ST. PAUL, Minn. - A Minnesota Department of Health (MDH) report found large swings in prices between hospitals and large price differences within a single hospital.
A patient undergoing one of four hospital procedures may pay between two to nearly seven times as much as another patient at the same hospital, according to the MDH report. This could mean a price difference from about $7,000 to nearly $70,000.
The study, conducted between July 2014 to June 2015, reviewed four common procedures at Minnesota hospitals: spinal fusion surgery, major bowel surgery, appendectomy and removal of uterine fibroids.
Prices for the most expensive procedures (spinal fusion surgery and major bowel surgery) varied by three-fold or more within hospitals. For example, prices for a bowel procedure at the most expensive hospital ranged from about $14,500 to $68,800, and prices at the most expensive hospital for spinal fusion ranged from about $27,600 to $80,800. Even the hospitals with the lowest average price exhibited sizable variations in prices, MDH says.
The study looked only at commercially insured patients with minor or moderate clinical complexity.
“This degree of variation shows that the healthcare market lacks meaningful transparency and a consistent link between cost and prices,” said Health Commissioner Jan Malcolm. “This undermines effective competition and rational pricing of health care services and contributes to the cost pressure that families and businesses are experiencing. Shedding light on prices is a step in the right direction toward a better functioning market where individuals and employers can play a stronger role as informed consumers.”
MDH says the study was not designed to show what is causing the differences within and between hospitals. However, national studies provide some sense of what may be driving price differences. Likely factors include differences in labor markets, operating costs, hospital and patient characteristics, and practice styles.
Preliminary results from the MDH study showed that a substantial amount of the statewide variation in prices – about 36 percent – was related to differences within individual hospitals and was not explained by factors such as severity of illness, length of stay, patients’ age, and certain health benefit characteristics. National researchers suggest that this type of unexplained variation is likely driven by how much market or pricing power health insurers and hospitals have.