Hospitals across Minnesota and the rest of the country are charging wildly different prices for similar types of care.
At Cambridge Medical Center in northern Minnesota, the average bill on a major joint replacement is $58,683, while Park Nicollet’s Methodist Hospital in St. Louis Park averages $22,788. The bill for heart failure and an electrical shock ranged from $35,723 at Abbott Northwestern in Minneapolis to $9,754 at Park Nicollet.
The first-of-its-kind data released Wednesday by the Centers for Medicare and Medicaid included 100 of the most common inpatient procedures at 3,300 hospitals during 2011. In some cases, hospitals were charging 20 times what the government’s Medicare program reimburses.
“What surprised us when we started looking at it is the wide variation in charges,” Jonathan Blum, acting principal deputy administrator for the Centers for Medicare and Medicaid Services, said in a conference call with reporters. “The reasons — our hypotheses driving that variation — didn’t add up to us.”
The charges have long been kept under wraps by hospitals that view the figures as competitive and proprietary. Federal officials admit their data is imperfect — it uses an average “charge master,” essentially a sticker price, that is not necessarily the negotiated amount that the government, insurers or patients actually pay.
But the figures nonetheless provide a first glimpse for consumers into how much health care procedures cost. It also reveals the most likely prices those without insurance are charged, officials said.
Joseph Schindler, vice president of finance at the Minnesota Hospital Association, acknowledged that the charge amounts are complicated and difficult to explain. Indeed, the charge master is “relatively meaningless” in the current system in which some reimbursements for some patient care are set by state and federal governments while others are negotiated by private insurers with varying amounts of market clout, he said.
“The health insurance side of the operation really subsidizes some of the Medicare and Medicaid shortfalls,” he said. “It exposes the fact that we have been living with for years. We have tried to advocate for better payments from both the federal and state levels, but with all the budget crises, it seems an easy way to cut expenses because health care is a major component of state and federal budgets.”
Minnesota is farther along than some other states in making costs more transparent, according to some national advocacy groups. The Minnesota Community Measurement provides health scores and clinic ratings. Some of the individual health plans rank hospitals by dollar signs as well.
A recent report from the Catalyst for Payment Reform, a consortium of businesses and labor pushing for more openness, gave Minnesota a B for cost transparency, while 29 states got a failing grade.
Still, the variety of charges was striking across many hospital systems in both rural areas and in the Twin Cities.
A spinal fusion ranged from $97, 873 at United Hospital in St. Paul, to $26,133 at the Mayo Clinic in Mankato. A diagnosis of esophagitis, gastric or other intestinal disorders was billed at $23,412 at the University of Minnesota Medical Center and $12,0409 at HCMC.
Allina making changes
When it came to heart failure, joint replacement and gastric disorders, hospitals in the Allina Health system posted among the highest charges while Park Nicollet was among the lowest.
Allina officials said in a statement that they have already made fundamental changes to the cost structure that may not be reflected in the government report.
“It’s important to remember that what a hospital ‘charges’ rarely reflects what it is paid by government or private insurers,” Allina Health said in an e-mailed statement. “Allina Health is moving away from charges to more value-based contracts. We strive for transparency and affordability and we are supportive of the move away from the traditional fee for service model to arrangements that support the Triple Aim [improve quality of patient care, enhance patient experience and lower cost].”
Nonprofit and charitable hospitals have come under fire in recent years for charging exorbitant rates for an aspirin while paying seven-figure CEO salaries, and the data is likely to raise new questions about why there is so much variation in prices.
“Consumers are going to be in a better position to be asking hospitals how much is this procedure going to cost,” said Wendy Burt, a spokeswoman for the Minnesota Hospital Association. “So we’re all going to have to get better at that.”