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Smoke and Mirrors.

The Price is… Huh?

Discrepancies in medical billing costs are baffling, and patients pay the price—literally.

July 25, 2013

The Price.

“How much is this going to cost?” It’s a simple enough question, unless you’re asking about your upcoming surgery. Between doctors, billers, insurance companies, and hospitals themselves, no one seems to be able to give a straight (or correct) answer.

The Motley Fool’s “Anatomy of the World’s Most Insane Health Care Billing System” explores the disjointed, dysfunctional nature of pricing in the healthcare industry. States and hospitals between and within each state vary vastly for the same medical procedure, and no one seems to know how to resolve it. An excerpt from the article highlights the extreme disparity:

 “A permanent pacemaker implant at Pennsylvania's Phoenixville Hospital is billed at $211,534. Four hours away at Unitown Hospital, the same procedure costs $19,747, or 91% less. 163 hospitals across the country charge at least $100,000 for a pacemaker, while 46 charge less than $30,000.

The official bill rate to treat chronic obstructive pulmonary disease, or COPD, at Bayonne Hospital Center in New Jersey is $99,690. At Lake Whitney Hospital in Texas, it's $3,134, or 97% less. Thirty-five hospitals bill an average of more than $50,000 to treat COPD, while 161 bill less than $7,500.

A kidney and urinary tract infection faces a $132,569 bill at Crozer Chester Medical Center in Pennsylvania, but $6,224 at Wyoming County Community Hospital.”

The difference can best be illustrated through comparison. A brand-new Prius fetches about $26,651, while a Ferrari 458 Spider goes for around $257,000, about a 96% difference. Which would you prefer?

The Problem.

One of the most common responses to, “How much is this going to cost?” is, “We won’t know until after the fact.” Of course, there are very few purchases that operate this way. And it’s not even that hospitals and third-party billers are trying to dupe patients—they really don’t know. A variety of factors make it nearly impossible to give a correct cost, including:

  • Length of stay
  • Complications and special needs
  • Type of hospital (teaching, private, public)
  • Quality of care
  • Sticker price vs Actual charge
  • Change in law
  • Insurance provider/ type of insurance (if they have it)

Even if you try to find out on your own, there isn’t much readily-available information. One database—it collects what 3000 hospitals (about half of all in the US) charge for 100 most common procedures—comes from the Centers for Medicare and Medicaid Services. There’s even a place for inquiries, but no guarantee that they’ll have the answer.

Ultimately, the loser in this scenario is the patient. 

Case and Point.

Time Magazine dedicated an entire issue to healthcare in March—for the first time in its history—called “Bitter Pill: Why Medical Bills are Killing Us.” A couple case studies illustrate just how crazy medical pricing has become, including:

The One-Day, $87,000 Outpatient Bill: As it stands, Medicare and insurance companies provide incentives to get patients “in-and-out” of the hospital as quickly as possible. This is supposed to reduce costs for everyone involved, but instead backfires, as charges are levied for quick performance and prices increased for outpatient services.

A man received a surgery at Mercy Hospital in Oklahoma City for backaches. He was charged for, among other things, the pen to mark incision site, the table strap to hold him in place during surgery and a blanket—all of which are reusable, and none of which he kept afterward.

The main component of his surgery—a Medtronic simulator—was marked up over 150% by the Catholic, tax-exempt hospital. After toppling his annual insurance limit, he still owed over $40,000 out-of-pocket.

The $21,000 Heartburn Bill: When a Connecticut woman felt chest pains, she was driven 4 miles by ambulance to the local “non-profit” hospital. She received a few tests and was sent home after 3 hours, thankfully suffering from only indigestion. The bad news: the ambulance was $995; the doctor was $3,000 and the hospital, $17,000. She was uninsured and 64—one year from qualifying for Medicare.

Even if she was covered by Medicare, however, the discrepancy between sticker price and what they covered was still staggering. The complexities of filing a claim for Medicare differ from those for insurance, only adding to the problems faced by America’s aging population.

More patient stories can be found in the overwhelming response to the issue. 

Possible Solutions.

This is a huge problem to tackle, and it’s going to take more than one person to fix it. With all the drama surrounding healthcare, it’s unlikely that legislation is going to fix this anytime soon. In the meantime, possible routes toward real solutions include:

  • Awareness of the situation and pressure on local, state and national legislators to address it.
  • Creation of databases by hospitals, insurance companies and states, and eventually combining them.
  • Collaborative efforts by institutions to make pricing more transparent and even across the board, for each other and for patients.
  • Use of “Big Data” to create and modify accurate databases.
  • Crowdsourcing as a means of estimation and reference.
  • Word of mouth from previous patients and healthcare providers who have insight (although this could become tricky with privacy laws.)
  • Regulating price of specific procedures.

Patients need transparency to make the best decisions for their health. And it seems that the demand for this is growing. In the future, we expect that data gathering and analytic techniques, combined with institutional or legislative action, will help patients find which hospital is best for their well-being and their wallet.

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