The CMS released data showing U.S. hospitals charge widely varying amounts for the same services and also illustrating the significant variation in how much Medicare pays for those services.
The database, posted on the CMS website, includes hospital charges for 100 most frequently billed discharges by the more than 3,000 hospitals reimbursed under the inpatient prospective payment system. The numbers reflect $66.7 billion in Medicare spending during fiscal 2011 and represent 7 million discharges, or 60% of the total Medicare IPPS discharges that year.
Patients are rarely billed or pay a hospital's nominal charges. Nor do the charges or their variation indicate the rates hospitals negotiate with insurers.
The administration, though, touted the release as part of an ongoing effort to increase price transparency in the healthcare system and said additional data on charges by hospitals and other providers could be released in the future.
“There is much more variation in what hospitals charge than in what Medicare pays,” said a CMS official speaking on condition of anonymity.
The agency views the undiscounted charge data release as “a first step.”
“This is data that we are 100% confident in and that we're comfortable releasing and we're looking at next steps,” said the agency official.
HHS has highlighted variations in the undiscounted prices hospitals charge for the same procedures. Specifically, joint-replacement charges ranged from $5,300 at a hospital in Ada, Okla., to $223,000 charged at a hospital in Monterey Park, Calif.
Few patients are charged the undiscounted rates, since Medicare and private insurers have their own discounted rates for care provided in hospitals.
“What hospitals charge and what they are paid are different things and the charges doesn't necessarily have a very strong relationship to the payments,” said Caroline Steinberg, vice president for health trends analysis at the American Hospital Association.
Steinberg blamed the higher charges on the effort by some hospitals to mitigate the financial impact of insurers demanding greater discounts on their standard charge lists, known as a chargemaster.
“But at the same time, federal regulations are tied to the chargemaster, so it is very difficult to actually make changes that lower your charges without affecting other parts of the system,” Steinberg said.
Jonathan Blum, director of the Center for Medicare at the CMS, discounted the likelihood that the differences in hospital charges are driven by variations in patients' health status, the provider's status as a teaching hospital or higher capital costs of some facilities.
“Those reasons don't seem very apparent to us,” Blum said in a call with reporters.
The impact of such large and varying prices for people without health insurance coverage has raised some concerns.
“Most perniciously, uninsured people are the ones who usually pay the highest prices for their hospital care,” Ron Pollack, executive director of Families USA, said in a news release. “It is absurd—and, indeed, unconscionable—that the people least capable of paying for their hospital care bear the largest, and often unaffordable, cost burdens.”
But Steinberg noted few uninsured patients pay the full undiscounted rate because the Patient Protection and Affordable Care Act required hospitals to implement a written financial assistance policy and to limit charges for patients qualifying for assistance to amounts billed to insured patients.
“So there really aren't very many people who get billed full charges and even fewer of those even pay,” she said in an interview.
The hospital trade group does not track how many people are charged the undiscounted rates. Steinberg highlighted the hospitals group's support for legislation sponsored by Rep, Michael Burgess (R-Texas) that would require the public release of what insurers and hospitals charge patients. However, hospitals generally do not support the release of rates for various procedures that they have negotiated with each insurer from which they accept payment.
“What we support is information that would be useful to consumers, so it would be what the consumers' obligation would be,” Steinberg said.
The new CMS data also showed wide variation in what Medicare pays hospitals for treating the same conditions. A CMS official blamed that variation, chiefly, on wide variations in the average morbidity of patients and local costs at different hospitals. Specifically, hospitals with sicker patients receive health status outlier payments and add-on payments based on the geographic location.
“So let's say one hospital is treating much, much, much sicker patients in a much more high cost area and they have a higher proportion of uninsured patients; yes, they would get paid more and they could be paid up to two or three times as much,” the CMS official said.
Those Medicare discounts appear unrelated to specific hospitals' undiscounted prices, the official said.
“There doesn't seem to be a real strong relationship between those adjustments that are made to Medicare payment rates and what the hospitals are actually charging,” the CMS official said.
The first-time release of the undiscounted hospital charges by CMS was paired with HHS expanding its efforts to encourage states to do the same. The agency announced $87 million in grants states can apply for to expand their collection and public release of provider charges and insurance rate information. More than 40 states require or encourage hospitals to publicly report information on their charges or payment rates.
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