Healthcare costs vary widely by region

The best solutions to decrease the high costs of healthcare services may not be solved at the federal level but in states and their communities, a new study suggests.

The report, published by researchers this week at the Health Care Cost Institute, found costs of services vary dramatically depending on a patient's zip code.

For example, patients in El Paso, Texas, paid 29% more than the national average in 2014 for inpatient services. This is in stark contrast to patients in Knoxville, Tenn., who paid 37.5% less than the national average for inpatient services that same year.

The price differences in regions can't be pinned down to one reason, but a variety, said Eric Barrette, an author of the report and director of research at the Health Care Cost Institute.

Prices can differ depending on competition of services in a specific market, the number of insurers in the region and the availability of services or physicians in an area.

"Every time you peel a layer off the healthcare price onion, there is another layer," Barrette said.

He said the findings will hopefully push state lawmakers, community organizations and patient advocacy groups to investigate why their markets have high healthcare prices.

The study analyzed claims data of employee-sponsored health plans from 2012 to 2014 for about 40 million individuals who received care in inpatient, outpatient and physician settings. The data accounted for people in all 50 states and the District of Columbia.

The services selected were those that accounted for about 65% of total healthcare spending and were weighted for an overall average.

Along with finding various prices by region, the report also found price differences depending on the healthcare setting. For example, services rendered in the outpatient setting were subject to the most price hikes. Costs of outpatient services increased by 8.9% from 2012 to 2013 and then an additional 6% from 2013 to 2014.

This is likely because the use of outpatient services is increasing overall as the industry looks to shift more services to that setting rather than the inpatient setting, Barrette said. "As people are using those services more often, those prices are going to change," he said.

But when the researchers took a closer look at outpatient services, the amount of the cost increase varied in specific regions. For example, in Peoria, Ill., outpatient prices were only 4.6% higher in 2014 than in 2012. That is compared to Green Bay, Wis., where outpatient prices increased by 24.3% from 2012 to 2014.

In addition, prices among physician services increased the least. From 2013 to 2014, prices only increased 3.3%. Barrette said physicians usually administer the same services repeatedly so they aren't vulnerable to as much price variation. He added that prices in the physician segment are important to watch as more and more practices are scooped up by large hospitals and systems.

Barrette said of the findings, "this is just a starting point." There is a lot states can do to lower costs if they invest the "appropriate resources and time," he said.