Wednesday, May 8, 2013

Local Health Care Costs Revealed!

Today's release of Medicare data on the cost of specific medical treatments in America is rather eye opening.

First, let's look at the state-wide picture, which isn't so bad relative to the rest of the country (as always, click to embiggen):

The highest and lowest billed amounts are national figures, not Wisconsin specific numbers. By and large, however, Wisconsin patients appear to get billed below the national average, which is to be expected given variables like income and cost of living. The most expensive state appears to be New Jersey, while the least is Maryland.

So far, a good deal of the analysis has been centered on the difference between hospitals in close geographic proximity to each other. Like this:
When a patient arrives at Bayonne Hospital Center in New Jersey requiring treatment for the respiratory ailment known as COPD, or chronic obstructive pulmonary disease, she faces an official price tag of $99,690. 
Less than 30 miles away in the Bronx, N.Y., the Lincoln Medical and Mental Health Center charges only $7,044 for the same treatment, according to a massive federal database of national health care costs made public on Wednesday.
Or this:
In the District [of Columbia], George Washington University’s average bill for a patient on a ventilator was $115,000, while Providence Hospital’s average charge for the same service was just under $53,000. For a lower joint replacement, George Washington University charged almost $69,000 compared with Sibley Memorial Hospital’s average of just under $30,000.
Or this:
Loyola Gottlieb Memorial Hospital in Melrose Park, Ill., outside Chicago, charged the highest prices for 16 of the 24 procedures reviewed by HuffPost. For kidney failure, Loyola Gottlieb charged $97,926, more than twice average cost of 59 hospitals in the Chicago area. The price is more than five times what John H. Stroger Jr. Hospital, 12 miles to the east, charges.
That's not entirely fair. Not all hospitals are created equally, and this is especially true in urban areas where the variety among health care centers is particularly noticeable. Some hospitals are teaching centers attached to universities. Some have to maintain expensive trauma centers that likely need to be subsidized with revenue from other departments. Others provide amenities, like a guaranteed private rooms per patient. Some only treat children, some specialize in specific ailments, etc. All of these variables will increase or decrease the costs of a given hospital's services. 

But hospitals start to look much more alike when one moves away from the population centers. Lets look at the local level here in Oshkosh. Here are the prices for comparable procedures at the two hospitals in Oshkosh. The figures below are for the year 2011:

That last unlabeled column is how much more expensive the cost of a procedure is at Aurora relative to the cost at Mercy Medical Center. The average mark-up is about 78.25% (that's my quick math/not double-checked figure). 

That's kind of amazing. I can't think of a single good or service available in the Fox Valley that costs almost twice as much at one place as its does at its closest competitor.

It's difficult to say why Aurora costs so much more than Mercy. One would be hard pressed to argue that Aurora is 78% more superior than it's competitor just 1.6 miles down the road. In fact, most of the scuttlebutt among the doctors I've gleaned over recent years has been that the opposite is actually true: that Mercy is actually the better place not only receive care, but also to work.

By the way, I only briefly glanced at the data for Theda Clark Medical Center in Neenah, which is almost universally regarded at the gold standard for health care in the Fox Valley, and it's costs appear to be even lower than Mercy's. (It's also not at all surprising for those of us "lucky" enough to have dealt with all three hospitals recently.)

There is a lot that remains to be said about the gulf between health care billing. I don't think anyone will be disappointed that this kind of information will add some much needed transparency to the mystery of medical costs. People who think the America health care system is just fine and dandy will predict that costs will undergo a "market correction:" Aurora will need to slash it's prices to remain competitive while Mercy will potentially hike up it's own rates because, well, it can. That's how the free market works.

But the difference in cost between Mercy and Aurora is a big reason how we got into the medical cost mess we're currently negotiating in this country. It's very easy to say that one company is simply doing a better job than the other at keeping costs down and that one will simply disappear if it can't remain competitive -- that's fine if you're talking about, say, a toy manufacturer since the customers in that scenario don't stand to lose much. Health care is a different story altogether, especially since insurance companies very frequently determine which health care systems their policy-holders must use. For people without insurance the consequences could be catastrophic: the difference between treating kidney failure with comorbid conditions (683 on the spreadsheet above) at Aurora as opposed to Mercy is an additional $26,000. It's easy to see how people who don't make much more than that a year suddenly find themselves in dire financial straights. 

It's also a pretty strong validation of the work of former Oshkosh state legislator Greg Underheim, who made cost transparency in health care a signature issue. It wouldn't surprise me that most health care consumers understood, if only intrinsically, how arbitrary medical cost could be, but I doubt anyone would have assumed we would be looking at such a stark example so close to home. It clearly remains to be seen if this level of transparency will be enough to curb exploding medical costs, but this is the kind of measure that patients should have had years ago.  

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