Federal information shows cost variation among hospitals

by Jaclyn Cosgrove Modified: May 8, 2013 at 9:58 pm •  Published: May 8, 2013

A drive from Oklahoma City to Tahlequah down Interstate 40 would probably take about three hours.

But it could possibly save you thousands of dollars if you're looking for a place to have joint replacement surgery.

The scenario is one of the take-aways from data released Wednesday from the federal government's Centers for Medicare & Medicaid Services.

The information lays out the average amount of money hospitals across the nation bill Medicare and the average amount Medicare pays them for the care they deliver.

Health and Human Services Secretary Kathleen Sebelius said the prices hospitals charge, as shown in the data, can vary dramatically, even within the same communities, in ways that cannot easily be explained.

“When consumers can easily compare the prices of goods and services, producers have strong incentives to keep those prices low,” she said. “That's really a market theory, and that's how markets work. But even basic information about health premiums or hospital charges has long been hidden from consumers.”

For example, Tahlequah City Hospital in northeast Oklahoma charges an average of $26,831 for a joint replacement for a lower extremity. Meanwhile, the average amount hospitals in Oklahoma City charge ranges from $28,194 to $78,071.

But whether these amounts are close to what patients actually pay is up for debate.

Out of pocket?

Rick Snyder regularly works with hospitals on reimbursement issues, including Medicare, Medicaid and private insurance.

How useful is the data to an insured Oklahoman who wants to price shop hospitals?

“Not very,” said Snyder, the vice president of finance and information services at the Oklahoma Hospital Association. “It's interesting, and there is a lot of variation, but in terms of what people really care about — it's what the care is going to cost them out of pocket, and that's usually (based on) what's their insurance plan's deductible (and) coinsurance, and those things are usually not related to the amount the hospital charges for the service.”

People with insurance are likely to pay a predetermined amount. In most cases, insurance companies have agreements with hospitals that determine the amount the hospital will receive, regardless of what the hospital's total charges are, he said.

For example, Mercy Hospital Oklahoma City charges an average of $18,240 for treating pneumonia, according to the CMS data. An insurance company might have an agreement with Mercy that it will pay $4,000. The patient's out-of-pocket expense is usually based on that $4,000, not the $18,240.

Mercy Hospital officials could not be reached for comment but released a statement, explaining how the hospital's pricing structure is based.

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by Jaclyn Cosgrove
Medical and Health Reporter
Jaclyn Cosgrove writes about health, medicine and fitness, among other things. She graduated from Oklahoma State University with a news-editorial and broadcast production degree. Outside of work, she enjoys riding her bike, taking pictures of...
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