Report Finds Massive Price Differences At Minnesota Hospitals

MINNESOTA — As part of an ongoing effort to bring greater transparency to the hidden world of health care costs, a new Minnesota Department of Health report finds large swings in prices between hospitals, and also 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. As shown, this can mean a price difference from about $7,000 to nearly $70,000.

The report analyzes the prices paid from July 2014 to June 2015 for a set of four common procedures at Minnesota hospitals: spinal fusion surgery, major bowel surgery, appendectomy and removal of uterine fibroids.

To make direct comparisons meaningful the analysis looks only at commercially insured patients with minor or moderate clinical complexity.

Sign Up For Patch's Daily Newsletter and Breaking News Alerts in Your Neighborhood

Prices for the most expensive procedures (spinal fusion surgery and major bowel surgery) varied by three-fold or more within hospitals, the report finds.

For example, prices for a bowel procedure at the most expensive hospital ranged from about $14,500 to $68,800 (a 4.7-fold difference), and prices at the most expensive hospital for spinal fusion ranged from about $27,600 to $80,800 (a 2.9-fold difference).

Even the hospitals with the lowest average price exhibited sizable variations in prices.

“This degree of variation shows that the health care 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.”

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.

The prices in the new report reflect the fees paid to hospitals for the inpatient treatment as well as the professional fees (physician services) received for delivering care. The first report in this series, from January 2018, analyzed a different set of four inpatient procedures and focused just on hospital fees.

Neither report lists the names of specific hospitals, as Minnesota law prevents the use of the MN APCD to identify individual hospitals or providers.

Image via Shutterstock