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Medicare Data Shows Different Pricing For Same Procedures at Local Hospitals

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Medicare released a list of average prices it was charged at 3,000 hospitals for 100 common procedures. We dug through the data from local hospitals and found major differences in the amounts charged.

Hospitals determine what they will charge. Medicare reimburses the hospital based on a number of factors, including geography and the wage index.

"You have to look at the type of hospital," said Katharine Webb, the Virginia Hospital and Healthcare Association senior vice president. "The Medicare payment formula is so complex that it's pages and pages and pages of regulation of what an individual hospital's payments might be."

There are hundreds of major joint replacement/re-attachments done without major complications, but the cost varies.

Carilion Clinic Hospitals:
RMH - total discharged: 683; average covered charge: $53,441
NRV Medical Center - total discharges: 71; average covered charge: $51,900

LewisGale Hospitals (The spokeswoman couldn't tell us why the prices vary so much):
Salem - total discharged: 319; average covered charges: $64,505
Montgomery - total discharged: 142; average covered charges: $76,001
Pulaski - total discharged: 21; average covered charges: $55,699

Centra:
Lynchburg General - total discharged: 507; average covered charges: $29,354

The hope is releasing this data will make healthcare more affordable and accountable.

But keep in mind, Medicare reimburses the hospitals differently, too.

"In addition to charges, what this report shows is that Medicare is paying LewisGale, on average, 20 percent less than what it pays our competitor for these 100 DRGs," said Nancy May, a LewisGale spokesperson." In fact, Medicare is paying us less on all of these DRGs but two."

Medicare released the following data about what they reimbursed local hospitals, on average, for the major joint replacement/re-attachments procedure mentioned above:

Carilion Clinic: $13,000-$16,000

LewisGale: a little more than $11,000 to a little more than $12,000

Centra: More than $13,000

"Hospitals also may have different methods of determining their base prices," said Don Halliwill, Carilion Clinic's CFO. "At Carilion, we use benchmark data from groups of similar hospitals to try and make sure our pricing is appropriate"

The charges and Medicare payments vary for all of the procedures and hospitals. Hospitals tell us what you actually pay depends on your coverage.

We contacted Centra but haven't gotten a response. Many of the people we talked to today agree transparency is a good thing and helps patients make important choices. Webb says in Virginia, they're putting together a more expansive, statewide database that will include all procedures and costs, not just Medicare.

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LewisGale statement from Nancy May, a spokesperson:

What patients pay has more to do with the type of coverage they have than charges. Government programs like Medicare and Medicaid determine how much they reimburse hospitals. Insurance plans negotiate their payments. Everyone else is eligible for our charity care program or they receive our uninsured discounts, which are similar to the discounts a private insurance plan gets. 

In addition to charges, what this report shows is that Medicare is paying LewisGale, on average, 20 percent less than what it pays our competitor for these 100 DRGs. In fact, Medicare is paying us less on all of these DRGs but two.  

We're committed to giving patients and payers high value for their healthcare dollars, and this report shows we're succeeding. 

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Carilion Clinic statement from Don Halliwill, Chief Financial Officer:

At Carilion, we think transparency is good thing, especially when it helps patients make informed choices. The challenge in this case is the sheer volume of data along with the fact that a patient's actual payment will depend on the discounts negotiated by their insurance company, determined by Medicare, or available through our Charity Care program, which offers discounts up to 100% based on the patient's ability to pay. 

It is also confusing because there seems to be no rhyme or reason for the wide fluctuations across the country. This may be due to the fact that no two hospitals are truly alike, especially if you compare smaller, rural hospitals with large teaching hospitals and trauma centers. Hospitals also may have different methods of determining their base prices. At Carilion, we use benchmark data from groups of similar hospitals to try and make sure our pricing is appropriate.

Hopefully, making this information available for review on the CMS web site will motivate the health care industry to facilitate a comprehensive pricing system that is more consistent, user-friendly and relevant to the needs of patients today.