Hip Replacements in L.A.: $12,457 to $17,609
A short drive in the Los Angeles area can yield big differences in price for knee or hip replacement surgery.
New Medicare data show that Inglewood’s Centinela Hospital Medical Center billed the federal program $237,063, on average, for joint replacement surgery in 2013.
That was the highest charge nationwide. And it’s six times what Kaiser Permanente billed Medicare eight miles away at its West L.A. hospital. Kaiser billed $39,059, on average, and Medicare paid $12,457.
The federal program also paid a fraction of Centinela’s bill — an average of $17,609 for these procedures. (Chad Terhune & Sandra Poindexter, “Price of a common surgery varies from $39,000 to $237,000 in L.A.,” Los Angeles Times, June 2, 2015)
Okay, hospital bills are silly. We already know that. Let me point out two things.
First, it gives me another reason to applaud (once again) the Obama Administration’s commitment to transparency in Medicare claims data. These are not private data: They are the taxpayers’ property. The government should just get the data out there and let everyone figure out what they mean.
It also gives me the chance to illustrate what I mean when I advocate giving Medicare beneficiaries a share of the savings. The difference between $17,609 and $12,457 is $5,152. Currently, the Medicare beneficiary does not really care that there is such a big price difference. (Indeed, the Los Angeles Times article might have the unintended consequence of inducing more patients to go to the more expensive hospital, because they would perceive it as superior.)
Suppose Medicare said to beneficiaries in Los Angeles: “We pay up to $17,609 for hip replacements in this town. If you can get it for less than $17,609, we’ll add one third of the difference to your Social Security deposit. So, if you get the procedure for $15,609, you’ll get a bonus of $333.”
Maybe the beneficiary should only get a quarter of the savings, or maybe half. The point is, that would drive prices down to the low end of the scale far quicker than current efforts.
Good post.
It would be interesting to know how one hospital got $17K and another got $12K for the same procedure from Medicare.
All it probably took was the manipulation of a few codes in the Medicare billing process.
Why would any institution, hospital or hotel or hot dog stand, send out bills it never expects to collect in full or even a fraction thereof? OF course there is a complex answer to this question, but in the meanwhile, I would like to see laws that state the following:
– if a patient is hospitalized involuntarily, with no time to review charges or no charges are disclosed to the patient, then the maximum hospital bill would be 125% of the Medicare rate.
This would also apply to ‘out of network’ situations.
I would like to drive chargemasters out of existence, and frankly, my contempt for some hospitals is fervent enough that I do not care if these institutions go broke. I have read (but do not remember where) that only about 5% of hospitals account for a large portion of bad debt lawsuits.
Okay, but then what do you think would happen to the Medicare rates? They would go up!
What a strange society we have. We are very afraid of providers talking to each other about what they charge, but yet we somehow expect them all to charge the same. We don’t like government interfering in free markets, and yet we complain bitterly about what “free markets” are doing to healthcare and then want government to intervene which of course is ironic since healthcare is not a true free market.
And: “the point is, that would drive prices down…” For whom? All it would do is make sure all the hospitals do whatever it takes to make sure the patient does not get any bonus. Not that that is inherently bad or good, just that the current system is so far removed from what most people understand it to be that the legislation aimed at that misunderstanding only seems to make the reality worse.
Even better would be a rebate to the person who finds cheaper treatment overseas. Even in Mexico, a procedure often costs 1/3 what it costs stateside. In India and Thailand, it might well cost 1/9 as much.
Yes, as I have written before. However, I am recommending this smaller step because I believe it is more achievable. Politically, there would be domestic interests on both sides.
Agree. Besides there is not enough capacity worldwide to treat enough American patients to make a dent in total US medical costs. While so-called medical tourism can benefit some individuals, even that is limited by insurance policy rules, by the need to travel, and by the necessities of follow up care.
Of course, if you relocate / retire to another country which has a superior medical system (I don’t include Cuba, btw) and find you don’t need Medicare any more, more power to you.
We can open up another can of worms by introducing “telemedical tourism,” e.g. radiologists in India interpreting patients’ scans. That would draw the ire of organized medicine.
I agree that Prices should be made public but they must also be attached to quality of care measures of the hospital so the patient can make a fully informed decision on where to get their surgeries. I’d be willing to pay more if it’s less likely the staff would leave a sponge in my hip post surgery. although, now that I think about it, maybe a few sponges left inside might make my sofa feel a little more comfortable during those overtime football games I love to watch.
However, unless they are competing on price, they are not competing on anything else. Get price competition first, then differentiation.