Kokomo Tribune; Kokomo, Indiana

July 7, 2013

Health care costs vary widely from hospital to hospital

Federal data shows prices vary widely from one health care provider to another.

By Ken de la Bastide
Kokomo Tribune

---- — Most consumers will do comparison shopping when it comes to purchasing a car, major appliance or gasoline. Comparing hospital costs, however, can be a risky venture, experts say.In May the Centers for Medicare & Medicaid Services (CMS) released data comparing common procedures at hospitals throughout the nation. The data was compiled from hospital claims provided in connection with the top 100 patient stays billed to Medicare by approximately 3,400 hospitals.“The data show significant variation in charges from hospital to hospital including those within the same community for inpatient services,” the Department of Health and Human Services (HHS) said in a press release. “Hospitals determine what they will charge for items and services provided to patients and these charges are the amount the hospital bills.”As an example, HHS said nationally, the average cost for major joint replacement is $50,116. It's lowest, at $5,300, in Ada, Okla., and highest at $223,000 in Monterey Park, Calif. The average cost in central Indiana ranges between $42,000 and $51,000.

A number of factors influence the price of health care. Consumer advocacy not-for-profit group Common Cause Indiana has been working since 2009 on a hospital accountability study, said policy director Julia Vaughn.

“We’re trying to get the not-for-profit hospitals to report the number of charity cases and how much financial assistance they’re providing to patients,” she said. Charity can have a significant impact on pricing, Vaughn said.

Vaughn cautioned consumers about using the CMS report as a guide for selecting health care options. It's not all about how much a procedure costs, she said.“For the consumer, the available tools should address the cost and quality of care,” Vaughn said. “We need to worry about the quality of the care. We haven’t developed a correlation between cost and quality.”

The Indiana State Board of Health issues an annual Medical Errors Report, which compiles data submitted by all hospitals. It examines a number of areas that deal with quality of care, such as incidents of bed sores, foreign objects left in a patient, patient falls and number of cases that result in infection.Vaughn said when a consumer is looking for health care they should consider the number of procedures performed at a hospital and the percentage of people who develop complications. The data only paints part of the picture, she said.“The federal government is trying to put the consumer in the driver’s seat,” she said.She said the comparison of hospital costs has been discussed for the past 25 years and the nation is a long way from a point where accurate comparisons can be made from one provider to another. The problem remains that there is no easy way for consumers to gather data on cost, number of procedures and success rates of various providers.

Vaughn said the data should be viewed with some skepticism because it is not necessarily comparing “apples with apples.” Beyond the limitations of cost comparisons, she said some doctors are attracting the tougher, more expensive cases. Another factor is the income level of the health care provider's patients. In order to provide more charity care, hospitals need to make up the funds elsewhere.

"This is the start of the lengthy conversation about health care charges and why the variation is so wide," Vaughn said. "It's up to the hospitals to reach out to the consumer. The hospitals have been less than forthcoming with the information on how charges are determined. They need to do a better job of encouraging consumers to make decisions based on information that is being provided."

Vaughn said the CMS data should be used as a base line when comparing costs.She also said hospitals are investing in new technology, but fancy new buildings don’t mean better health care.“Hospitals have to be careful about a construction boom,” she said. Construction, she cautioned, should be a wise investment.“More hospitals don’t drive down the costs, it does the opposite,” Vaughn said. “When a new hospital is constructed and it’s half full, it results in higher costs to the patients.”

Regional comparisons

There is variation in the charges from Community Howard Regional and St. Joseph Hospital when it comes to various procedures. Both hospitals are not-for-profit and affiliated with different statewide hospital associations. St. Joseph is a part of the St. Vincent network and Community Howard is a part of the Community Healthcare network.

Kathy Young, CEO at St. Joseph Hospital, said price ought to be just one factor when consumers are making decisions about where to go for their health care.“Other important factors include the quality and safety of the care provided, the experience of the caregivers, recommendation from their family physician, access to care and financial assistance options,” she said.Young said another factor is the patient experience in terms of being treated with dignity and compassion.“Using only one number — price — won’t give the consumer the complete picture of value or affordability,” Young continued. “No patient should delay needed care because of cost. In order to keep health care affordable, St. Joseph Hospital has a number of financial assistance options available for people who need them.”

When asked for comment on the pricing data, Community Howard Regional Hospital provided information from the Indiana Hospital Association. CEO Jim Alender was unavailable for comment.In responding to the pricing data from CMS, the Indiana Hospital Association indicated what hospitals charge rarely reflects what is paid by government and private insurers. It said the focus should be on what hospitals are actually receiving as payment.

“Hospital charges vary because they reflect the individual hospital’s mission, the patient population it serves and the financing necessary to provide essential public services,” the IHA said. “A hospital that provides vital, highly specialized services, such as emergency room care 24 hours a day, seven days a week, and community outreach, has a different cost structure and pricing than one that does not.”

The number of charity cases provided by a hospital increases the overall cost to those paying for health care. The amount of reimbursement received through Medicare and Medicaid and from private insurance providers also factors into pricing, IHA said. Hospitals in the state have been laboring under reduced payments for Medicaid patients while the state wrestles with expanding the program. Indiana Gov. Mike Pence is seeking an expansion of the state's Healthy Indiana Plan, rather than the expansion of Medicare coverage as prescribed in the federal Affordable Care Act.

The association said hospitals are committed to providing price information to consumers.“For each hospital, there is a uniform set of charges,” the association said. “Sharing meaningful information, however, is challenging because hospital care is individually tailored to each patient’s needs. A hospital’s list of prices, called the chargemaster, is individual to each hospital. All hospitals are unique, and the needs of communities vary.”What consumers need is information about out-of-pocket expenses, the association asserted, which requires transparency from other stakeholders, particularly insurers.

However, consumers are likely to look at costs with even more scrutiny as more people are brought into the insurance marketplace in 2014. For a respiratory infection and inflammation with major complication or comorbidity, the report finds St. Joseph charged an average of $39,728 on billing for 43 claims. For the same code, Community Howard charged an average of $21,500 on 22 claims. If a patient's plan covers 80 percent of the total procedure cost and without factoring in deductibles, that could translate to an out-of-pocket cost of $7,945 or $4,300.

As consumer health care dollars continue to be stretched, this type of information may be more sought after and, with few alternative sources of information, the government's report is one of the only ways for consumers to compare their options. For uninsured people who pay for every procedure outright, the information could become a vital part of their decision-making process.

"Indiana is at the forefront," Vaughn said when it comes to educating patients. "Common Cause is trying to develop a consumer guide which would include information such as the number of procedures performed, complications and the cost."

Hospital cost comparison information can be obtained at the Centers for Medicare & Medicaid Services at http://go.cms.gov/16bZgrB.