Prices for the same procedure can vary wildly between hospitals, or even between payer types at the same hospital, a new analysis found.
C-section prices across Sutter Health's 24 hospitals ranged from $7,634 to $70,553 a report from the Health Care Cost Institute revealed. At Novato Community Hospital, commercial prices ranged more than five-fold for an upper gastrointestinal biopsy with an endoscope or by $32,821 for a C-section delivery. Still, the minimum C-section price at Sutter Coast Hospital was higher than most other commercial C-section prices at most hospitals, researchers noted.
Across Sutter hospitals, some knee X-rays and C-sections cost more than eight times as much, while some major lower joint replacements cost nearly $55,000 more than others.
The variation largely stems from Sutter's bargaining leverage with commercial payers, experts said. Sutter has been accused in multiple lawsuits of imposing all-or-nothing contracts with insurers, which have inflated healthcare costs.
"This analysis highlights the insanity of U.S. healthcare prices, in addition to the fact that most consumers can't control the type of insurance they have," said Niall Brennan, co-author of the report and the CEO of HCCI.
Sutter said in a statement that price variation, in part, reflects health insurers' significant bargaining power.
"Rate variation for certain procedures is commonplace and exists because negotiations are conducted separately with each insurance company and generally focus on a basket of services that hospitals provide as opposed to one individual service or DRG," the organization said. "Negotiations with insurance companies are a lengthy back and forth process, and each insurance company approaches provider negotiations with different goals based on the company's networks, products, membership base, actuarial analyses and other factors, which is why their prices can vary."
In past reports, HCCI found that commercial prices rose three times faster than inflation even as utilization dropped. Rising hospital prices are the main driver of U.S. healthcare spending growth, research shows.
"Working Americans suffer with higher premiums, reduced benefit packages and lower wages because money that could be spent on wage compensation is diverted to the cost of health insurance," Brennan said.
Generally, Sutter's commercial prices tended to be less expensive than discounted cash and out-of-network prices. But there were exceptions.
The HealthSmart PPO and Multiplan PPO C-section delivery prices were more expensive than the cash prices at every hospital, according to the report. The HealthNet Medi-Cal C-section delivery price at Sutter Amador Hospital was also more expensive than most commercial prices at 15 other hospitals.
HCCI analyzed the pricing data provided by Sutter as part of the new HHS regulation forcing providers to post their payer-negotiated rates. Even though not every Sutter hospital published the same information, the data was made readily available in a consistent and user-friendly format for all of its hospitals, researchers said. That wasn't the case for all systems.
Only half of the hospitals analyzed published negotiated prices in any manner, and only one-third published prices that aligned with the regulation's intent, HCCI's cursory search of 16 hospital systems found.
The goal of the transparency mandate is to put pressure on the hospitals that boast higher-than-average prices as well as push consumers and payers toward lower-cost options. Although some worry that it could incentivize the lowest-priced hospitals to increase their prices.
"The staggering hospital price disparity is caused by two disadvantages suffered by some payers—their lack of pricing information and their lack of bargaining power against hospitals," said Ge Bai, associate professor of accounting and health policy and management at Johns Hopkins University, adding that the price transparency mandate remedied the former.
Payers can design narrow networks that exclude expensive hospitals and build purchasing alliances to consolidate bargaining power, Bai said. The price transparency mandate also promotes competition from other types of providers, such as ambulatory surgical centers, to enter the market dominated by high-price hospitals, she said.
But the regulation lacks teeth, Brennan said. Non-compliant hospitals only face a $300 per day penalty, which is insignificant for many of the multi-million, if not billion, dollar systems, he said. There are also limited guidelines on how the information should be posted.
IU Health, for instance, posted their negotiated rates for all services and all payers via a running string of inconsistently formatted text on a blank webpage, making it nearly impossible for anyone other than experienced coders to interpret, according to the report. Nearly every hospital examined chose to bury the cost sheets deep on their site and adjusted the underlying website code to conceal them, researchers found.
Regardless, Brennan is skeptical that folks will or should shop for healthcare, even if there was 100% compliance, he said.
"Asking consumers to navigate the healthcare system on a transactional basis is absurd," Brennan said. "It is possible this data may be leveraged over time by employers and insurers, but I don't think it should be consumers. You can't shop for healthcare when you are unconscious, scared, in pain or if English isn't your first language."
Correction: HCCI used inaccurate prices in its original analysis, which has been updated along with the story.