The same blood test costs just over $10 in one part of the country but nearly $1,000 in another, while the price of a C-section can vary by nearly $25,000 within one market alone, a new analysis Health Care Cost Institute (HCCI) reveals.
For the report, HCCI looked at insurance claims from 34 million commercially insured U.S. residents to calculate pricing of common medical procedures across 112 metro areas in the United States. HCCI excluded the bottom and top 10% of prices in each area to limit the outlier effect.
The analysis found that the average prices for the same procedure varied significantly across markets as well as within markets.
For example, HCCI found that a caesarean delivery (C-section) in Knoxville, Tennessee, costs an average of $4,556. However, that same procedure in the San Francisco Bay area costs an average of $20,721. Similarly, a "common blood test" in Toledo, Ohio, costs $18, while that same test in Beaumont, Texas, costs about $443 on average, according to HCCI.
HCCI also found wide price variation within the same metro areas. For example, a C-section in San Francisco could cost anywhere from $15,165 to $39,272. Similarly, a metabolic blood test in El Paso, Texas, could cost anywhere from $144 to $952.
According to Sherry Glied, a health economist and dean of the Wagner School of Public Service at New York University, one major factor in price variation is how many patients an insurer sends to a specific hospital.
Popular hospitals frequently offer better prices since the insurance companies negotiate in bulk. "One person buys one hamburger, and another buys 1,000," Glied said. "And it completely makes sense that the guy who buys 1,000 hamburgers gets the better price."
However, the New York Times' "The Upshot" reports that market power also plays a role.
According to a study co-authored by Martin Gaynor, a professor of health economics at Carnegie Mellon University, hospitals generally get paid more in markets where there are fewer hospitals competing for patients. "Some of these really simple diagnostic tests—what the heck?" Gaynor said. "It does mean, in a sense, the market is broken in terms of problems with market power."
Jeanne Pinder, who runs the consumer-oriented website Clear Health Costs, has collected cash prices for medical procedures throughout the country, and said the only services that have predictable pricing are cash-only treatments typically not covered by insurance.
"When you get into MRIs, ultrasounds, and blood tests, they are crazy," she said. "The secrecy in pricing all over this marketplace encourages this behavior" (Sanger-Katz, "The Upshot," New York Times, 4/30; My9NJ, 5/1; HCCI analysis, 4/30).
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