U.S. Hospitals Charging Widely Varying Prices for the Same Medical Procedures

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U.S. Hospitals
Charging Widely Varying Prices for the
Same Medical Procedures

A CMS report showed that the cost for the same treatment varies among
hospitals in different regions as well as in the same area or city

Earlier in the year, the Centers for Medicare and Medicaid Services (CMS)
released data for 3,330 hospitals which showed that the cost for the same
medical procedure varies widely across the U.S. What startled the public
and policy makers was that in some cases, the difference was 52 times

The data is based on bills submitted from almost every hospital in the
country in 2011 for the 100 most common hospital treatments and
procedures such as hip replacements, heart operations and gallbladder

Staggering Variations in Cost

Charges for chronic obstructive pulmonary disease (COPD) among hospitals
in the New York area varied from $99,690 per patient to $7,044. In the Los
Angeles area, the cost of treating the same pneumonia condition varied by
as much as $100,000 in the case of two hospitals. The cost of a joint
replacement in New York ranged between $15,000 and $155,000. A hospital
in California charged an average of $123,885 for a major artificial joint
replacement. This was seen to be much higher than other hospitals in the
Los Angeles area.


Variations in medical procedure costs per patient across geographical
locations in the U.S.

Chronic obstructive pulmonary disease (COPD) in the New York area
New Jersey - $99,690
The Bronx - $7,400

Heart failure
Denver, Colorado - $21,000 to $46,000
Jackson, Mississippi - $9,000 to $51,000

Joint replacement
Ada, Oklahoma - $5,300
Monterey Park, California - $233,000


An analysis of the data also showed that hospitals were charging a rate that
was significantly higher - three to five times - than the average amount of
Medicare reimbursement for the procedure.

Who is affected?

Medicare uses a system of standardized payments and does not reimburse
the amount that hospital charges for specific treatments. Private insurance

companies also do not pay the full charge to hospitals but negotiate
payments with them for certain treatments. Patients covered by Medicare
and those who have private insurance, are not directly affected by what
hospitals charge them.

Experts have pointed out that it is people without health insurance who are
likely to be hit when they are presented with hospital bills that have little
relevance to the actual cost of treatment.

Explaining the Cost Differences

Both hospitals and federal officials have put forward reasons for these
variations in hospital billing

-According to government officials, the variations could be explained by
the longer hospitalization needed by patients who are sicker

-Hospitals are known to raise charges to pay for technology upgrades
and education and research and to make up for their operational

-The prices of health care services may differ from region to area,
including labor costs and other local economic circumstances, though
this does not explain the variations in charges in the same city

-Teaching hospitals were found to have sent higher bills to Medicare.
Such medical centers have a higher cost structure and a higher volume
of patients with many health complications. Medicare pays a higher rate
to teaching facilities or hospitals in places where labor costs are higher

-Hospitals charge higher rates as they hoped to negotiate discounts with
private health insurance companies while managing their revenues.
Private health insurance companies usually pay more for the same
health care than Medicare does, which means higher premiums for the

Despite these explanations, there is still a lot of debate on the methods that
hospitals are using to fix charges. What really matters is the segment of the
population that is uninsured. Obamacare is set to change that with the
health insurance mandate that requires every individual to get coverage
starting in 2014 or pay a fine.

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