A Knee Replacement Surgery Could Cost $17k or $61K. And That’s is in the Same City

January 27, 2015

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Source: Washington Post

Thanks to recent efforts to make health-care prices more transparent, we have a better idea that Americans pay much more for a doctor’s visit or common procedures in some parts of the country versus another. And a new report from a major health insurance organization shows how even within the same market, surgery prices can vary by tens of thousands of dollars.

The Blue Cross and Blue Shield Association, whose member organizations cover about one in three Americans, for the first time on Wednesday released prices that its insurers are charged by health-care providers. The group’s report cover prices for knee and hip replacement surgeries, which are among the fastest growing procedures in the country.

The report, which analyzed three years of BCBSA companies’ claims data in 64 markets, found that the average price for a knee replacement surgery is $31,124. But that price, which doesn’t reflect what the patient actually pays, can vary greatly within the same city. In Dallas, for example, a knee surgery will run anywhere between $16,772 and $61,585 depending on the hospital. That’s a 267 percent price variation, the largest within any of the markets that BCBSA analyzed.

The analysis reinforces that in health care, cost doesn’t bear much relation to quality, said BCBSA chief strategy offier Maureen Sullivan. And with consumers generally bearing more of the cost of health insurance these days — in the forms of higher deductibles and co-pays — people are also becoming more price-conscious.

Consumers could be surprised by the savings if they shopped around more, though reliable information could be difficult to obtain. Prices varied by at least 100 percent in 11 other markets, according to the claims data. This map from the BCBSA report gives you an idea of what this variation looks like within markets across the country:

The health insurance organization reported a similar pricing disparity for hip replacement surgeries, which averaged $30,124 across the country. In the Boston area, the price ranged anywhere between $17,910 and $73,987 — the largest variation within any market for the procedure. The surgery cost as little as $11,327 in Birmingham, Ala., according to the report. Hospitals that reported fewer fewer than six surgeries were excluded from the analysis.

As expected, the average price of hip replacement surgery also varied greatly across the markets. The procedure cost on average $16,399 in Montgomery, Ala. but cost as much as $55,412 in Fort Collins, Colo.

The BCBSA report comes almost two years after Medicare for the first time disclosed the prices that hospitals charge for the 100 most common inpatient procedures. It was an unprecedented data dump, but the prices were the amounts advertised by hospitals, which often don’t reflect what the vast majority of people actually pay.

A number of factors start to explain why charges vary so greatly across hospitals, though they’re not immediately clear to patients. It could depend on the mix of private versus public insurance, how much free care the hospital provides, competition, its location and more.

Wednesday’s report was the first in a series that BCBSA plans to release as it tries to nudge customers into choosing higher-quality, lower-cost providers. The association has a program highlighting hospitals that perform better on quality metrics, such as lower rates of complications and readmissions, while also meeting affordability standards.

Some past studies show that such health price transparency tools can bring consumers some modest savings, but they’re often underused. In 2013, 98 percent of health plans reported offering cost calculator tools, but they reported only 2 percent of patients made use of them.

“High cost doesn’t necessarily mean high quality,” Sullivan said. “It’s very important for patients, when going to seek care, to ask questions and learn the information on cost and quality.”

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