Hospital prices for procedures vary in Valley
Average charges for common ailments such as chest pain and pneumonia at hospitals that serve the Alle-Kiski Valley vary so widely that in one case the difference between two hospitals' charges is more than $77,000.
That's according to federally released data showing how much hospitals charged Medicare in 2011 for the 100 most common procedures.
Excela Health Westmoreland charges about $22,000 for replacement of a major lower joint — a knee, for example — compared to nearly $100,000 at UPMC Presbyterian.
Hospital officials warn that the charge data is misleading because that isn't how much hospitals actually are paid. Medicare reimbursements actually are much less. The data also doesn't reflect how much a patient might pay, officials said.
“Payments are meaningless in determining how costly a hospital is going to be,” said UPMC spokeswoman Wendy Zellner. “They don't reflect cost. They're not looking at what it costs Presby to do ‘x' or ‘y.' ”
UPMC's hospitals, including St. Margaret and Mercy, routinely charged among the highest amounts for six of the most common procedures that the Valley News Dispatch compared.
Charges at hospitals in the Allegheny Health Network, formerly West Penn Allegheny Health System, which includes Allegheny Valley Hospital in Harrison, Allegheny General Hospital and Forbes Hospital in Monroeville, held the middle ground.
ACMH in Kittanning had the lowest charges.
There is not as much variation between average reimbursements. For example, Excela received about $11,000 from Medicare for lower major joint replacement, while UPMC Presbyterian received about $16,000 for the same procedure.
The reimbursement rates are more reflective of a hospital's actual revenue, administrators said.
“Only 10 percent of hospitals have a cost structure low enough to make money when they're paid the Medicare rate,” noted Excela Health CEO Robert Rogalski. “Our actual costs are slightly higher than what we get paid by Medicare.”
Medicare sets a base reimbursement rate for each procedure. Certain factors allow for higher payments.
“If you're a flagship, your amount is going to include amounts for teaching, low-income patients and managing these extremely complex cases,” Zellner said. “These costlier and complex cases get higher payments.”
Many hospital patients use Medicare, according to hospital data.
In the nine months ending March 31, about 42 percent of UPMC's revenue came from Medicare and 43 percent from insurance, according to their financial disclosure statement.
Within the Excela system, 51 percent of patients used Medicare, and 36 percent had private health insurance or paid out-of-pocket.
And in the Allegheny Health Network, 46 percent of revenue came from Medicare reimbursements, and 39 percent from private insurance in fiscal year 2012.
Hospital officials said the Medicare data doesn't tell the whole story.
“All it is, is charges and the reimbursement; that's not talking about quality,” said Pat Burns, chief financial officer at ACMH, the Armstrong County Memorial Hospital.
He added that there are two components that affect cost, labor and non-labor.
“For the labor, we try to make sure our productivity is measured against the standard to produce what we should be, and that we're paying competitive wages,” Burns said. “On the non-labor side, we try to make sure that we're buying the product at the lowest price possible.”
Allegheny Health System spokesman Dan Laurent said higher charges don't always equal higher quality care.
The hospital chain's charge for treating chest pain was between $15,000 at Forbes to $17,000 at AGH, compared to between $13,000 and $26,000 at UPMC hospitals and $11,000 at Excela Westmoreland.
“The strength of our hospitals in the Allegheny Health Network, including Allegheny Valley, has been their record of providing the highest quality of care at lower costs, and the recent charge data released only further confirms that,” Laurent said in an emailed statement. “Charges at our community-based hospitals compare favorably with those at most of the region's independent hospitals for similar services.”
More transparency needed
The Obama administration released the Medicare charge and reimbursement data as part of efforts to make the nation's health care more affordable and accountable, according to the Centers for Medicare & Medicaid Services, which maintains the data.
Excela Health's Rogalski said he would like to see more transparency in actual hospital pricing, including negotiated rates with insurance companies.
Those rates are typically contractually confidential.
“Now, with a lot of the high-deductible plans, it's impacting patients more and more,” Rogalski said. “It's important for patients to understand.”
Zellner said the Medicare data isn't particularly useful to patients.
“It's not really measuring the efficiency (of a hospital), she said. “It's pretty rare for it to be reflective of what people pay.”
Jodi Weigand is a staff writer for Trib Total Media. She can be reached at 724-226-4702 or email@example.com.