Treating a patient with a brain hemorrhage at Kaiser Permanente Hawaii cost $30,000. The price for the same procedure seven miles away at Straub Clinic & Hospital is 80 percent higher at $54,000.
Why the $24,000 price disparity? That’s the question being asked by the Centers for Medicare & Medicaid Services, the federal agency in charge of Medicare, which for the first time Wednesday released a list of prices U.S. hospitals charge for common procedures.
"Currently, 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," U.S. Department of Health & Human Services Secretary Kathleen Sebelius said in a news release. "This data … will help fill that gap."
"Hospitals that charge two or three times the going rate will rightfully face scrutiny," Sebelius said.
The price list exposes some extreme differences around the nation. The average charges for joint replacement, for example, range from about $5,300 at an Ada, Okla., hospital to $223,000 in Monterey Park, Calif.
"It doesn’t make sense," said Jonathan Blum, Medicare deputy administrator. The higher charges don’t reflect better care, he said.
The disparities are too great to be explained by obvious differences among hospitals, such as a more expensive regional economy, older or sicker patients or the extra costs of running a teaching hospital, Blum said.
A spokeswoman for Straub’s parent company, Hawaii Pacific Health, said, "Hospital billing is a complex issue — one that is not easily navigated by the consumer."
"It’s important to note that the (prices) in the Medicare analysis reflect significant variation based on the amount of resources each individual patient uses," Shawn Nakamoto, Hawaii Pacific Health spokeswoman, wrote in an email. "The figures reported by CMS are only an average of multiple charges … and may include charges pertaining to diagnostic testing (labs, radiology), medications, supplies, operating room time, length of stay and whether the patient has secondary conditions that affect their care."
Nakamoto added that Hawaii Pacific Health is working with other hospitals in the state to create better transparency and clarity.
Stephen Kemble, president of the Hawaii Medical Association, a physician advocacy group, added that the cost of caring for uninsured and inadequately insured patients adds to billing disparities.
"Hospitals vary a lot in their exposure to the uninsured and under-insured," he said. "Depending on where they are located, and if they have a high burden of uncompensated care, they jack up prices wherever they can to make their budgets work. The inability of St. Francis Hospitals to make up for their high burden of Medicaid and uninsured is the reason those hospitals went bankrupt."
The price list released Wednesday on the website www.cms.gov will help lead to answers to the riddle of hospital pricing and pressure some hospitals to lower charges, said Blum, the Medicare administrator.
The database also will help consumers shop around, he said.
"As a consumer I would want to know why there is a difference in price if the service is the same," said Kapahulu resident Thomas Wang. "If I know the price difference and if I know I’m getting the same level of service then why would I want to pay more? Often now we don’t know how much it costs until after the fact, when we get the bill."
It should be noted the prices quoted in the Medicare list aren’t what most insurers or patients pay.
Medicare pays hospitals on its own fee schedule that isn’t based on the listed charges, Blum said. And insurance companies routinely negotiate discount rates with the hospitals.
On average, hospitals charged Medicare three to five times more than what the agency pays for a service, said Patti Unruh, a CMS spokeswoman.
Patients who are uninsured can be billed the full amount, but they may be eligible for some assistance.
Hawaii Pacific Health said they provide financial counseling to patients who are under-insured or uninsured and have a process to help patients estimate charges before hospitalization.
"We offer a significant discount to patients who are able to pay in full at the time they receive service and also offer discounted payment options," Nakamoto said. "If a patient is unable to pay for services, they are offered an opportunity to participate in our charity care program."
Hawaii Medical Service Association, the state’s largest health insurer, said it typically pays more for services than Medicare. HMSA also said it is working to lower costs by shifting contracts with hospitals and doctors from a volume-driven model to payments based on the quality of care.
Two national business coalitions, the Catalyst for Payment Reform and the Health Care Incentives Improvement Institute, gave Hawaii a failing grade earlier this year for consumer access to medical prices because the state has no laws that require medical care providers to make pricing information available.
Insurance Commissioner Gordon Ito said the state will likely apply for funding from the U.S. Department of Health & Human Services, which is offering $87 million to support rate review programs and help states publicly release pricing information useful to consumers.
The hospital pricing data were compiled by CMS and included the 100 most common procedures charged to Medicare in 2011 by roughly 3,400 providers.
"We expect patient advocate organizations will use this data and package it in a form consumers can use," Unruh said. "This is going to make the hospitals, make the amount that they bill, more open and come under more scrutiny."
The Associated Press contributed to this report.
