It’s nearly unbelievable to average consumers, but well known to wonks: health care prices are impossible to come by. Even calling and asking about a specific procedure, as researchers recently reported, led to an “I dunno” from the hospital itself more than half the time.
But now, a little bit of light is being shed on this dark area of health care. Wednesday morning, the federal government released a massive amount of data: the prices that hospitals across the country charge for 100 of the most common inpatient treatments.
Skipping over the wonk for now, let’s dive in to some numbers right here in the Bay Area. They cast a spotlight on how random and wildly variable health care prices are.
I picked one procedure, a hip or knee replacement (“lower extremity major joint replacement”) without major complications.
A joint replacement is generally a procedure you would schedule in advance, not a race-to-the-hospital-life-or-death-spare-no-cost situation. You might think the range of prices would be somewhat narrow.
You would be wrong.
Coming in at the highest price in the Bay Area was the Regional Medical Center of San Jose, where the charge is just over $170,000. But if you drove across town to the Santa Clara Valley Medical Center, you could save nearly $100,000. Its average price for a hip or knee replacement is just under $75,500.
If you’re a Kaiser member, you can save even more. Kaiser Antioch charges the least for this procedure in the Bay Area. Its average charge is $43,628.
Before we go much further, you should know that what a hospital charges is generally not what it gets paid. The Medicare data also shows its average payment to each hospital for these 100 procedures. For the knee or hip replacement, Medicare paid Bay Area hospitals between $16,000 and $25,000 — in other words, far less than $170,000 or even $43,628.
In other words, price has nothing to do with actual cost.
The same is true for people with private health insurance. If you have health insurance, your insurance company has probably negotiated a rate with the hospital, so your insurer is likely paying a lower price too.
So, who gets charged the rack rate? Those with the least ability pay — people who lack insurance.
“These are the people who are hardest hit,” says Renee Hsia, an assistant professor at UCSF. “They really do face these sticker prices, and it’s horrifying.”
Hsia says these high hospital prices affect us all, albeit in a roundabout way. They “come back to us through our premiums,” she says. For people who have health insurance with a very high deductible — or must pay a percent of a charge as a co-pay, they too could be hit with a big bill after a procedure. It depends how the contract is written, Hsia says. For these people, shopping around could save a lot of money.
What about the roughly half of Californians who get insurance from their employer? They’re reliant on their company to negotiate with insurance companies. But this release of data will do little to help employers, argues Bill Kramer with the Pacific Business Group on Health. That’s because health plans negotiate prices directly with hospitals and physicians, he says, and that’s the price reflected in the premium employers are charged. The prices that are paid to hospitals and physicians are “what needs to be made transparent,” Kramer says. “That information is not currently available and it should be.”