September 25, 2018

5 charts that prove hospital pricing is even wilder than you think

Daily Briefing

    By Jackie Kimmell, Senior Analyst

    You've read the news stories: A $108,951 bill—after insurance—for an ED visit. A $5,751 bill for a patient who declined medical care.

    For patients confronted with these bills, they can present an unexpected—even shocking—financial blow. But even as journalists and politicians are increasingly digging into stories about "surprise medical bills," they often leave a root question unexamined: How did hospitals set these prices in the first place?

    The answer is complicated, of course, but it's often linked to hospital's chargemasters, which can list prices over 1,000% greater than the price set by Medicare. Hospitals have wide latitude to set the prices for any procedure or test that they want, and each hospital determines their price differently, leading to a remarkable amount of variation between providers. 

    How to grow market share with price transparency

    It should be said that very few people actually pay these prices. Hospitals will often argue that listing these charges is misleading, as Medicare, Medicaid and private payers don't pay these list prices. Yet while these pieces aren't what most patients pay, they are often the starting point for hospital negotiations with private insurers, and serve as a baseline for determining cost for those who are uninsured or out-of-network.

    To see how much variation truly exists in these numbers, we've analyzed Medicare's data files to see the range of average covered charges (the list price billed by the hospital) at every hospital in the US. View the variation in cost for five common DRGs below by selecting tab for the DRG of interest and then look at minimum, maximum and average prices in the list below.

    1. Spinal fusion (except cervical without major complications) (460)
      • Minimum list price: $15,084
      • Maximum list price: $469,924
      • Average list price: $117,784
      • Average Medicare reimbursement: $24,565
    2. Major joint replacement (without major complications) (470)
      • Minimum list price: $8,930
      • Maximum list price: $267,726
      • Average list price: $62,622
      • Average Medicare reimbursement: $12,244
    3. Heart failure & shock (with major complications or comorbidities) (291)
      • Minimum list price: $6,081
      • Maximum list price: $453,199
      • Average list price: $42,537
      • Average Medicare reimbursement: $9,415
    4. Septicemia or severe sepsis (without mechanical ventilation, >96 hours, with multiple complications) (871)
      • Minimum list price: $7,903
      • Maximum list price: $281,370
      • Average list price: $52,168
      • Average Medicare reimbursement: $11,492
    5. Stroke (intracranial hemorrhage or cerebral infarction with multiple complications) (64)
      • Minimum list price: $9,646
      • Maximum list price: $300,831
      • Average list price: $57,579
      • Average Medicare reimbursement: $11,198


    Next, learn how to compete for patients in a cost-conscious market

    Read the study to learn how to produce consistent and accurate price estimates, train staff to explain variations in prices and payment responsibilities, promote transparency tools, and more.

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