Wyoming Medical Center charged an average of $59,000 to perform major joint replacement surgery in 2011. A few hours to the south, Laramie’s Ivinson Memorial Hospital billed Medicare roughly $44,000 for the same type of procedure.
Similar price disparities exist across the Cowboy State. A pneumonia patient with complications generated an average bill of $25,000 at Riverton Memorial Hospital, compared to $17,000 at St. John’s Medical Center in Jackson. Charges for urinary tract infections varied by about $6,000 at hospitals in Lander and Sheridan.
Last week, the federal government released a massive data file showing how much hospitals charge Medicare for 100 of the program’s most common procedures. The first-of-its-kind release highlighted wide disparities in prices. Wyoming hospitals were no exception. Average charges for pneumonia cases varied by nearly 60 percent. For major joint replacement surgeries, the range grew to 90 percent.
In interviews, hospital officials say different patient populations, operational costs and geographic areas contribute to the price disparities. Wyoming Medical Center generally had higher prices than other hospitals in the state, but as a regional facility, it also treats patients with more intensive medical needs, explained Chief Executive Officer Vickie Diamond.
“We are higher because our patients are sicker,” she said.
Federal officials are skeptical of such explanations. Speaking at a teleconference announcing the release, an official with the Centers for Medicare and Medicaid Services said factors such as patient population can’t alone explain pricing disparities.
“We don’t see any business reason why there is so much variation in the data,” said Jonathan Blum, the center’s deputy administrator.
Sticker price vs. reality
The data, which are based on charges from 2011, have limitations. They include a hospital’s “sticker price” for a given procedure but don’t reveal how much most patients — especially those with government or private insurance — actually pay for care. That’s because private insurance companies typically negotiate sizable discounts with hospitals. Also, government insurance programs reimburse facilities for a fraction of the list price.
“I don’t know exactly how useful this will be for individuals in terms of allowing them to select their care,” said David Lind, chief medical officer at Cheyenne Regional Medical Center. “It might create confusion, rather than clarity.”
Pricing data don’t show how much value customers get for their medical dollars, said Anne Ladd, executive director of the Wyoming Business Coalition on Health. Ladd has long advocated for more transparency in the health care system, but she insists consumers need to know the quality of a hospital before they can truly make an informed decision.
A facility could charge less for surgical procedures, but be more prone to infections that might add thousands of dollars to a patient’s bill, she said.
“I think it would be foolish to make [a decision] just based on the price of a procedure,” she said.
Even with its limitations, the released data offer consumers a glimpse into the complicated and often confusing world of health care pricing.
The figures show Wyoming Medical Center charged Medicare the highest prices for six of the 10 most common diagnoses, including heart failure, kidney failure and blood infections with major complications. The Casper hospital billed an average of $23,500 for a patient treated for heart failure with complications. Cheyenne Regional Medical Center’s average price was $14,500.
WMC officials say the higher prices result in part from the patients the hospital serves. As a regional facility, the medical center treats people transferred from rural hospitals because of serious or complex conditions. Those cases ultimately cost more money.
“We are treating a little bit sicker population,” said Chief Financial Officer Don Claunch. “That is going to give us a higher cost.”
Wyoming Medical Center also provides money-losing services that smaller hospitals don’t offer, he added.
The data shows Ivinson Memorial Hospital in Laramie had some of the lowest average charges in Wyoming. It ranked at or near the bottom in most common inpatient procedures.
Ivinson CEO Carol Dozier said her hospital made lowering costs a priority during the past four years.
“We have done well financially and we want to be good stewards for our community,” she said.
The cost of operating a hospital varies according to several factors, including its location and debt load, Dozier continued. Hospitals adjust their prices in relation to those costs.
“I’m just under the assumption that people are charging what they need to charge, and I certain don’t want to be critical of it,” she said.
Federal officials maintain costs alone can’t explain the wide variation in prices. Speaking to reporters last week, Blum said different patient populations could account for some, but not all, of the price disparity.
“The variation that we see in the data, those reasons don’t seem very apparent to us,” he said.
It remains to be seen whether last week’s data release will prompt hospitals to adjust their prices. That didn’t happen two years ago when the Wyoming Hospital Association launched a price-comparison website, said President Dan Perdue.
Most hospitals already do some type of market research to keep their prices within a certain range, said Kerry Warburton, chief financial officer at Cheyenne Regional. He doesn’t expect the newly publicized data will influence rates.
“I don’t think it is going to be a game-changer as far as prices,” he said.
Ladd, the Wyoming Business Coalition CEO, said the data could prompt some of the more expensive hospitals to examine options for lowering costs. No administrator wants to see their facility’s name at the top of a public price list, she said.
But that doesn’t mean consumers will end up paying less. In fact, the new transparency could result in higher sticker prices at some facilities, Ladd said.
“The fear is the hospital on the low end says, ‘Wow, we need to charge more for these services … we are leaving money on the table,’ ” she said.