Recently, CBS News came out with some pretty amazing statistics about the wide disparity in costs for a common surgical procedure across the country. For the appendectomy, a common and often performed operation, one would expect to pay virtually the same price regardless of what part of the country the surgery was done. Not so, according to the following report, which was included in the journal Archives of Internal Medicine on Monday, April 23, 2012. Surprisingly, the findings in this report were very similar to those results from a study conducted in 66 United States and Canada hospitals, which indicated a wide disparity in charges depending on geographic location.
In a California study funded by the Robert Wood Johnson Foundation, it was revealed that the average cost of the procedure was around $33,000 but the extremes ranged from under $2,000 to more than $180,000. As would be expected, the lowest price charged a patient for the surgery was in a rural northern California town and the highest bill was for a lady who had the procedure in technology rich Silicon Valley. The patients, both female, had essentially the same number of preoperative studies done, had the type of surgical procedure and were only in the hospital for one day. The only significant difference was that the lady who had the surgery done in Silicon Valley was said to have been a cancer patient, although there was no indication of any cancer related treatment provided to her during the one day hospital stay. In the overall study, the cost disparity seemed to be related to two things, the health of the particular patient and the place where they had the appendectomy done. Those who were older with other medical problems such as diabetes, heart conditions, high blood pressure or lung issues necessitated additional workup and longer stays in the hospital than others. The other disparity was simply venue.
Data for the overall study was gathered from California hospitals for 19,368 appendectomy patients in 2009. Comparisons were made only for patients between the ages of 18 and 59, whose procedure was a standard appendectomy requiring a hospitalization of less than four days. This billing data included the hospital room, operating room, the surgical procedure, surgical supplies, other tests and medications. Examiners looked at the gross billing to the patients, prior to any health insurance company write-offs or payments, and did not have access to what the hospital actually was paid. Since the data looked at did not reveal whether any patient was covered by health insurance, the total gross billing was the amount owed to the medical care facility if they were uninsured and even under the best of circumstances hospital patients may still owe some portion of the billed amount even if they have insurance. Charges were determined to be the highest at profit oriented hospital facilities and non-profit hospitals, with the lowest charges seen at county facilities.
The results were that some disparities could be rationalized but clearly there was no rationale for one third of the cost differences. According to the International Federation of Health Plans, the average price for an appendectomy should be around $28,000.
Dr. Renee Hsia with the University of California, San Francisco, said “there’s no method to the madness” and “there’s no system at all to determine what is a rational price for this condition or this procedure”, suggesting that the system itself was broken. Her idea is that people are not able to hospital shop when the need arises, since medical care facilities don’t advertise their services and the related costs. Another physician with Dartmouth College’s Center for Health Policy Research, Dr. David Goodman, deemed the findings of the study to be “very concerning.” Also weighing in one the findings was Caroline Steinberg, with the American Hospital Association, who said that two people having the same procedure done in the same hospital at the same time would receive the same bill, since the real variation is where the operation is done and the hospital’s costs in providing the services. Interestingly, some other countries control wide fluctuations in the costs of medical care by governmental intervention, whereas the United States favors more competition between medical care facilities. Dr. Howard Brody from the University of Texas Medical Branch in Galveston, Texas, a long time opponent of spiraling medical costs, said that unfortunately “the laws of supply and demand do not work well on health care.”