Medicare Data Shows Huge Cost Disparity

The Fiscal Times

Everyone knows health care in the United States is expensive—but several new studies examining Medicare data offer the latest snapshot into the extreme disparity hospitals and doctors charge for their services.

It all depends on which hospital you go to and which provider you see.

Related: How Medicare Data Could Revolutionize Health Care

Take hip replacement surgeries, one of the most common elective procedures in the United States, for example. Medicare pays an average of about $50,000 per surgery to hospitals nationwide. However, that same surgery’s price tag shoots up to $223,373 for Medicare patients at Monterey Park Hospital near Los Angeles.

Meanwhile, the National Medical Center in Oklahoma bills Medicare a much lower average of $5,303 per surgery.

The disparity was noted in by experts at NerdWallet, who have conducted a number of new studies focused on how much the government pays hospitals and doctors for hip and knee replacement surgeries. These popular surgeries cost Medicare about $20 billion annually with the costs ranging widely from hospital to hospital.

Related: Female Docs See Fewer Patients, Earn $55,000 Less from Medicare

In fact, the top 10 most expensive hospitals charged nearly 12 times more than the 10 least expensive hospitals, NerdWallet found. Five of those hospitals are located in California.

Christina LaMontagne, NerdWallet’s VP of health, said the cost break down varies –but on average, procedures in California cost 69 percent more than the national average.

The NerdWallet analysis accounts for the total Medicare pays the hospital –this covers everything from doctor payments, hospital fees, anesthesiologists, and most importantly medical devices, which, experts suggest, are the major cost driver.

Though Medicare does not provide data on how much each hospital charges for specific devices, LaMontagne suggested that higher priced hospitals are likely charging higher prices for equipment. To demonstrate just how expensive equipment used in hip surgeries costs, she pointed to a separate study by Medscape, which found the average cost of hip implants ranged from $2,392 to $12,651.

Higher prices, better care?
The analysis also notes that higher priced hospitals don’t necessarily produce better outcomes. The researchers measured each hospital with their “Quality Benchmark” that takes into account the number of surgeries performed and their outcomes. Surprisingly, not one of the 10 most expensive hospitals exceeded the benchmark. The analysts found that patients at these hospitals were more likely to face an increased chance of infection, pneumonia, heart attacks and even death.

Meanwhile, the analysts said four of the least expensive hospitals exceeded the “Quality Benchmark” and may offer better outcomes to patients.

Payments to doctors
The experts also looked at physician payments, which account for about 12 percent of the total bill to Medicare. Unsurprisingly, they found a similar disparity in how much Medicare is paying doctors for hip replacement surgery.  

In 2011, for instance, Medicare paid doctors an average of $5,000 per surgery. However, the price varied greatly, with some doctors charging as little as $251 to as much as $40,736 per surgery.

How much physicians bill the government varies for a number of reasons, including whether their reimbursement rate is higher or lower, or whether their practice is private and not affiliated with a hospital. Some physicians also have agreements worked out with patients ahead of time so that Medicare only covers a specific portion of the cost.

LaMontagne said the new access to data is especially important to hip and knee surgery patients—who, unlike others, have time to plan ahead and research their options.  

“Do your own due diligence before having the surgery. Do research on the hospital, the doctors and the cost to know all of your options,” LaMontagne said.

Here are the most expensive hospitals for hip surgery:

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Source: Nerdwallet. Click To Enlarge

Least expensive -

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Source: Nerdwallet. Click To Enlarge

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