Magazine article State Legislatures

Uncovering Hospital Charges: Hospitals Are Reporting Their Rates for Various Procedures in an Effort to Satisfy Those Who Want More Transparency in Health Care Costs

Magazine article State Legislatures

Uncovering Hospital Charges: Hospitals Are Reporting Their Rates for Various Procedures in an Effort to Satisfy Those Who Want More Transparency in Health Care Costs

Article excerpt

Few consumers would buy a car, enroll in college or hire a remodeling contractor without doing some cost-comparison shopping. But when it comes to hospital procedures, prices largely have remained a mystery. Facilities each set their own charges and may negotiate with insurance plans and large employers for discounted rates, but they generally don't advertise prices.

With health care costs continuing to rise, however, finding ways to save is on the minds of not only individual consumers, but all payers of health care, including employers and governments. One way may be through greater price transparency of hospital procedures, which allows consumers to make smarter, cost-conscious decisions about their health care.

In May, the Centers for Medicare & Medicaid Services released prices charged for 130 of the most commonly performed medical procedures (from visits to a health clinic to open heart surgery) at more than 3,000 hospitals--in all, more than 170,000 different billed charges. The data included both the list prices (as initially charged to private health insurance companies and the uninsured) and the discounted rate (paid by the federal government for Medicare patients).

The data revealed that hospital prices can vary dramatically, even within the same community. For example, in New York City, one hospital's average charge for a complicated case of asthma and bronchitis was $34,310, with an average total payment of $8,597. At another New York City hospital, the average charge was only $12,391, with an average total payment of $6,692.

In Birmingham, Ala., the differences were even more dramatic. For that same complicated case of asthma and bronchitis, one hospital charged an average of $21,128 while another charged $8,932. The average total paid for Medicare-covered treatments in these Birmingham hospitals was $7,112 and $4,801, respectively.

The full report, by the Centers for Medicare & Medicaid Services, also found significant variations from state to state. The average cost of a joint replacement, the most common treatment for Medicare patients, ranged from $21,230 in Maryland to $88,238 in California.

American Hospital Association CEO Rich Umbdenstock believes that the health care financing and delivery systems need significant adjustments, including changes to the hospital "charging" system. But he does not believe hospitals are solely to blame for the significant variations in cost. "Variation in charges is a byproduct of the marketplace, so all parties must be involved in a solution, including the government," he says. The association and its members, he says "stand ready to work with policymakers on innovative ways to build on efforts already occurring at the state level, and share information that helps consumers make better choices about their health care."

State Databases, Websites and More

The government's release of the hospital charges nationwide made headlines, yet state lawmakers have been working for years to improve the disclosure process of various health care costs. Currently, 34 states require hospitals to report certain charges and reimbursement rates, and lawmakers in more than 30 states have introduced legislation to increase the availability of rates charged at hospitals.

Since 2000, 10 states have established statewide databases of statistical information from health insurance claims, with Maryland, Massachusetts, New Hampshire and Utah leading the way.

"Utah's new cost and quality comparison tools for public employees compare insurer contracted charges, not just the non-discounted billed charges," says Utah Representative James Dunnigan (R). …

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