Costs can vary widely for same medical procedures
Drivers wouldn't buy gasoline at a pump where prices aren't posted.
Not many people purchase a car or a house without haggling with the seller.
Yet, few Americans pay attention to their own health care tab at a time when those mounting expenses account for 16 percent of the economy.
Health care experts say a big reason for this is that most people have insurance through an employer or the government, so they may pay a little for a service -- but they don't pay full price. Another reason is the actual costs for health care such as complex surgery, an MRI, a colonoscopy or even routine blood tests are among the nation's best-kept secrets.
A Tribune-Review investigation exploring health care costs finds the price for identical medical procedures differs widely across the United States, not only by region, but even within the same hospital or clinic. Cost also depends on who pays -- an insurer, Medicare or you -- and the differences can amount to thousands of dollars.
The newspaper found that hospitals, doctors, insurers and the government cloak actual health care costs from the public through contractual agreements, often labeled as "proprietary," and through the use of complex reimbursement formulas. The system typically rewards providers with more money for ordering tests or performing procedures regardless of the cost -- or sometimes medical need.
"There's no way to figure out how much anything is going to cost you," said Ed Larkin, 70, of Baldwin Borough, a retired construction estimator. "It's like going to Giant Eagle and you find out nothing on the shelves has a price. You fill up your buggy and only when you check out do you find out how much you're going to pay. It's ridiculous."
Using publicly available Medicare data, studies of certain health care costs by private companies and nonprofit groups and data obtained for some national health insurers, the Trib found:
-- For the same magnetic resonance imaging (MRI) scan of the lower back, Aetna members could pay more than $3,100 in South Texas or less than $300 in South Florida. Uninsured patients could be charged more than $4,600.
-- A cholesterol test can cost $11 from a national lab and $150 at a San Francisco hospital, according to Castlight Health, a California company that uses insurance claims to determine costs.
-- An MRI that costs Aetna members more than $1,300 at a hospital in Pittsburgh can be had for $425 at a Monroeville clinic.
-- Unlike most states, Maine publishes the average cost of 30 common medical procedures online. The Pine Tree State's data show Anthem Blue Cross and Blue Shield HMO members can pay anywhere from $537 to $3,151 for a colonoscopy, depending on location. The insurer's PPO members pay from $559 to $4,526.
Even at the same Maine hospital, the price depends on who pays. At St. Joseph Hospital in Bangor, Medicare pays $780 for a colonoscopy, while private insurers have negotiated rates that range from $1,445 to $2,306. The charge for uninsured patients is more than $2,600.
"There is, indeed, great variability in health care costs, not just in Maine, but throughout the country," said Chris Dugan, Anthem's spokesman. The differences are due to the insurer's individual contracts with hospitals, based in part on local market competition, he said.
-- The amount of care that patients receive -- such as how often they go for a follow-up visit -- varies across the United States.
Doctors in regions of the country that spend the most Medicare dollars "see patients back more frequently and are more likely to recommend screening tests of unproven benefit and discretionary interventions compared with physicians in low-spending regions," according to research published in the medical journal Health Affairs. "Higher spending appears to result, if anything, in slightly lower quality and worse outcomes."
In Miami, where Medicare spends the most money nationally at $18,199 per beneficiary, the Trib found patients are more likely to undergo imaging tests (such as CT scans and MRIs) or buy durable equipment (such as wheelchairs and catheters) than those in Minneapolis, where Medicare spending is about $7,400 per person. Twenty-five percent of Medicare recipients in Miami use home health care, compared to 5 percent in Minneapolis.
While more retirees settle in the Sunshine State, Miami remains more expensive even after adjusting for differences in costs and demographics.
The Pittsburgh region, which includes most of Western Pennsylvania and parts of southeast Ohio and northern W.Va., has the nation's highest average age of Medicare beneficiaries at 78.4 and ranks near the top for several cost indicators. For example, the city ranks second in the nation with nearly 27 percent of Medicare beneficiaries using inpatient care and fourth in the United States with more than 465 inpatient admissions per 1,000 beneficiaries. Pittsburgh costs Medicare $9,762 per beneficiary.
Private insurers see similar variations. In a never-published pilot study, Blue Cross Blue Shield Association found regional differences in cost and utilization when it looked at knee replacements among 110 million members at 18 related insurers. The study included Pittsburgh-based Highmark Inc., the state's largest health insurer with 3 million members in Western Pennsylvania.
The Health Care Cost Institute, a new nonprofit, announced plans last week to collect and analyze payment data from Aetna and three other private insurers. "We haven't had a really systematic source of information on utilization and cost for that group, which is the largest group in the United States with insurance," said Martin Gaynor, a Carnegie Mellon University professor chairing the group. "So the goal here is just to shine a light on what's happening with the privately insured population."
Differences in cost and quantity add up, especially at a time when federal lawmakers are looking for ways to slash the nation's budget deficit. Medicare would save $41 billion per year from its annual budget of nearly $569 billion in fiscal year 2011 if all of its 306 hospital referral regions nationwide were limited to the lower beneficiary average in Minneapolis versus the Miami cost.
But instead of trying to save money, some lawmakers want to spend more. The Institute of Medicine, an independent nonprofit, was commissioned by the federal government to recommend changes that could give more money to regions that spend less. Doctors and hospitals in high-spending regions argue they have to spend more because they treat more poor, uninsured patients and deal with more complicated cases.
Joseph Newhouse, a Harvard University health policy professor who chairs the Institute of Medicine's task force, said some members of Congress from relatively low-spending Medicare regions "feel they're not getting their fair share, and the representatives from high-spending districts feel these differences are justified."
Rewarding quantity over quality
The stakes for resolving differences in price and utilization are high. Americans spend $2 trillion a year on health care, and eliminating waste has emerged as a priority in Washington.
"We'd save billions and billions of dollars," said Dr. Jack Lewin, CEO of the American College of Cardiology. "I'm telling you, this is big, big money, and it's the opportunity that's out there."
The American health care system favors hospitals and doctors that order many tests and procedures, yet punishes those focused on keeping patients healthy, several experts told the Trib. Simply slashing reimbursements, however, does not work, they said.
When Medicare decides to start paying less for a particular test or procedure, as it has in the past, doctors simply order more tests, said Dr. Denis Cortese, director of the Health Care Delivery and Policy Program at Arizona State University and emeritus president and CEO of the Mayo Clinic in Rochester, Minn. If the reimbursement for a colonoscopy goes down, doctors react by encouraging patients to have them more often.
"They can make up that lost income by doing more of them," Cortese said. "Absolutely, I think it is a cognitive decision."
Patients trust what their doctors suggest, largely without paying attention to price. "It really is in the patient's best interest to shop around," said Catherine Marshall, business manager of Monroeville Imaging Center.
Popa Banks, 57, of Stanton Heights needed a lower-back MRI, and earlier this month his doctor recommended he go to the Monroeville center. "I didn't even look at the cost," he told the Trib.
The charge for the MRI there is $1,000, but Banks' insurance through Blue Cross Blue Shield has a negotiated payment rate for the MRI at $553.50, Marshall said. Whether Banks has to pay any part of that depends on his specific plan and deductible.
Before people were asked to pay more out-of-pocket expenses, Aetna spokesman Walt Cherniak said, patients got used to buying a Cadillac for the cost of a Yugo.
Put another way, Highmark CEO Dr. Kenneth Melani said, "If cars were sold using (health) insurance, everybody would be driving a Mercedes."
Highmark does not give its members specific prices -- only ranges for common services.
"People really don't expect that we're going to give them an exact dollar amount," said Debra Miller, Highmark's product consultant.
Not so, said Susan Cosgrove, who owns a marketing firm in Pittsburgh's Oakland neighborhood and has paid as much as $23,000 a year in premiums for Highmark insurance for her small business.
Her husband recently got a chest X-ray that cost $415 and she wondered if they could've gotten it for less somewhere else. Even though Highmark paid all but $10, Cosgrove said premiums for small-business owners like her continue to escalate to unaffordable levels.
"We don't have the information -- the tools -- to make different decisions, and to help bring about the major change our health care and insurance system needs," Cosgrove said.
Health care costs matter
Aetna provides its members the actual price for common procedures from various providers, and even calculates a person's out-of-pocket costs based on their deductible and type of insurance. When Aetna reached a contract with UPMC this year, the insurer insisted that it be allowed to provide prices to members, said Peter McClung, Aetna vice president of client management.
It will take changing how the money flows to really change behavior, said Scott Malaney, CEO of the Blanchard Valley Health System in Findlay, Ohio, who headed a task force for the American Hospital Association on variations in health care prices and utilization.
"If we as Americans had to make some sort of choices, demand choices, like we do in everything else in our society, I don't have much doubt that variation would go down, quality would go up and cost would go down," he said.
Detailed cost and quality information would help employers who provide insurance, too, said Greg Paradiso, compensation director for Glatfelter, a York-based paper company that spent about $30 million last year on health care for its approximately 3,000 employees and retirees and their 5,000 dependents. Paradiso serves on a panel for the Pennsylvania Health Care Cost Containment Council, charged with finding a way to make cost information public.
With prices and quality data, Glatfelter could help its employees find values, he said.
"Without that information, we can't steer employees to the better hospitals," Paradiso said. "To be honest, hospitals and doctors are not always keen on sharing that information."
Other employers fed up with trying to get insurers and hospitals to break their silence have started using their employees' health care receipts to identify savings.
San Francisco-based Castlight works with large firms, such as Safeway grocery stores, to reverse-engineer medical bills and identify where savings occur. The company found price differences in one southern California city ranging from $19 to $55 for an electrocardiogram and from $93 to $213 for a cardiac stress test.
"The idea here is not to say that you shouldn't be able to get labs that are expensive and convenient, but that people should know what that costs," said Dr. Dena Bravata, Castlight's chief medical officer. "They should be able to at least know that these differences exist."
In Maine, where the state Health Data Organization spent several years putting costs for a limited number of procedures online so the public can access it, state officials and consumers would like to see more procedures and prices included.
Kathy Day, 62, a retired nurse who lives in Bangor, said the orthopedic surgeon who performed arthroscopic knee surgery on her uninsured son, Andrew, estimated the procedure would cost around $6,000. But once hospital, physical therapy and other costs were added on, the total tab was about $16,000.
"If I'm going to buy a car, I get a price," Day said. "I can't do that if I go to the hospital. Why is that? They should be able to tell me how much it will cost me when I go in. Everything is a secret."
To read the Trib's "Code Green: Bleeding Dollars" series on waste in national health care costs, click here .