Data Reveals Drastic Differences in Hospital Bills for Similar Care

May 8, 2013

A procedure could cost you tens of thousands of dollars more at one Charlottesville hospital than at another.

Data released Wednesday by the federal Centers for Medicare & Medicaid Services reveals large disparities in pricing among hospitals in central Virginia as well as across the country. The data outlines how much hospitals charge for the 100 most common inpatient procedures.

For example, the cost of a major cardiovascular procedure at UVa. Medical Center is listed at $107,266. The same operation at Martha Jefferson Hospital is priced at $50,599. UVa.'s average charge for spinal fusion is $120,839. Martha Jefferson lists it at $64,469.

Health care is one of the most highly-regulated industries, but when it comes to how hospitals determine how much they charge for their work, there is no standard they have to follow.

"That's left to individual hospitals to decide, and that's where we get that variation in pricing differences," said Elliot Kuida, the chief operating officer at Martha Jefferson.

Kuida says many factors go into pricing decisions, but the primary concern at Martha Jefferson is making sure they are below or near the Virginia median of prices for procedures.

Meanwhile, UVa. looks at a different set of peers to set prices.

"At UVa., we benchmark it to academic health centers, so we benchmark our prices to Duke, Wake, Hopkins, Vanderbilt," said UVa. Medical Center chief financial officer Larry Fitzgerald. "When you benchmark us against an appropriate peer group such as that, we benchmark very well."

The amount a hospital charges is not necessarily what they get paid. The government decides how much it will pay out of the Medicare charge -- regardless of a hospital's base charge, and insurance companies negotiate to bring the cost down. But uninsured patients, without the negotiating power, pay closer to the full list price.

"On the very small percentage of patients who are uninsured and have the financial resources to pay the bill -- and it's a very small percentage -- we don't even charge them what we charge. We give them a discount," said Fitzgerald.

So, if the vast majority of patients will never actually have to pay the full charge, why list it at that amount to begin with? Kuida says hospitals are required to set one price for everyone, regardless of what they actually end up paying.

"From a business perspective, we don't want to charge less than what we know we can get paid, and so we always want to try to make sure that our charges are greater than what we know we can get paid from the commercial insurers," he said.

The data released Wednesday is the first time the general public is getting an in-depth look at how hospital stack up when it comes to prices. The Centers for Medicare & Medicaid Services says the numbers are being unleashed "as part of the Obama administration's work to make our health care system more affordable and accountable."

Kuida says he does not anticipate future pricing regulations for hospitals. Fitzgerald says the charge structure should not be the main focus.

"The point really shouldn't be about charges. It should be about the underlying cost," said Fitzgerald. "That's the true issue that we're dealing with. The true issue is the cost of health care, not what we charge for health care."

For a full look at the data, click HERE.

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