NYT Editorial: The Murky World of Hospital Prices

The New York Times

By The Editorial Board
May 16, 2013

Last week, the federal government made public a vast trove of information on the list prices charged by hospitals for a large array of procedures commonly performed on hospitalized patients. It was a good start toward providing greater transparency in hospital billing, which has long been shrouded in secrecy. But it fell short of providing full information that patients need to make informed decisions about which hospitals to use and which insurance to buy.

The data was compiled from hospital claims submitted to Medicare by more than 3,300 hospitals seeking fee-for-service reimbursements for the 100 most common inpatient treatments in fiscal-year 2011. The prices at issue — sometimes called “chargemaster” prices — are not what most people pay. They are far higher than what Medicare pays, which is close to the real cost of providing the service, and also higher than what private insurers pay because they negotiate for discounts.

The only patients likely to be charged the full listed prices are those with little or no insurance and no purchaser to bargain on their behalf. Many insured patients also face higher premiums or co-payments because their plans reimburse the hospitals based on discounts from the listed prices. The listed prices varied wildly from one part of the country to another and even within the same city or region, seemingly without any good reason or any relationship to the quality of care delivered.

For example, a Times analysis published Friday found that the Bayonne Medical Center in New Jersey typically charged $99,689 for treating each case of chronic lung disease, 17 times as much as Medicare paid in reimbursement. The price for a joint replacement with artificial hips or knees ranged from a low of $5,300 in a hospital in Ada, Okla., to a high of $223,000 at a hospital in Monterey Park, Calif., a 40-fold difference that cannot be explained by regional differences in wages, the sickness of the patients, or a hospital’s teaching responsibilities. The charge for treating heart failure patients in hospitals in Jackson, Miss., ranged from $9,000 to $51,000.

The huge differences in list prices have been posted on a government Web site. But for consumers to compare one hospital with another in a meaningful way, they need to know a lot more — including the rates that have been negotiated between hospitals and insurers, the listed prices for outpatient treatments, and the quality of care provided, a difficult measurement that is in its infancy.