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HealthCare Checkup

The Seattle Times health-care team tracks the local impact of the Affordable Care Act.

October 1, 2014 at 6:01 AM

With huge variability in hospital prices, patients must beware

A comparison of costs for the treatment of heart failure in Washington, from Washington Health Alliance.

A comparison of costs for the treatment of heart failure in Washington, from Washington Health Alliance.

The American health-care system is befuddling in so many ways, but the variation in hospital prices is among the most confounding.

The price for back surgery at Yakima Regional Medical and Cardiac Center can cost $46,000 — three times as much as it costs at Seattle’s Virginia Mason Medical Center. If you’re looking for knee or hip replacement, at $92,000 you could wind up paying four-times more at Multicare Good Samaritan Hospital in Puyallup than the $23,000 price tag at Wenatchee Valley Hospital.

Across the state and for services ranging from urinary tract infections to strokes, the prices for care are two, three or even four times more expensive from one facility to another.

And with insurance plans boosting the amount of costs that patients have to pay while covering smaller networks of hospitals and doctors, these price differences can hit consumers hard.

“Understanding hospital sticker prices in advance of a hospital stay can help both insured and uninsured patients reduce sticker shock,” said John Gallagher, spokesman for Washington Health Alliance, a nonprofit that released the cost comparisons in a new report.

“Because more out-of-pocket costs are being shifted to consumers and because unpaid medical bills have become a leading reason for personal bankruptcy, it’s important for health consumers to understand the financial risks they might face as patients―whether they have insurance or not,” he said in an email.

The report from the Health Alliance, which tracks medical quality and costs, comes from data collected by Medicare in 2011 and 2012. The sticker prices represent the amount that hospitals billed the federal government for the services. The federal government released a similar study last year.

What Medicare actually paid the facilities was dramatically less than the billed prices. Consider that $92,000 charge for knee or hip replacement. Medicare paid the Puyallup hospital $12,363 on average for the procedure. That’s because the government pays for services according to its own prearranged formula. And the prices it pays generally vary little from site to site, regardless of the hospital’s asking price.

Private insurance companies also negotiate prices with hospitals and likewise don’t pay the requested price when settling claims for their customers. But someone who is uninsured or treated at a hospital outside of their insurance plan’s network could face the full charges.

Part of a chart comparing prices for the treatment of pneumonia at Washington hospitals, from the Washington Health Alliance report: "Hospital sticker shock: A report on hospital price variation in Washington state."

Part of a chart comparing prices for the treatment of pneumonia at Washington hospitals, from the Washington Health Alliance report: “Hospital sticker shock: A report on hospital price variation in Washington state.”

Shrinking networks, rising deductibles

Sticker prices are becoming increasingly important. Insurance companies are looking for new ways to control costs after the passage of the Affordable Care Act, which requires insurance plans to cover basic services and ban insurers from denying people coverage. One of those cost-cutting strategies is selling plans with networks that cover fewer hospitals and doctors.

A national study found that approximately 70 percent of silver-level insurance plans (those offering a middling level of benefits) sold on insurance exchanges across the country have what are called narrow networks.

When consumers are shopping on Washington state’s health exchange, called Healthplanfinder, the website has a filtering tool that allows people to see only the plans that include their preferred doctor or hospital.

But even with that tool, consumers are advised to double check with the insurance company if they’re set on getting coverage for certain providers.

“Changes can occur at any given time,” said Michael Marchand, communications director for the Washington exchange. The exchange updates the online network information monthly, he said, but “these changes happen frequently.”

The Health Alliance report reveals that it’s hard to predict which hospital will charge more than another. There are no apparent cost trends whether a hospital is in a rural setting or urban one, whether or not they’re associated with a university, or even whether they’re a nonprofit, government owned or a private facility. The prices are all over the place.

Part of a table comparing Seattle hospital prices for different procedures, taken from the Washington Health Alliance report: "4 For more about the Alliance: www.wahealthalliance.org For the Community Checkup report: www.wacommunitycheckuporg/ Hospital sticker shock: A report on hospital price variation in Washington state."

Part of a table comparing Seattle hospital prices for different procedures, taken from the Washington Health Alliance report: “Hospital sticker shock: A report on hospital price variation in Washington state.”

On its website, the Washington State Hospital Association tries to explain the variability. It cites nine factors that can influence costs, including the amount of Medicare and Medicaid patients being treated, the use of new technology, staffing costs, the frequency that a certain procedure is performed, and if the patient mix includes more severely sick or injured people.

Limits on transparency

Because of the divergent costs, consumer advocates and others have pushed for more transparency in health-care pricing so patients can make informed decisions.

Earlier this year state lawmakers approved the creation of a database of costs and quality. But lobbying efforts by insurance companies resulted in a database that will have incomplete information. Some medical clinics are taking steps to share costs on their own, including The Everett Clinic, which is publishing some prices online.

But even educated consumers can’t safeguard themselves against all unexpected medical costs.

Recent reports in the New York Times show that hospitals are increasingly using contract doctors. So even if a hospital is in an insurance plan’s network, a doctor might not be. That means the patient is responsible for their fees — even for services in the ER or care given by random providers lending a hand to doctors covered by insurance.

Comments | Topics: Affordable Care Act, All-Payer Claims Database, health insurance

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