(Bloomberg) -- U.S. hospitals are charging prices that can be thousands of dollars different for the same medical procedures, even within the same towns, according to federal data released Tuesday.
The data from more than 3,000 hospitals that take Medicare, the government’s health program for the elderly, showed that in some cases costs can drastically vary for hip replacements, bone fractures and treatments for kidney failure. Three hospitals in and around the Denver suburb of Aurora, Colo., alternately charged $97,214, $46,457 and $28,237 to treat a respiratory infection with complications, according to one example.
The U.S. Centers for Medicare and Medicaid Services said it released the data for the first time to make the health system “more affordable and accountable.” The information adds to the scrutiny of what patients, insurers and the government pay for medical services as President Barack Obama’s 2010 Affordable Care Act aims to extend coverage to 27 million uninsured people.
“Hospital pricing is the craziest of crazy quilts,” says Ron Pollack, executive director of the Washington-based consumer advocacy group Families USA. “People who wind up paying the highest prices are people who are uninsured and who can least afford bearing this unaffordable burden.”
The Medicare agency, known as CMS, released the prices for the top 100 most frequently billed inpatient services at hospitals, such as pacemaker implantations, which it said comprise 60% of Medicare billings.
In New York City, the treatment of a hip or pelvis fracture without complications at Lenox Hill Hospital in Manhattan averages $38,588. Fifteen miles away at Coney Island Hospital in Brooklyn, the procedure was priced at $13,137 on average.
“Consumers don’t know what a hospital is charging them or their insurance company for a given procedure, like a knee replacement, or how much of a price difference there is at different hospitals, even within the same city,” Kathleen Sebelius, the nation’s health secretary, said. “This data and new data centers will help fill that gap.”
The hospitals located in and around Aurora were paid a fraction of what was charged for the treatment, according to the data. Pollack said the only people who face the full charges are those who aren’t represented by the government or an insurer, such as UnitedHealth Group Inc., the nation’s largest for-profit health plan company.
“As we expand health coverage for people, it’s even more important to have a serious agenda that brings together the twin concerns of quality of care and cost efficiency,” Pollack says.
The U.S. Department of Health and Human Services says it would provide grants for organizations to make the hospital pricing data more accessible to the public, so that people can better understand how hospitals derive their charges.
Researchers have long known that hospital costs vary even at places just a few miles apart. The Dartmouth Atlas of Health Care has studied varying medical costs for more than 20 years. The Medicare agency’s report is the first time, however, that wholesale data has been made available to the public at large.
The pricing data is “absolutely irrelevant” to most managed-care plans, which use their own methodology to determine what to pay hospitals, says Sheryl Skolnick, an industry analyst at CRT Capital Group in Stamford, Conn. Medicare bases some of its payments to hospitals on a ratio related to the so-called chargemaster prices released Tuesday, and a handful of hospitals, including Health Management Associates Inc., still have contracts with managed-care plans that are based on chargemaster prices, she says.
“When was the last time you went in and paid list price for a car?” Skolnick says. “That’s exactly what this is, a manufacturer’s suggested retail price.”
Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the industry’s Washington-based lobby group, says the government’s disclosure of the chargemaster prices may help turn debate to “the underlying cost of medical care.”
“This data provides needed transparency on the wide variation in prices hospitals are charging for services,” he says.
The data were released as the federal government and states are ramping up to open insurance exchanges beginning on Oct. 1 that will offer coverage to the uninsured, in some cases with federal incentives to help pay for it. About 40% of the people expected to gain insurance under the Affordable Care Act are expected to be covered by Medicaid, the U.S plan for the poor and disabled.
Republicans have faulted the law for not doing enough to tame rising health costs in the U.S. even as the growth slowed to about 3% a year from 2009 to 2011.
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