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Hospital costs vary wildly for same procedure

ALBUQUERQUE, N.M. — Lovelace Medical Center billed Medicare an average of $58,724 in 2011 to install a drug-coated stent. Just across the parking lot, Heart Hospital of New Mexico, which Lovelace bought in August 2011, charged $69,586 for the same procedure.

By taking a short walk across Central Avenue to Presbyterian Hospital, the stent patient generated a bill to Medicare that averaged $53,401.

A quick bus ride to University of New Mexico Hospital meant a bill of $38,402.

The difference between the cheapest stent insertion average bill and the most expensive among the four hospitals was $31,184, according to hospital pricing data made available Wednesday by the federal government to the public for the first time.

Not that any of the hospitals collected the full bill. Medicare paid Lovelace an average of $21,520 in 2011 for inserting a drug-coated stent, Heart Hospital got $11,083, Presbyterian was paid $15,589 and UNM got $18,768. The most generous average payment was $10,437 higher than the lowest average payment.

The numbers are jarring and show a system with wide ranging variations in prices charged, but they may not be as meaningful as they might seem, according to some local hospital officials.

The charges vary a great deal among hospitals, but what they are actually paid is either set by Medicare or negotiated with insurance companies, said Stephen Forney, Lovelace Health System chief financial officer. Medicare payments vary by where a hospital is located, and hospitals like UNMH get higher payments because that’s how the federal government helps fund graduate medical education.

“Payments don’t vary a lot, just the charges,” Forney said. “So guess what? The charges don’t have anything to do with payments. This is political point scoring is what it is.”

The information isn’t even that unique, Forney said. Dartmouth Health Atlas has been providing billing and payment information for years.

Dale Maxwell, chief financial officer for Presbyterian Healthcare Services, applauds efforts to improve price transparency and said Presbyterian is working on a computer system that will let health plan members estimate their medical bills before they seek care.

“However, I do have concerns with the information that was released,” Maxwell said. The data are only for Medicare, and most medical providers lose money on Medicare patients, he said.

Nor is it clear if Medicare’s payment data among hospitals is comparable. Medicare payment is based on codes for a number of specific services. It isn’t clear if the sum of those specific services reported as “inserting a stent” is identical across hospitals.

“There is not a single clear explanation” for the widely varying prices hospitals charge for their services, said Michael Richards, UNMH executive physician in chief.

But to the individual patient it doesn’t matter.

At UNM, patients without insurance but who are not poor end up paying about the same rate as if they had an insurance company negotiating on their behalf, Richards said. Impoverished patients often get their care for free.

“Health care has an imperfect billing system,” Maxwell said. “It is probably one of the only industries that bills the same amount to all patients, then applies discounts to get to a net payment amount. A lot of it can be driven by contractual relationships with payers. Differences in bill charges can be based on the acuity level of a patient or what services are provided to the patient when in the hospital.”

What the Medicare numbers do reveal is a health-care system with tremendous, seemingly random variation in the price charged for services.

In the District of Columbia, George Washington University’s average bill for a patient on a ventilator was $115,000, while Providence Hospital’s average charge for the same service was just under $53,000. The price in Albuquerque ranged from $42,688 at Presbyterian to $60,162 at Lovelace.

Las Colinas Medical Center just outside Dallas billed Medicare, on average, $160,832 for lower joint replacements. Five miles away and on the same street, Baylor Medical Center in Irving, Texas, billed the government an average fee of $42,632. UNM charged $47,299 for the procedure, Lovelace charged $48,737, Presbyterian charged $50,251 and Heart Hospital charged $56,338.

In downtown New York City, two hospitals 63 blocks apart varied by 321 percent in the prices they charged to treat complicated cases of asthma or bronchitis.

“Historically, the mission of our agency has been to pay claims,” said Deputy Medicare Administrator Jonathan Blum. “We’ll continue to pay claims, but our mission has also shifted to be a trusted source in the marketplace for information. We want to provide more clarity and transparency on charge data.”

Hospitals nationwide showed a large variation for many common procedures.

For joint replacements, which are the most common hospital procedure for Medicare patients, prices ranged from a low of $5,304 in Ada, Okla., to $223,373 in Monterey, Calif. The average charge across the 427,207 Medicare patients’ joint replacements was $52,063.

A Washington Post analysis of the 10 most common medical procedures showed certain patterns by state. Hospitals in six states – California, Florida, Nevada, New Jersey, Pennsylvania and Texas – routinely had higher prices than the rest of the country.

Hospitals in more northern states, such as Idaho, Montana and North Dakota, tended to have the lowest prices.

For-profit hospitals tended to bill Medicare at a 29 percent higher rate, on average, than nonprofit or government-owned hospitals.

How consumers might use the new data remains to be seen. Some advocates for greater transparency in health care worry about releasing costs without any information about quality.

“I think a lot of politicians are thinking more about transparency as a principle than actually creating a strategy that would help consumers purchase health care,” said Paul Ginsburg, president of the Center for Studying Health System Change.

The Washington Post contributed to this story.