Report: Minnesota hospital costs vary statewide for four procedures examined
ST. PAUL — Minnesotans could pay up to eight times more for certain medical procedures depending on the hospital they choose, but it's hard to know which facilities offer the most affordable services.
That's the takeaway from a report released Wednesday, Jan. 3, by the Minnesota Department of Health aimed at making health care costs more transparent. Researchers examined the wide range of prices Minnesotans pay hospitals for four procedures — hip and knee replacements and normal and C-section births.
"This is eye-opening information for the purchasers of health care," said Carolyn Pare, who leads the Minnesota Health Action Group, a coalition working to improve health care costs and outcomes, in a statement.
But insurance and hospital advocates said that while the study contains new information, it shows only one piece of the complex puzzle behind rising health care costs in Minnesota and across the nation.
"This is a good reminder of something we all know," said Jim Schowalter, president of the Minnesota Council of Health Plans. "The price of health care varies widely and all of it is expensive."
A wide range of costs
Knee replacements had the largest cost discrepancy of the procedures examined by the state, with one facility charging a high of $46,974 and another the most affordable at $6,186 — a difference of nearly eight times. The average cost for a knee replacement during the 2014-15 period measured was $23,997.
The cost fluctuation for a hip replacement was almost as large, a difference of more than six times between the most affordable and most expensive. Normal and C-section births had cost swings of four and nearly five times, respectively.
Researchers limited their study to patients without complications who did not have the most severe medical conditions. The department plans to publish the cost of other common procedures later this year.
The data used for the analysis comes from the Minnesota All-Payer Claims Database that records how much 4.3 million consumers paid for more than $1.1 billion in services. The state Department of Health was able to analyze the price of different procedures at different hospitals thanks to legislation passed in 2014 to bring more transparency to health care costs.
The same legislation barred the department from identifying the average costs of procedures at different hospitals. Information about what different insurers pay and the personal information of patients is also protected.
How the data can be used
Stefan Gildemeister, director of the department's health economics program, acknowledged that the new information won't necessarily encourage patients to pick one hospital over another. But it does give consumers a new, unique glimpse at the wide range of prices charged for certain procedures, he said.
That will be useful to employers negotiating the cost and scope of the health plans they offer workers and possibly for patients trying to make financially informed decisions about their care.
"There is a change afoot where providers are realizing patients will want to know how much certain procedures cost," Gildemeister said.
The costs reported Wednesday are typically the result of negotiations between insurers, health care providers and hospitals, Gildemeister added.
The data show only hospital facility fees, not physician services, drug costs or patient rehabilitation. Patients and employers pay more with these costs factored in.
The analysis looked at services for patients with market health plans they received through employers or on the individual market. It does not include public health plans like Medicare and Medicaid.
Other pricing factors
Advocates for health insurers and hospitals say the state analysis has limited value because it only looks at hospital costs when patients often receive ongoing services when they have a condition that requires a medical procedure.
"Keep in mind, this research is looking at one very small part of the patient's journey," said Dr. Rahul Koranne, chief medical officer for the Minnesota Hospital Association. He added that more complete measures that include quality of care and outcomes of patients are a better measure of cost effectiveness.
Additionally, Koranne said that employers have long worked with providers to improve the health of their workers and lower the cost of care.
Schowalter, president of the Minnesota Council of Health Plans, agreed that the state report looked at a small part of the drivers of growing health care costs. Patients already have other resources to measure provider costs and can often get more information about the expense of certain procedures from their insurer.
Schowalter added that the state did not include what government programs like Medicare and Medicaid pay hospitals for procedures. Those rates are negotiated or set by the government and can have an impact on what hospitals charge consumers.
"I think this report is very useful background for policymakers," Schowalter said. "This is one slice, one piece of an important public policy issue."