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Good Question: Same Medical Procedure, Different Price Tags?

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MINNEAPOLIS (WCCO) – When you have a heart attack and are rushed to the hospital, you’re not usually thinking about doing some comparison shopping on price. But for the first time Thursday, the U.S. government released pricing information from hospitals around the country. And that data showed vast disparities in the amount hospitals are charging for the same procedures.

For example, a major joint replacement surgery costs $22,787 at Methodist Hospital, $38,550 at Maple Grove Hospital, and $56,102 at Unity Hospital.

“I’m gonna have to be truthful and say this is a black box,” said Dr. Roger Feldman, a professor of insurance at University of Minnesota School of Public Health.

Feldman said that it’s a mystery how different hospitals can arrive at vastly different prices for essentially identical procedures, although there are some factors that contribute to it.

“Every hospital has a charge master, a list of over 20,000 separate items that goes into a patient’s visit or admission,” he said. “How your charges develop depends on the accounting used.”

And every hospital does it differently. Take two hospitals both up-charging drugs 50 percent to keep their pharmacy operation breaking even. One might charge 1.5 cents for a one cent aspirin, marking that pill up 50 percent. Another might charge $25.01, deciding that the average pill cost is $50, so the policy is to mark up every medication $25.

“We should be outraged. No business should be doing this,” Feldman said.

Another example in the local data is heart failure treatment costs. At Methodist, the charge is $13,205. North Memorial charges $35,557, and the University of Minnesota Fairview Hospital charges $60,611.

“The government sees through this. They pay more or less the same for the same procedure. Private patients are likely to be charged the higher number,” Feldman said.

Private insurers also negotiate discounted rates from the sticker price.

But that’s not the only factor in the variety of sticker prices. “There is some gaming going on” by some hospitals, according to Feldman.

In effect, there’s an incentive to jack up the sticker price, knowing there’s a percentage of people who will not pay their bills. For-profit hospitals write the unpaid bills off as a loss, which help lower their taxes. Nonprofit hospitals in Minnesota are able to write that off as charity care.

Does it need to be this complicated?

“No, it doesn’t. Just like car pricing doesn’t need to be. I’m looking forward to the day when hospitals will be having real prices,” Feldman said.

To look up procedures at your hospital, you can see the government’s data online here.

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