Maine hospitals see broad price disparities, mirror national trend, study says
Rural medical centers that aren't able to benefit from economies of scale generally have higher prices, researchers say.
Maine's Mid Coast Hospital.
New research released by The Maine Heritage Policy Center has found significant variations in costs for certain procedures among Maine hospitals, sometimes representing thousands of dollars, or in a handful of cases, five times the amount.
Titled "Health Care Costs in Maine," the report found that, on average, medical care is most expensive in small, rural hospitals in northern and eastern Maine, and least expensive in urban hospitals in the southern part of the state.
This massive cost variation has been well documented across the country. A Yale study published last year found that hospital prices often vary by a factor of 10 or more across geographic regions. In 2013, for instance, the Centers for Medicare and Medicaid Services released data showing that a joint replacement in New York City can cost anywhere between $15,000 and $155,000. The cost of a pneumonia treatment in Los Angeles can vary by as much as $100,000 between providers.
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The Maine Heritage Policy Center said a number of different factors contribute to price variation. Geographic differences in wages and labor costs, a large expense category for hospitals, are important considerations, the group said. Rural medical centers that aren't able to benefit from economies of scale generally have higher prices; they have to maintain basic staffing, heat, electricity and security, while shifting the cost to the relatively few patients they serve.
But while there may be reasonable justifications for higher prices, the group said that non-competitive healthcare markets -- caused by a lack of either medical providers or informed consumers -- are one of the primary causes of the wide cost differences.
"The broad consensus among health policy analysts is that the absence of price transparency contributes significantly to price variation," the group said.
A brief from the Center for Studying Health System Change said recently that "providing information to enrollees about differences in what they will have to pay when using different providers" has a role to play in generating savings. A report by the Congressional Research Service, meanwhile, found that "price transparency leads to lower and more uniform prices, a view consistent with predictions of standard economic theory."
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Following that line of thinking, The Maine Heritage Policy Center suggested expanding the number of procedures in the state that are listed online, and raising awareness of price comparison tools.
However, the group cites multiple studies showing that price transparency alone may not be enough to encourage significant changes in consumer behavior. A recent Kaiser Family Foundation poll, for one, revealed that only about 6 percent of consumers compare hospital prices.
As a solution, The Maine Heritage Policy Center suggested providing incentives to motivate patients to shop for quality affordable care -- noting in particular a Chicago-based company, HealthEngine, which contracts with self-insured employers to offer their employees complete pricing and quality information for a wide swath of services. Employees get up to 60 percent of the cash savings between reimbursed costs and the actual costs.
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"Informed consumers motivated by financial incentives are the best antidote to the substantial price variation between Maine hospitals," the group said.
In the state, York Hospital was deemed the most affordable, followed by Central Maine Medical Center in Lewiston and Maine General Hospital in Augusta.
Twitter: @JELagasse
