Hospitals need surgery on pricing
How much of our current predicament regarding health care can be packed, symbolically, into one surgical procedure?
A whole lot, if we’re talking about joint replacements. All the promise and the problems of modern medical care seem focused in the rapid rise of our ability to replace our hips, knees and shoulders – from the demographic challenges of an aging population to the long-term effects of obesity to the life-altering benefits of technology to preposterous pricing schemes.
We have begun to learn a bit more about the surreal, unethical pricing at the nation’s hospitals. Steven Brill’s Time magazine piece in March – “Why Medical Bills Are Killing Us” – was an astonishing journalistic volley, examining several specific bills and discovering outrageous pricing abuses.
This week, the federal government released massive data about how much it was being charged for Medicare procedures. It showed that hospital charges vary so dramatically and appear so unmoored from any economic basis that it seems utterly random – or worse.
Stranger still is this fact: The charges often have no real relationship to what Medicare actually pays – and no relationship to what hospitals actually expect Medicare to pay, based on a standard scale.
In other words, pay no attention to the charge on the bill – the charge that might be several times more or less than a charge for the same service at a different hospital, and is certainly more, and often much, much more, than the hospital will be paid, at least by the government or insurance companies.
Beginning to learn the truth about this is what people are now calling “transparency” in health care.
An example of this cost variability is the average cost of a major joint replacement without major complications. In 2011, Providence Sacred Heart charged $47,203 on average for such procedures. What a difference a few blocks can make: Deaconess billed an average of $77,553.
Valley Hospital’s average was $65,177. At Kootenai Medical Center the average plummets to $35,000. Try Wenatchee, at $24,619.
I asked local hospitals to talk about this. Kaitlyn Aliota, spokeswoman for Deaconess and Valley Hospital, urged me to focus not on the charges, but on what hospitals are actually paid.
“Charges vary from hospital to hospital because each facility has a unique mix of payers, patients and services,” she wrote in an email. “It is important to note that what hospitals charge rarely reflects what they are actually paid by the government or private insurers. The focus should be on what hospitals are actually receiving in payment.”
It should? I think the focus should be on why hospitals have dreamed up this method of setting prices that is virtually impossible to make sense of – a system in which Deaconess, for example, might “charge” more than $75,000 for a procedure that the federal government will pay only $15,000 for, and which a private insurer will certainly pay some unknown lesser price for, and which only the poorest, least-insured patient might ever actually be charged.
Meanwhile, nobody can make sense of it.
Joe Robb, spokesman at Providence Sacred Heart, acknowledged that there are problems inherent in the system. It’s been around a long time and is based on a lot of different factors, he said. One problem is that hospitals don’t share data in a way that might contribute to more consistency and transparency in pricing.
“We do recognize it’s part of what needs to be corrected in health care,” he said.
Another fact about joint replacement stands out: At many hospitals, it is the most common procedure billed to Medicare, and in most others it’s No. 2. Replacing joints is big business. It is also, of course, much more than that. Many of us have seen the life-changing benefits of joint replacement. I’m not sure my own parents have any original joints left. The results have been so positive for them – in terms of reduced pain and improved mobility – that it’s impossible not to celebrate the benefits.
About half a million knee replacements are performed each year, and about 175,000 hip replacements. Those figures are expected to grow astronomically – the American Association of Orthopaedic Surgeons estimated in 2006 that knee replacements would rise 673 percent by 2026.
Which is to say nothing of replacing the replacements.
Experts give a lot of reasons for this. People are living longer, and living more active lives – wearing out their joints, essentially. Lots of us carry around more weight than we should. And the technology for replacing knees and hips, in particular, gets better and better; people are turning to replacements more quickly and at younger ages.
Robb said it’s becoming more common for people to pursue joint replacements in their 50s and even 40s – something that was unheard of 10 years ago.
But joint replacements also fall into certain gray areas when it comes to availability and patient choice. Researchers at Dartmouth found that joint replacement rates vary widely – by region and by race. They concluded that replacement surgeries were both overused in some regions – often those with wealthier populations – and underused in others.
The researchers concluded that this disparity showed that physician preferences were driving these decisions as much as what patients want. “These findings highlight the need for improved physician and patient education and the use of shared decision-making to determine whether a patient should undergo joint replacement,” said John-Erik Bell, a surgeon who co-authored the 2010 study.
This week’s federal release highlights another need: to let patients see past the great curtain of Oz, behind which are hiding such strange and inscrutable pricing practices.