Hospital Charges Vary a Lot: Big Deal or So What?



Baptist Memorial Hospital bills Medicare $51,152 for a drug-coated stent insertion, while Methodist Hospital bills Medicare $80,635 and St. Francis Hospital bills $82,211 for the same procedure. All three hospitals are in Shelby County.

To put in a pacemaker, the charges are $51,483 at Baptist, $76,490 at Methodist, and $61,614 at St. Francis. So it goes, for scores of medical procedures at nonprofit and for-profit hospitals all over the country.

What Medicare actually pays is another number, and the same goes for private insurance companies, employer-provided insurance, and the patient. So, assuming you know what a drug-coated stent insertion is, is this a big deal or one of those things like the national debt, public pension obligations, and food additives that is vaguely troubling but too complicated to worry about?

The question comes up following release of a massive amount of data on Medicare this week. The story was reported Wednesday, with some nice context and quotes, by The New York Times and The Washington Post and other news organizations.

For the first time, the federal government released the prices that hospitals charge for the 100 most common inpatient procedures. The charges have been mostly secret to the average person. What the numbers reveal is a health-care system with lots of variation in the costs of services.

This document dump required a fast computer and, at national newspapers, a team of reporters to sort and digest. A day later, the job was made easier by links such as this one in the New York Times that enable you to pick a city and a hospital and make comparisons.

Here are more comparisons for charges and amount paid (in parentheses) for hospitals and procedures in the Memphis area.
Chest Pain: Baptist $16,314 ($3,509), Methodist $17,821 ($4,157), St. Francis $30,960 ($3,509).
Renal Failure: Baptist $24,675 ($6,213), Methodist $31,944 ($11,771), St. Francis $46,993 ($10,428).
Major Joint Replacement: Baptist $36,477 ($12,209), Methodist $64,976 ($19,487), St. Francis $64,482 ($13,921).

Even with the help of our company's benefits and insurance expert, I found the data well-intentioned but overwhelming and not especially useful.

As a journalist I usually like disclosure, especially of financials. But this volume of data defies summary. In addition to the "amount billed" there are separate columns for "amount paid" and a ratio that compares the number to the national average.

As a consumer, choosing a hospital for a knee transplant by price shopping is not like choosing a grocery store, car dealer, or department store that promises to match or beat the competition's price. The decision is influenced by what insurance plans are accepted and other factors out of the control of patients. The simplest charges are anything but simple on a typical insurance benefits statement. I am looking at one for a visit to an eye doctor. The total charge was $100, the Humana discount $37.43, the copay $50, and amount Humana paid $12.57. For prescriptions, there is a billed cost, a copay, plan payment, and a Humana discount for each one.

Over the long term, this week's report on Medicare charges may result in lower costs to patients if hospitals are impacted the way mortgage lenders and brokerage firms were when their charges became easier to compare. But for anyone taking a bill to Hospital A with a comparison price from Hospital B or Hospital C and expecting a reduction, good luck with that.

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