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Got Transparency? Hospital Pricing Is Getting Tougher Scrutiny These Days

April 24, 2012
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A UCSF team of researchers finds wild variations in hospital charges

A research study was published this week that received more than just academic notice, and for good reason. Renee Hsia, M.D., an assistant professor of emergency medicine at the University of California San Francisco (UCSF) School of Medicine, prompted by awareness of a friend’s personal situation, launched an investigation into hospital charges for routine appendectomy, a procedure that is both extremely common, and relatively straightforward in its clinical landscape. Together with her colleagues Abbas H. Kothari, Tanja Srebotnjak, Ph.D., and Judith Maselli, Dr. Hsia pored over more than 20,000 cases of routine appendicitis treated at 289 hospitals and medical centers throughout California. The patients, all adults, had lengths of stay three days or shorter. What they found was astonishing: the charges for these stays ranged from a low of $1,529 to a high of nearly $183,000, with a median hospital charge of $33,611. In other words, the top charge for this routine procedure was nearly 120 times as much as the bottom charge for the same procedure.

What’s more, Hsia and her colleagues found clear patterns, with charges higher for older patients, patients at for-profit hospitals, and slightly higher for Medicaid and uninsured patients, while lower for those at county hospitals.

The study, published online this week in Archives of Internal Medicine, reveals what Dr. Hsia calls a “broken system,” in terms of hospital and medical pricing. “We talk about ‘consumer-driven healthcare,’ and how patients should ‘shop’ for care,” Hsia said in an interview posted on UCSF’s website. “But right now, our system isn’t set up at all for allowing patients to act as consumers. It is nearly impossible—even for me, as someone who studies this—to predict what someone’s hospital bill will be. Our system doesn’t have a good way of regulating charges.”

To say that this kind of research and reporting is going to become more common going forward is to make an understatement. I actually became aware of this because of a report on the ABC Evening News with Diane Sawyer, this week. And let’s face it: as many rationalizations and excuses as we in healthcare can make for such a situation, it’s awfully difficult to explain to the general public why a routine surgical procedure should be charged out across such a wild pricing differential—a factor of 120—! Can hospitals truly justify charging anyone $183,000 for such a routine surgical procedure, when others are charging many, many times less than that??

Ultimately, in the age of YouTube, Twitter, Facebook, exploding medical costs, healthcare reform, and growing healthcare consumerism, it seems clear to me that we’re headed inevitably in the direction of hospitals and medical groups being compelled to bring more transparency to the issue of charges for procedures and patient care. This will be particularly so as more and more patients are thrust into high-deductible health plans and as co-pays even in health plans not described as “high-deductible” continue to skyrocket.

Will healthcare IT leaders be a part of this discussion? Absolutely. Indeed, CIOs and their teams, working in collaboration with executive and clinician leaders at their organizations, will come under increasing pressure to analyze their costs and charges, and be able to explain to the public and to purchasers and payers why they’re charging what they are for particular procedures and treatments. And that will necessarily require investment in developing data warehouses, data analytics, and business intelligence, on a wide scale.

We’ll be discussing some of these issues during the Healthcare Informatics Executive Summit, to be held May 6-8 in Orlando, where CIOs, CMIOs, CTOs, executive and clinician leaders from hospitals and medical groups, and industry experts, will be convening to discuss some of the most important issues facing the healthcare system today. Don’t miss the discussion! I know it will be very enlightening and useful for everyone involved.

In the meantime, I’ll leave you with Renee Hsia’s concluding comments regarding her team’s study: “One of the very basic functions of any healthcare system should be that getting sick doesn’t jeopardize you financially. But in America, that’s exactly what people are afraid of, and rightly so. Right now, the status quo is that no one knows what others charge, no one knows what others pay. We have a system that isn’t structured in the interest of the patient.”




I have read about this study on numerous news sources and blogs in recent days. While no one can dispute that healthcare costs are out of control, it seems many are assigning responsibility to the wrong party. Hospitals do not have complete control over pricing. For the most part, hospital costs are driven by the insurance companies. Here is a link to an article that explains this idea in more detail:

Dear Reader,

Thank you very much for your comment, it is much appreciated. I did read the article you linked to. However, that article addressed hospital pricing for overall patient stays, not the specific issue of extremely dramatic ranges in procedure pricing. Yes, it is certainly absolutely true that health insurance/managed care contracting has an enormous impact in this area. But it also remains true that hospitals have a responsibility in this area to move towards rationalization and transparency, as the numbers revealed in the UCSF study should be troubling to everyone, including to provider organization leaders. I certainly do agree, though, that insurance contracting plays a significant role here. Thank you very much for your comment. --Mark