What hospitals charge can vary greatly

Complicated pricing systems and various market factors affect the price tag of a procedure from site to site

By Marissa Harshman, Columbian health reporter




The Centers for Medicare & Medicaid Services recently

released data on hospital-specific charges for various procedures. The charges vary from hospital to hospital, due to differences in hospital charge structures.

Major joint replacement

(without major complications)

PHSW — $48,558

Legacy — $31,892

WA state — $53,039

Kaiser — $28,633

OHSU — $40,784

Acute myocardial infarction

(heart attack with major complications, discharged alive)

PHSW — $46,295

Legacy — $43,322

WA state — $39,743

Good Sam — $62,150

St. John — $21,781

Spinal fusion

(without major complications)

PHSW — $71,615

Legacy — $50,279

WA state — $110,701


PHSW: PeaceHealth Southwest

Medical Center, Vancouver

Legacy: Legacy Salmon Creek

Medical Center, Vancouver

WA State: Washington state average

St. John: PeaceHealth St. John

Medical Center, Longview

Kaiser: Kaiser Sunnyside Medical Center, Clackamas

OHSU: Oregon Health and Science University and clinics, Portland

Good Sam: Legacy Good Samaritan Medical Center, Portland

Data provided by the Centers for Medicare & Medicaid Services.

The price tag for a spinal fusion surgery can range from $50,000 at one hospital to $71,000 at another — and that's just in Vancouver.

Take a trip across the Columbia River for the procedure, and you may see an $81,000 charge. Having the procedure performed in Seattle could result in a six-figure medical bill.

For the first time, the federal government has released the prices hospitals across the country charge for the most common inpatient procedures. The data — which was released by the Centers for Medicare and Medicaid Services in an effort to make the health care system more affordable and accountable — revealed the drastically different amounts hospitals charge for the same procedure.

In Vancouver, a major joint replacement at PeaceHealth Southwest Medical Center comes with a $48,558 bill. Legacy Salmon Creek Medical Center charges $31,892 for the same procedure.

The data also revealed the differences in charges between hospitals within the same system. PeaceHealth St. John Medical Center in Longview charges $29,546 for a joint replacement. Legacy Emanuel Medical Center in Portland charges $46,621.

The charge amount isn't the same thing as the cost of the procedure. Nor does it reflect how much the hospital actually receives in payment, said Mary Kay Clunies-Ross with the Washington State Hospital Association.

The listed charge anticipates the highest cost of a given procedure, even though the actual cost and actual charge may be less, Clunies-Ross said. The cost of a procedure can be influenced by a number of factors: the health of the patient, procedure complications and how long the person is hospitalized, for example.

"A given surgery can go very differently depending on the health of the patient," Clunies-Ross said.

At PeaceHealth Southwest Medical Center, one of the most common cases listed in the data is septicemia (an infection in the bloodstream).

One person may respond quickly to antibiotics and, therefore, recover quickly. Another patient may stay in the hospital a week for treatment.

"We're paid the same by Medicare and the insurance companies regardless of stay," said Tom Haywood, chief financial officer for the PeaceHealth Columbia Network.

And while a hospital may charge $50,000 for a procedure, that doesn't mean it will be paid that amount.

"The one thing that is most important about (the data) is, there's very little correlation between what the hospital charges and what the hospital gets paid," Haywood said.

PeaceHealth, for example, gets paid about 30 percent of what it charges for procedures, he said.

"The release of the data is, in my perspective, is going to be a bit confusing to the consumer for that reason," Haywood said.

Hospitals are required to charge the same amount for a procedure, regardless of the payer. But the payer — whether Medicaid, Medicare or a commercial insurer — doesn't actually pay that amount, Haywood said.

The Centers for Medicare and Medicaid Services pay hospitals certain rates for procedures, regardless of what the hospital charges. Hospitals negotiate various rates for procedures with commercial insurance providers. And in the case of the uninsured, hospitals may only receive a fraction — or none — of the charged cost.

For example, while PeaceHealth Southwest charges $48,558 for a major joint replacement, the average Medicare payment for the procedure is $15,593. Legacy Salmon Creek receives nearly the same amount, even though it charges $31,892 for the same procedure.

Years ago, however, the charge amount was significant, Haywood said.

Prior to 1983, the charge amount affected how much Medicare paid for a procedure. Then Medicare implemented a fee schedule, paying a set amount regardless of the charge, he said.

"As costs went up, the only place for hospitals to obtain additional payments was through private insurance," Haywood said. "Prices at that time affected how much insurance paid and prices were increased, in total, in order to get more out of insurance."

"Each hospital was doing it independently," he said. "Hospitals couldn't trade hospital data, so you ended up with some real discrepancies."

Pricing systems differ

Each hospital has its own system for determining charges.

Legacy Health has a policy in place that requires consideration of three factors when developing charges: procedure cost, the market, and payer or regulatory constraints, said Terrie Handy, vice president of revenue cycle operations for Legacy Health.

The charge should reflect the actual cost of performing the procedure, including supplies, labor and the general cost for running a hospital, Handy said. The hospital also uses available regional and state data on charges and reimbursements to make sure the charge is reasonable, she said. Finally, the hospital factors in state and federal regulatory requirements, as well as contractual terms, Handy said.

While the entire Legacy Health system follows the same policy, factors unique to specific hospitals can mean two hospitals charge different amounts for the same procedure, Handy said.

One hospital may require a higher intensity of care for its patients or may have more advanced technology that comes at a higher cost. One hospital may perform a small volume of a specific procedure, while another performs the procedure more frequently and more cost-effectively, Handy said.

Hospitals with higher amounts of uncompensated and charity care may also factor those losses into their charge amounts, she said.

"It's a very complex, challenging system," Handy said.

Adding to the complexity is the differences between marketplaces.

Some markets are competitive — such as the Portland-Vancouver market — and some are less competitive. In less competitive markets, negotiating rates with payers can be easier than in competitive markets, where care can be sought elsewhere, said Ken Cole, spokesman for PeaceHealth Southwest Medical Center.

"One thing (the data) definitely tells us is a pricing system for health care is convoluted," said Clunies-Ross with the state hospital association, "and it's hard to understand."

Marissa Harshman: 360-735-4546; http://twitter.com/col_health; http://facebook.com/reporterharshman; marissa.harshman@columbian.com.

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