The real cost of healthcare in New York

Rankings tout the best hospitals to receive cancer care or treatment of a heart attack. They recommend where to go for a hip or a knee replacement. But tools are scarce for patients who want to choose a hospital based on costs.

A federal rule that went into effect Jan. 1 was intended to provide just that. Enacted by the Trump administration, it requires hospitals to disclose their cash prices, or the costs of procedures without health insurance, and the rates they negotiate with insurance companies for all their services.

In New York City the result has been haphazard at best and defiantly noncompliant at worst. For facilities that have shared at least some of the figures, the files are difficult or impossible to navigate without tech savvy, dogged determination and advanced data skills.

But the patchwork of information that can be extracted shows that local hospitals charge patients wildly different amounts for the same few common procedures—with variations at times exceeding $10,000, according to a Crain's analysis undertaken in partnership with Turquoise Health, a health-tech company that built a machine-learning algorithm to parse the pricing data.

An MRI scan of the brain, for example, costs $446 without insurance at a Mount Sinai Health System–run hospital but an average of $7,356 at a New York-Presbyterian system hospital—more than 16 times as much.

There were substantial price differences even between hospitals owned by the same health system. A patient who gets a CT pelvic scan at Montefiore Health System's Nyack Hospital will be charged $220 without insurance. If that patient were instead to go to Montefiore's White Plains Hospital, just a 20-minute drive away, the cash price would almost quadruple, to $848.

Adding insurance into the mix points to seemingly arbitrary differences in rates between plans, with negotiated fees sometimes even exceeding the price a patient would pay without insurance. A colonoscopy at NYC Health + Hospitals/Elmhurst, part of the city's public hospital system, costs about $318 with a Healthfirst plan, $1,200 with a MetroPlus Medicaid plan and nearly $2,200 with Aetna commercial coverage—more than double the $895 rate without insurance.

Brian Walsh, client success leader at Turquoise Health, said Crain's findings fit into a national trend of volatility in hospital pricing.

"Overall, this is par for the course," he said.

Pulling back the curtain

The federal government's price-transparency rule promised for the first time to pull back the curtain on one of the most opaque corners of healthcare: negotiations between insurance companies and hospitals.

The rule mandates that hospitals publish the prices they have agreed upon with each of the health plans they accept. Unlike cash prices, which the U.S. Centers for Medicare and Medicaid Services started requiring hospitals to disclose in 2019, these are the numbers that often have the most bearing on what a patient actually owes for hospital care. (The vast majority of New Yorkers are insured either privately or through Medicare or Medicaid.)

The reality is much less clear. Each hospital uses disparate naming conventions that can complicate efforts to compare and contrast prices. Many use highly technical medical billing codes to identify services. If a patient were to figure out the right code for the service they need, they'd still have to go through tens of thousands of rows of data to make a comparison.

Some systems, such as Mount Sinai, break out the cost of service by insurance, while Montefiore's 50,000 rows of data disclose only cash prices—which few patients actually pay.

"The data isn't exactly perfect, and this is the first time hospitals are taking a whack at putting this data together," said Walsh.

Hospitals are not entirely to blame. The price-transparency legislation offered limited guidance on what exactly facilities need to provide and in which format, which ultimately poses a hurdle for patients trying to make sense of the numbers.

Some procedures, for example, are commonly priced as part of a bundle of services, noted Elisabeth R. Wynn, executive vice president of health economics and finance for the Greater New York Hospital Association. Facilities also sometimes tack on additional charges based on quality metrics, further complicating matters.

The U.S. Centers for Medicare and Medicaid Services said that, as of the end of October, it had issued 329 warning letters to hospitals for noncompliance and requested 76 corrective action plans from those that had not yet corrected deficiencies. The agency has repeatedly declined to name the scofflaws and would not disclose New York-specific figures.

Fines for noncompliance were originally set at just $300 a day. The government has since announced plans to raise the penalties to as much as $5,500 per day, or more than $2 million per year, starting next year.

The enlarged fines still may not be enough to coax data disclosures from giant health systems, which report billions of dollars in revenue per year—and have an incentive to keep their rates under wraps.

Bargaining power

In 2016, years before the federal price-transparency rule was instituted, a group of experts got an initial glimpse at the rates New York hospitals and insurers had long kept quiet.

The New York State Health Foundation, a Midtown-based grantmaking organization, had commissioned an actuarial firm to study hospital pricing in three regions of the state. The study's authors obtained what was then unprecedented access to contracts between hospitals and insurance companies from the state Department of Financial Services, which regulates insurers. The 151-page report included pricing and reimbursement data from more than 100 hospitals—including 75 in downstate New York—and nine commercial insurers.

It found that market leverage, or bargaining power, rather than quality, was key to the prices that hospitals charged for privately-insured patients. Hospitals with the biggest market share, such as those in the New York-Presbyterian, Northwell Health and Montefiore systems, tended to charge higher prices. And the difference was significant, the researchers found: The highest-priced hospitals downstate were 2.2 to 2.7 times more expensive than the region's lowest-priced facilities.

Prices were also higher at downstate hospitals that serve smaller shares of Medicare and Medicaid patients, countering "a widely held belief that a hospital negotiates for higher commercial prices to offset lower reimbursements received for their publicly insured patients," the authors wrote.

"Hospital prices are not transparent, and perhaps if they were, we wouldn't see this much variation," Bela Gorman, the study's project lead, told Crain's at the time.

The 2016 study was the most comprehensive attempt at transparency until now.

Dr. Mark Zezza, director of policy and research at the New York State Health Foundation, said Crain's findings indicate the same patterns in hospital pricing have persisted in the years since.

Importance of transparency

Transparency alone will not lower the cost of care, experts say, but it is an important precursor.

The new Coalition for Affordable Hospitals, convened by Local 32BJ of the Service Employees International Union, is pushing state lawmakers to pass a bill during the next legislative session, in 2022, that would prohibit certain anti-competitive contracting provisions between hospitals and insurers. Among the provisions cited in the bill, called the Hospital Equity and Affordability Law, or HEAL, is an all-or-nothing clause that requires payers to contract with all facilities in a health system if they want to include any in their health plan.

Other advocates tout the New York Health Act, which would switch the state to a single-payer system, as the only real solution to procuring lower prices.

This story first appeared in our sister publication, Crain's New York Business.