center so we can take care of the needs of any patients that walk in through the door.”

And, of course, the figures don’t take into account quality of services or results.

“Comparison or price shopping is not the best thing when it comes to medicine,” Chadwick says. “It’s not how I would make decisions for my family. You want to be asking what are your outcomes and how good is the doctor at this.”

Still, experts say price transparency is a good thing for consumers, allowing them to make more informed choices. And the prices are relevant for the uninsured, who may find themselves stuck with the entire bill, and for insured persons with high deductibles.

Second round

This is the second year CMS has released such data, which show the average amounts hospitals in all 50 states and Washington, D.C. – more than 3,300 in all – charged for similar items and services.

The information shows that average charges increased for all so-called MS-DRGs – the classification system the government uses to group similar clinical diagnoses and the procedures used to treat them. In a news release accompanying the data’s release, CMS said that most charges increased less than 5 percent – although that still exceeded the 2 percent inflation rate in 2012.

It noted that chest pain had the largest increase in average charges, jumping almost 10 percent from 2011 to 2012.

The charges often vary enormously – both nationally and within the same geographic area.  Services provided in connection with a joint replacement, for example, ranged from a low of $15,901 in Baltimore to a high of $239,138 in Los Angeles.

“The release of these data sets furthers the administration’s efforts to increase transparency and support data-driven decision making which is essential for health care transformation,” Kathleen Sebelius, the secretary of health and human services, said in a statement.


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