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AJN, American Journal of Nursing:
doi: 10.1097/01.NAJ.0000432944.42397.62
In the News

Variations in Hospital Charges for Inpatient Procedures

Potera, Carol

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Abstract

Newly available data expose striking local and national cost differences.

On May 8 the U.S. Department of Health and Human Services (DHHS) released information that compares hospital charges for services related to the 100 most common inpatient procedures billed to Medicare from 3,400 hospitals that receive payments under the Medicare Hospital Inpatient Prospective Payment System. These hospitals account for 92% of all inpatient hospital discharges.

Figure. U.S. Departm...
Figure. U.S. Departm...
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The data posted at the Centers for Medicare and Medicaid Services (CMS) Web site allow comparisons not only across local hospital markets but also nationwide. The charges vary widely. For example, an inpatient joint replacement can cost as little as $5,300 in Ada, Oklahoma, or as much as $223,000 in Monterey, California. Charges can vary widely even within one city: the average costs of heart failure treatment in Jackson, Mississippi, range from $9,000 to $51,000. (To view the data, go to http://go.cms.gov/16WaMfH.)

The information “has sparked a national conversation about why hospital charges are so different,” Marilyn Tavenner, the newly appointed CMS administrator and a nurse, told AJN. “It's my hope that the conversation will continue and not be limited to hospital charges. As a former nurse, I know that when people are fully engaged in their care, the process of healing is more successful.”

Today's hospital prices don't reflect either the cost or the quality of a procedure. In the May 28, 2012 Archives of Internal Medicine, Hsia and colleagues released findings of a study on the relationships between the hospital charges and outcomes, infection rates, readmissions, and other quality markers. The study showed that those factors don't correlate at all with the differences in prices. The researchers found that prices for acute uncomplicated appendicitis in California ranged from $1,529 to $46,204. Traditional market principles simply don't apply to health care.

Other peculiarities in the payment recipe have recently come to light as well, particularly regarding hospitals’ pricing guides. Each hospital determines its own prices, and according to a scathing exposé of medical costs by Steven Brill, published in the March 4 issue of Time, they have little to do with actual costs—or what the hospital will receive. Private insurance companies pay much less because insurers negotiate secret lower rates with the hospitals. And Medicare and Medicaid pay even less because they pay only what they believe such services should cost, often many times lower than what the hospital would otherwise charge. For example, the average hospital charge nationally for inpatient treatment of chronic obstructive pulmonary disease without complications is $18,064, yet the national average Medicare payment is just $4,946. But those unfortunate patients who are underinsured or without medical insurance altogether don't have such luck; they have to pay astronomical medical bills, a factor that contributes to nearly two-thirds of bankruptcies in the United States.

The national conversation is likely to continue as more reports like Brill's and the release of the CMS data bring the matter to the attention of health care professionals and consumers.—Carol Potera

© 2013 Lippincott Williams & Wilkins. All rights reserved.

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