Perceptions into the Recent Hospital Billing Data Release

On Wednesday May 8^th, 2013, the Centers for Medicare and Medicaid Services (CMS) released data from more than 3,300 U.S. hospitals regarding average hospital billing and Medicare payments for 100 of the most common medical procedures. CMS’ goal of publishing this data was to make the information more accessible and provide a better understanding as to how different hospitals are pricing their procedures.

From Figure 1[1], these findings show that different types of hospitals dramatically vary in the prices they charge for procedures.  However, Medicare’s reimbursement amount remains pretty consistent throughout each hospital.

Even hospitals of the same type of ownership that are located closely, vary enormously with the prices they charge for common procedures. A good example of this is shown by Figure 2’s[2] comparison of two closely located hospitals in Florida.

The reasons for this pricing variation are still unclear though. According to the New York Times[3] some of the variation in hospital billing may be due to different levels of patient acuity.

Another explanation, by the St. Louis Beacon[4], suggests that some hospitals set their prices higher to extract greater payments from private insurance companies. Many private health plans contract with their network hospitals for reimbursement at a percentage of billed fees.

Before the release of the transparency data, patients did not have access to pricing information.  Therefore, they could not incorporate differences in their financial responsibilities into their provider selection decision.  However, access to list prices may now enable patients who are more price sensitive to make an assumption about contracted rates and the patient’s financial responsibility.  As a result, pricing differences might affect hospital census rates.

How will hospitals respond to CMS’ transparency data?  Perhaps public outcry over pricing disparities or changes in census will encourage hospitals to price their procedures similarly to surrounding hospitals.  This could affect census rates at competing hospitals, especially among price-sensitive patients.

Perhaps hospitals will use pricing variations to communicate differences in quality of care to patients, insurers and physicians.  If so, the transparency data might encourage CMS and private payers to implement pay-for-performance programs or risk-sharing agreements that reward providers for quality improvements.

Over time we will see the implication of CMS releasing pricing data.  Whatever the outcome, releasing the data is a good step towards encouraging higher quality, more cost effective care.  Educating patients and physicians about the cost of care can only encourage them to more carefully select their hospital provider.

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[1] Andrews, Wilson, Darla Cameron and Dan Keating. “Disparity in Medical Billing”. The Washington Post 08 May 2013. Web. 15 May. 2013. <http://www.washingtonpost.com/wp-srv/special/national/actual-cost-of-medical-care/?hpid=z2&gt;

[2] Andrews, Wilson, Darla Cameron and Dan Keating. “Disparity in Medical Billing”. The Washington Post 08 May 2013. Web. 15 May. 2013. <http://www.washingtonpost.com/wp-srv/special/national/actual-cost-of-medical-care/?hpid=z2&gt;

[3] Meier, Barry, Jo McGinty, and Julie Creswell. “Hospital Billing Varies Wildly, Government Data Shows.” New York Times 08 May 2013. Web. 15 May. 2013. <http://www.nytimes.com/2013/05/08/business/hospital-billing-varies-wildly-us-data-shows.html?pagewanted=all&_r=1&&gt;.

[4] Joiner, Robert. “Medicare Data Show Wide Variations in Hospital Charges.” St. Louis Beacon. (2013):  Web. 15 May. 2013. <https://www.stlbeacon.org/&gt;

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