Hospitals' charges can vary greatly for similar services

Federal data show differences in cost for same procedure

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Even a quick glance of the data released Wednesday by the U.S. Centers for Medicare & Medicaid Services shows stark differences in what hospitals charge for essentially the same service.

If a patient had a pacemaker implanted at Allegheny General Hospital in 2011, the hospital on average charged $56,364. At UPMC Presbyterian Shadyside, the average cost was $89,793, and at St. Clair Hospital in Mt. Lebanon, the average charge was $41,345.

Heritage Valley Sewickley, meanwhile, charged an average of $22,365 for the same procedure.

The information, which can be viewed online at www.cms.gov, lists average charges and Medicare payments for more than 3,000 U.S. hospitals in 2011 for the most common treatments and procedures. The data found wide variations across the country.

Few people end up paying the listed charges, as those who have health insurance would be responsible for only a pre-negotiated portion of the charges, and Medicare pays only a pre-designated amount based on a variety of factors.

PG graphic: Costs and Medicare reimbursements vary by hospital
(Click image for larger version)

But those without insurance could face a bill for the full charges.

The variation in charges also has cost implications for those who have insurance but are receiving treatment "out of network," an issue that will impact many southwestern Pennsylvania residents if UPMC carries through with its vow not to extend or renew its contract with Highmark after 2014 now that the insurer is building its own provider network.

The variations in cost can be startling, even for hospitals located only a few miles apart:

l For treating a patient in heart failure, Presbyterian Shadyside charged on average $31,320, AGH charged $18,538, St. Clair charged $9,971 and Heritage Valley Sewickley charged $7,103.

l For similar treatments for patients with pneumonia, Presbyterian Shadyside charged an average of $47,639, AGH charged $24,131, St. Clair charged $14,400 and Heritage Valley Sewickley charged $9,804.

l For major joint replacement or reattachment of a lower extremity, Presbyterian Shadyside charged $99,874, while AGH charged $40,892 and St. Clair charged $40,089. Heritage Valley Sewickley charged $19,496 for that procedure.

Local hospital officials, including those at UPMC and the West Penn Allegheny Health System, declined to comment on the data.

Pat Raffaele, vice president for advocacy and communications at the Hospital Council of Western Pennsylvania, said it "believes that transparency in pricing for hospital care is extremely important" and the council supports legislation that would require states to provide hospital charge and insurer information.

PG graphic: Cost comparison of three hospitals
(Click image for larger version)

A number of factors can be at play in determining hospital charges, said Stephen Foreman, associate professor of health care administration at Robert Morris University, including a hospital's overhead costs, the severity of a patient's condition and a patient's willingness to pay.

UPMC may charge more, he added, but "I'm not saying they're the bad guy at all. There are reasons they charge higher. They offer some of the finest care in the world, and we have them right here. There's a lot of infrastructure that goes into that that has to be paid for.

"I bet you have 10 departments that lost money at UPMC, where they're doing high-quality medicine they can't charge for because people don't have the money to pay for it."

Martin Gaynor, professor of economics and health policy at Carnegie Mellon University, said it would be a mistake for people to make medical decisions based on the government charge data. Higher charges do not necessarily mean higher quality and, depending on a health plan, a patient might even end up paying more at a hospital with lower charges, he said.

"The charge information could actually be misleading to you," Mr. Gaynor said. "What we really need information on is the actual prices that hospitals got paid."

The payment information -- what Medicare actually pays a hospital for care -- may be more useful because it more closely reflects the actual cost of care. Ms. Raffaele said Medicare payments cover about 91 cents on the dollar of the actual cost of care provided.

Making charge and Medicare payment information public can make consumers more sensitive to what their health care costs, Mr. Gaynor said. "And it may make hospitals think a bit harder about where they set their charges if the general public sees them."

The CMS data, Mr. Foreman said, also illustrate the growing demand for more information on health care costs and quality. He pointed to an initiative in the Philadelphia area in which a collection of labor unions, representing such diverse professions and trades as teachers and plumbers, are collecting data for their members on both costs and outcomes as just one example.

"The real problem is at the bottom," Mr. Foreman said. "Are our major hospitals inefficient? What they charge isn't necessarily any indication of how efficient they are."

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Steve Twedt: stwedt@post-gazette.com or 412-263-1963.


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