Hospitals lift curtain on prices, revealing giant swings in pricing by procedure
The price to replace a hip or knee in the U.S. can vary dramatically, even within a single hospital, new data show. At a Sutter hospital in San Francisco, a procedure can range from $22,865 to $101,571.
It all depends on the patient's insurer.
As of Jan. 1, hospitals must publicly reveal the negotiated rates reached with insurers for services, a landmark shift in the sector notoriously opaque when it comes to pricing. The data offer a peek behind the curtain, exposing prices long kept a secret.
The hospital lobby fiercely opposed the move and tried to block it from going into effect by turning to the courts, but failed. Judges forcefully pushed back against the American Hospital Association's claims that the policy was unlawful and that some prices were "unknowable" and therefore hospitals could not publish them.
"Why is the price of the X-ray unknowable?" Judge David Tatel of the D.C. Court of Appeals asked AHA lawyers during a colorful line of questioning at oral arguments in October.
For employers, the new rules represent an opportunity to trim costs by kicking out high-cost providers. But compliance is spotty thus far, limiting that potential.
For consumers, questions remain on how useful the data will be. Ultimately, the price a consumer is on the hook for depends on their insurance benefits. Some experts have criticized the Trump-era policy because it does not reveal exactly what a consumer will owe, though it gets them closer than before.
Healthcare Dive analyzed the new pricing data released by a handful of separate health systems across the country and found dramatic price ranges for the same procedure, even within the same hospital. Prices swing widely between markets, too. Healthcare Dive examined the prices for joint replacements and deliveries, including caesarean sections.
While the swings can be eye-popping, the data are not surprising to some researchers and industry experts steeped in the U.S. healthcare system.
"The fact that the price for a knee replacement can vary from $23,000 to $100,000 at a single hospital in one area of the country just demonstrates the total insanity of American healthcare pricing," Niall Brennan, CEO of the Health Care Cost Institute, which is partially-backed by payers, said.
For the first time, it's possible to directly compare the prices each insurance company negotiated with a hospital for a single service like a hip replacement due to rules put forward in 2019 under former President Donald Trump's administration.
Joint replacements are among the most common surgical procedures. Typically, patients know in advance when they need to replace failing hips and knees for new joints, making it possible to shop around, unlike with emergency medical situations.
Part of the new rule is designed to help these patients calculate their potential costs. It's especially important for consumers with high-deductible health plans.
The prevalence of these plans has increased dramatically, exposing patients to a greater share of their healthcare costs with the hope that with more "skin in the game" they'll be more alert to prices and apt to shop around.
When shopping, consumers and employers will likely first notice the variation in prices for a single procedure.
For example, the price for a joint replacement at California Pacific Medical Center Van Ness in San Francisco ranges from a low of $22,865 to a high of $101,571.
In Chicago, at Northwestern Memorial Hospital, the same procedure to replace a joint ranges from $4,613 to $50,680.
In New York, a hip or knee replacement price may be anywhere between $14,202 to $45,387 at New York Health + Hospitals Elmhurst location in Queens.
At University of Florida Health Shands in Gainesville, price ranges from $8,114 to $66,734.
The swing in prices was also evident for both vaginal and C-section deliveries with ranges reaching nearly $55,000 between the minimum and maximum price at one location.
The outlier was Kaiser Permanente, an integrated system that serves as its own insurer and does not contract with other payers.
AHA defended the span in prices.
Costs can vary by region, facility and by patient, all of which can lead to a variation in prices, the lobby said in a statement.
Other factors go into the negotiated rates between insurers and providers, AHA said, including expected patient volumes, performance-based metrics and the population the facility serves.
"Rates reflected in these spreadsheets often do not reflect what is actually paid, due to individual episodes of care and adjustments as laid out in contracts," AHA said.
Tool for employers
Still, the "mind-boggling" price variations mean there might be cost-saving opportunities for employers, Ge Bai, a researcher and associate professor at Johns Hopkins, said.
Employers can kick out expensive hospitals from their networks and steer patients to other less-pricey ones, Bai said. They can also form purchasing alliances to improve negotiating power, Bai said.
This is a wake up call for the average business owner, Anne Ladd, associate director of purchaser innovation for the Purchaser Business Group on Health, said.
"You hate the high healthcare costs and, in fact, they're putting you out of business. But here's something you could do about it," Ladd said.
The data provide a roadmap to which hospitals employers should include in their networks. The caveat is the pricing data need to be paired with quality data.
Still, some resistance is often found in the C-suite, Ladd said.
Executives who compete for top talent want wide open health provider networks, seeing it as an edge to recruiting even though they know narrower networks can lead to price savings.
While a benefits expert at a mid-sized company may create a narrow network, an executive's spouse, for example, may want to go somewhere not in the network.
"And there's a pillow talk that happens. And the next thing you know that hospital is in the network," Ladd said.
Even though the government requires hospitals to share this information, not all facilities are doing so.
A review of 1,000 facilities across 27 states found that 30% of providers were not compliant with providing either a consumer-friendly file of prices or a machine-readable one, according to the firm Guidehouse.
The penalty does not have enough teeth, according to some critics including Ladd. The consequence for failing to comply with the rule is a $300 fine per day, which some critics called a pittance.
The lack of compliance makes it difficult to make meaningful comparisons within a single region of competitors and across markets in the U.S.
Plus, there is no central repository for all the data, forcing researchers to hunt and peck around thousands of hospital websites to find the information.
In January, shortly after the policy went into effect, CMS said it was auditing a sample of hospitals and probing complaints it had received about noncompliance.
More recently, CMS said the matter is still under review when asked if any hospital had faced a penalty for failing to comply with the requirement. "This matter is currently under CMS review. CMS looks forward to sharing additional information about this program soon," an agency spokesperson said.
Yet, Sutter Health in California did receive some praise for its compliance with the price transparency rule.
"I would like to give them some kudos because they're one of the few that really, really complied with the letter of law," Ladd said, noting her organization isn't always singing Sutter's praises.
Sutter previously reached a $575 million antitrust settlement with California Attorney General Xavier Becerra to resolve allegations the dominant system in Northern California drove up prices through its anticompetitive practices. Becerra now awaits a confirmation vote in the full Senate for his nomination to be HHS secretary.
For this story, Healthcare Dive collected data from five hospitals on negotiated rates with insurers. The five hospitals include Kaiser Permanente Oakland Medical Center, Sutter Health's California Pacific Medical Center - Van Ness, University of Florida Health Shands, Northwestern Memorial Hospital and NYC Health + Hospitals Elmhurst. These were selected because prices were accessible and locations are spread in different regions of the country. Data for each hospital was downloaded from its website (see below for links).
Data was collected for three services, determined by specific codes. The codes and corresponding descriptors are the following:
470 Major hip and knee joint replacement or reattachment of lower extremity without MCC
788 Cesarean section without sterilization without CC/MCC
807 Vaginal delivery without sterilization or D&C without CC/MCC
Many types of insurers were included in the prices beyond just commercial plans.
Links to download data on company websites:
Kaiser Permanente (prices effective December 2020)