The price tag for a hip or knee replacement at Baptist Health’s Doctors Hospital in Coral Gables is bound to cause sticker shock: $208,602, the highest charge for such a procedure at any South Florida medical facility.
A little farther north, the quoted price drops substantially for the same surgery: $65,120 at Broward General Medical Center in Fort Lauderdale. That’s about $12,000 less than the national average for a joint replacement with major complications, according to new data the U.S. Department of Health and Human Services released this week.
The department’s Centers for Medicare and Medicaid Services analyzed what 3,337 U.S. hospitals charge for the 100 most-common inpatient procedures covered by Medicare, based on the 2011 fiscal year.
By making public the wildly varying costs of the procedures, the Obama administration said it hoped to increase transparency from healthcare providers and give consumers the power to be smarter shoppers for medical care.
“We want to start a dialogue about why, from Florida to Washington state, and even from hospital to hospital in Miami, there are such significant variations in healthcare costs,” said Patti Unruh, deputy director of media relations for Health and Human Services.
“We don’t fully understand the reasons,” she said. “But we want people to know that, when they go to the hospital for something, there may be another hospital two miles away that charges significantly less. We hope [the new data] gives folks the information they need to do some selective shopping.”
Jackson Memorial and the University of Miami Hospital are much less than two miles apart — they’re right across from each other along Northwest 12th Avenue — but they charge far different prices for the same procedures.
The University of Miami's average cost for a pacemaker implant was $127,000, about twice as much as the $66,000 that Jackson Memorial charged. Treatment for pneumonia cost about $32,000 at Jackson — and $60,000 at UM.
Similar cost discrepancies are apparent throughout South Florida and the rest of the country.
In Miami-Dade and Broward counties, inpatient charges to treat heart failure varied from a low of $31,000 at Imperial Point Medical Center in Fort Lauderdale to a high of $110,000 at Coral Gables Hospital. The same treatment in Denver hospitals ranged from a low of $21,000 to a high of $46,000, while the costs ranged from $9,000 to $51,000 in Jackson, Miss. The national average: $34,519.
The price disparities puzzled Jonathan Blum, an administrator with the Centers for Medicare and Medicaid Services. He said the charges “don’t seem to make sense to us from a consumer standpoint. There’s no relationship that we see to charges and the quality of care that’s being provided.”
The pricing variants revealed in the federally released data have the greatest effect on uninsured Americans, who often are billed for the full, hospital-mandated cost.
South Florida healthcare-industry experts said the price data has less of an effect on privately insured consumers, because their health-insurance companies pay pre-negotiated rates for services. Still, insurance companies set their reimbursement rates based on hospital prices; as hospital prices go up, so do premiums.
Hospitals are loath to reveal their pricing lists out of fear of giving competitors a financial advantage.
But the disparity in prices for the same procedure at different hospitals could put pressure on healthcare executives to explain their cost structures, said Sal Barbera, a former hospital chief executive and now a Florida International University professor of health-services administration.
“Some hospitals will claim their patients are sicker,” Barbera said. “And some hospitals could be dealing with patients who have multiple complications. So somebody with diabetes may also have heart problems and other complications. Those kinds of multiple-complication patients will definitely add up charges.”
Hospitals typically don’t explain what goes into the cost of care. Teaching hospitals, for example, have to pay medical residents, and those costs may get passed on to patients.
“We have got to come up with a simpler way to pay hospitals based on true costs,” Barbera said, “because we really don’t know what the cost structure is the way they’re charging.”
Barbera said some hospitals may inflate prices simply because no one’s ever paid much attention to them — since few insured people actually pay or even see the advertised price.
“Medicare has a flat amount it will pay based on a predetermined formula,” he said. “In fact, that’s why Medicare went to that payment method, because of the inconsistencies in all these charges.”
Private insurers also do not pay the advertised price.
“They all pay on a negotiated fee,” Barbera said. “So the charges don’t mean anything to them either. They’re going to pay on a per diem amount to a given hospital.”
The patients who do see the full prices are typically the uninsured. And unless they’re independently wealthy, Barbera said, many uninsured patients simply don’t pay at all.
Low reimbursement rates cause hospitals to jack up the price of medical procedures well above actual costs, said Linda Quick, president of the South Florida Hospital and Healthcare Association, an advocacy and education group.
“The charges are always substantially higher than the costs, because the reimbursement usually comes somewhere in between the two — or not at all in some cases.”
With the release of the price data, consumers now have a greater ability to shop around, and hospitals have a reason to adjust inflated rates, Health and Human Services Secretary Kathleen Sebelius said.
“When consumers can easily compare the prices of goods and services, producers have strong incentives to keep those prices low,” Sebelius said. “Hospitals that charge two or three times the going rate will rightfully face greater scrutiny. And those that charge lower rates may gain new customers.”
Barbera said he thinks the government released the new data to push the healthcare industry to contain — or at least provide a better explanation for — their costs.
“It’s probably coming out because right now there’s a lot of focus and attention on healthcare reform, and I think that there’s a lot at stake,” he said. “Clearly what healthcare reform has done is it’s kind of stirred the pot, and now these things are coming out.”
Barbera said private insurance companies also could make use of the new Medicare data to examine their negotiated fees with hospitals.
“Typically, Humana, Blue Cross are going to pay more than the government pays for a particular service,” he said. “But they’re also going to use this information as well.
“Even though people are not on Medicare, the Medicare process has kind of a halo effect on other payers as well.”
Tony Pugh of the McClatchy Washington Bureau, Trevor Aaronson of the Florida Center for Investigative Reporting and Lazaro Gamio of The Miami Herald contributed to this report.
A previous version of this article misstated the costs of pacemaker implants at the University of Miami and Jackson Memorial Hospital.