Inpatient price variation may be justifiable, hospitals claim
Just as there is with quality, there is significant variation in pricing among hospitals
A “huge variation” in inpatient pricing between hospitals in the state of Washington is “putting some consumers at financial risk,” according to a recent study by the Washington Health Alliance. But the state’s hospitals are questioning the report’s conclusions, claiming that price variation should not be surprising.
“Depending on the design of their health insurance plan, or if they are uninsured, consumers may be hit with large, unexpected medical bills after receiving treatment in a hospital,” wrote the authors of Hospital sticker shock: A report on hospital price variation in Washington state.
“The results of this report confirm what the Alliance and others in the healthcare community have always suspected: just as there is with quality, there is significant variation in pricing among hospitals,” asserted Nancy Giunto, WHA’a executive director, in an introduction to the report. “However, the magnitude of price variation is much larger―an eye-popping 300 percent to 700 percent for the 100 most common inpatient treatments.”
The alliance’s report analyzed the average amounts billed to Medicare by Washington hospitals for 12 common inpatient procedures and the amount covered by Medicare.
[See also: Price transparency pressures.]
But Mary Kay Clunies Ross, vice president of communications and public affairs for the Washington State Hospital Association (WSHA), says it really isn’t “surprising that there’s variation between costs and charges of somewhat similar medical events between hospitals.”
“Hospitals are very, very different in what they do and how they do it,” Clunies Ross said. “There might be more variations for some procedures than others, but it takes a lot more analysis to know whether it’s inappropriate or not. It may be that it’s totally appropriate.”
A hospital that has the staff and resources for specialty treatments shouldn’t be expected to price its procedures and treatment at the same level as a facility with less expertise or resources, she said. “We want our Level 1 trauma hospital to be an extraordinary place where they have the capacity to do extraordinary things,” Clunies Ross said.
The real issue, she said, is “not just that Medicare pays less than charges, it pays less than cost. That’s the thing the alliance missed, though it’s certainly not news to hospital CFOs that Medicare pays less than the cost of care.”
“What I really do worry about, and I think this probably is a concern for any publicly minded CFO, is that people will feel they are being taken advantage of because there is price variety,” Clunies Ross said. “But there’s price variety in a lot of things we buy.”
[See also: Price transparency market to grow to $3B.]
The WHA says it hopes its new report will inform and empower Washington state residents seeking hospital care.
“Because more out-of-pocket costs are being shifted to consumers and because unpaid medical bills have become a leading reason for personal bankruptcy, it’s important for health consumers to understand the financial risks they might face as patients―whether they have insurance or not,” the WHA report affirmed.
Clunies Ross says the WHA report “sheds light on the medical provisions in a way that a lot of consumers have not had to think about it before.”
“It used to be that if you had insurance you were 100 percent covered, and if you didn’t have insurance you were 100 percent out of luck,” she said. “We’re entering a place where there are lot more shades of gray than there used to be. People have insurance but they have very high deductibles, so they’re paying a lot more costs up front than they ever needed to.”
