CMS Hospital Cost Comparisons Offer an Intriguing Start

Logic says that a medical procedure at a not-for-profit hospital would be cheaper than at a physician-owned, for-profit hospital. After all, not-for-profits are obliged to provide a certain amount of their care to benefit the community and receive certain tax benefits in return.

But it doesn’t always work that way.

he Centers for Medicare & Medicaid Services (CMS) recently rolled out its Hospital Compare website at www.hospitalcompare.hhs.gov, which allows viewers to do a payment comparison for procedures and treatment at hospitals, sorted by hospital, Zip code, city and county.

A recent look into Medicare payments for angioplasty surgery at hospitals in the Wichita, Kan., market showed CMS paying more to large commercial chains and not-for-profit hospitals than to physician-owned facilities.

Between October 2005 and September 2006, Wesley Medical Center, an affiliate of publicly traded HCA Inc., was paid an average of $13,745 for 158 angioplasty surgeries, which included insertion of drug coated stents into the heart artery.

Medicare paid Via Christi Regional Medical Center, a not-for-profit operated by the Via Christi Health System, an average of $12,279 for the 249 angioplasty surgeries it did during that time.  

Meanwhile, physician-owned hospitals Kansas Heart Hospital received an average of $10,830 for the 150 procedures it did, and Galichia Heart Hospital received an average of $11,055 for the 312 procedures it performed during that period.

CMS began posting the pricing information to promote transparency in healthcare costs, which industry experts say is needed to help consumers who are shouldering a larger portion of their health care costs (“CMS Hopes Medical Cost Comparison will Reduce Healthcare Debt,” April 8).

CMS’ payment information represents only the amount Medicare paid to hospitals. It does not include additional payments from a supplemental insurance plan or out-of-pocket costs to the patient, so the angioplasty procedures probably cost patients more.   

InsideARM reviewed the Wichita market because of its mix of non-profit, for-profit and specialty hospitals within about 10 miles of each other. Of the seven hospitals identified, Wesley, Via Christi, Kansas Heart Hospital and Galichia offered the angioplasty procedure.

Logic suggests that the larger the CMS payment for a procedure, the more the hospital charged and the more healthcare debt the patient would ultimately incur. But experts say hospital prices aren’t that simple. Hospitals charge different prices depending on who is paying and insurance companies pay different rates to in-network and out-of-network providers.

“People who retain the services don’t always bear the cost,” said Lauren Coste, a healthcare facilities analyst in Fitch Ratings’ corporate finance department. “Insured patients, only bear a fraction of the cost.”

It’s unclear why Wesley and Via Christi received higher payments. CMS said the average hospital payment can vary for several reasons, including if the hospital is classified as a teaching facility, such as Wesley. And patients pay different amounts depending on their insurance plan. 

Payment also may be higher if the patients treated tend to be sicker, said CMS spokesperson Peter Ashkenaz. “If they are sicker, more services are needed to treat them,” he said.

The data from Wichita that commercial and not-for-profit hospitals received higher Medicare payments may not hold true nationwide, as local market conditions and individual hospital costs impact pricing decisions. Some hospitals are beginning to offer their own cost of care estimates, with HCA’s www.hcahealthcare.com providing pricing information and assistance via its website.

“I think this is the trend,” Coste said. “The industry in general will realize the need to be more transparent with its pricing.”