Hospital Costs in Context

To it’s great credit the Washington State Hospital Association has made available hospital charges for various type procedures in member hospitals around the State. These figures compare our local Bellingham hospital (selected hospital) with others in the state–you can make other comparisons on the site.

Major Hip, Knee, Ankle, Foot Surgery, Including Replacement2005

Selected
Hospital

Hospitals
in this County


Hospitals with Similar Patient Volume

All Washington
Hospitals

Number of Discharges:

372

372

5,595

14,319

Average Length of Stay:

3.5 day

3.5 day

3.8 day

3.8 day

Average Charge

$20,358

$20,358

$30,019

$32,533

Average Charge Per Day:

$5,816

$5,816

$7,900

$8,561

Median Charge:

$19,565

$19,565

$27,815

$30,140

Pacemaker Implant Without Heart Attack 2005

Selected
Hospital

Hospitals
in this County

All WA
Hospitals with Similar Patient Volume

All Washington
Hospitals

Number of Discharges:

85

85

841

1,865

Average Length of Stay:

2.2 Day

2.2 Day

2.8 Days

2.9 Day

Average Charge:

$21,022

$21,022

$31,027

$34,474

Average Charge Per Day:

$9,556

$9,556

$11,081

$11,887

Median Charge:

$17,814

$17,814

$28,395

$31,900

Implant of Standard Stent Without Heart Attack–2005

Selected
Hospital

Hospitals
in this County

All WA
Hospitals with Similar Patient Volume

All Washington
Hospitals

Number of Discharges:

20

20

132

313

Average Length of Stay:

1.4 Day

1.4 Day

2.3 Day

2 Day

Average Charge:

$18,208

$18,208

$31,497

$34,074

Average Charge Per Day:

$13,006

$13,006

$13,694

$17,037

Median Charge:

$16,157

$16,157

$28,958

$30,997

Major Small and Large Bowel Procedures, Without Complications–2005

Selected
Hospital

All Hospitals in this County

All WA
Hospitals with Similar Patient Volume

All Washington
Hospitals

Number of Discharges:

52

52

731

1,580

Average Length of Stay:

5 Day

5 Day

5.2 Day

5.1 Day

Average Charge:

$18,110

$18,110

$21,540

$23,892

Average Charge Per Day:

$3,622

$3,622

$4,142

$4,685

Median Charge:

$17,450

$17,450

$18,866

$21,001

The hospital association’s explanation of the variation in pricing follows:

“Payer mix – As with other businesses, hospitals cannot survive if costs exceed revenues over a long period of time. Government programs (like Medicare and Medicaid) generally reimburse facilities at rates that do not cover the costs they incur to provide care. Therefore, hospitals that have a relatively high percentage of government-program patients are forced to recover a greater percentage of their operational costs from privately insured and self-pay patients through higher charges. “

“Facility cost structures – Facilities differ in their approach to pricing based on operational costs. Some facilities try to spread the cost of all services and equipment among all patients. Others establish charges for specific services based on the cost to provide each specific service. Furthermore, some facilities may decide, or be forced, to provide certain services at a loss while other facility operations subsidize the losses. Any of these situations can result in significantly different charges among hospitals for a given type of service.”

“New technology – The equipment facilities use to provide services differs in age, sophistication, and frequency of use. Facilities with the latest technology may have higher charges than those with older, less sophisticated equipment.”

“Staffing costs – Salary scales may differ by region and are typically higher in urban than rural areas. Shortages of nurses and other medical personnel may affect different regions differently. Where shortages are more severe, staffing costs, and, therefore charges, may be higher.”

“Intensity of care – Some facilities are equipped to care for more severely ill patients than others. Patients within the same diagnosis or procedure category may need very different levels of service and staff attention, causing variation in charges.”

“Range of services provided – Facilities differ in the range of services they provide to patients. Some may provide the full range of services required for diagnosis and treatment during the stay. Others may stabilize patients and then transfer them to another facility for more specialized or rehabilitative care.”

“Service frequency – The per-patient cost of services is generally higher if the type of hospitalization occurs infrequently at the facility. Furthermore, a single case with unusually high or low charges can greatly affect a facility’s average charge if the facility reported only a few cases in a given time period.”

“Capital expenses – Facilities differ in the amount of debt and depreciation they must cover in their charge structure. A facility with a lot of debt may have higher charges than a facility not facing such expenses. Furthermore, facilities may choose to lease or purchase equipment or facilities. The choices made about financing of capital projects may affect charges in different ways”

Variations in cost of 50-100% within a region for the same procedure category reflects the system’s inefficiency and the patient’s inability and unwillingness to shop for health care based on price. It represents a failure of the market system to control costs. As a matter of fact, it appears from the Washington State data that where there are multiple hospitals available pricing actually increases.

These hospital cost numbers do not include the additional fees for doctor’s services and perhaps other costs. We are also told that these are not the amounts insurers pay. They are given a preferential rate. We can also presume that those least able to pay, i.e. the uninsured working poor, do not get a break on their bills and perhaps that explains the huge proportion of bankruptcy filings (something like 50%) attributable to medical bills and also the large amount of noncollectable accounts receivable that hospitals experience. It should further be noted that with a well functioning national health insurance plan both of these problems, as well as the Canaries in the Mine issue, disappear.

It’s unclear what these procedures cost in the past but since 1980 national health expenditures have increased over 800%. In the same period of time the proportion of total expenditures for hospital care have declined from 38% in 1980 to about 30% in 2004. In dollars however expenditures for hospitalization in this period have increased more than 600%. This “moderating” of the increase in hospital expenses has been more than offset by even higher increases in prescription drugs and professional fees accounting for increases in national health expenditures from 232 Billion in 1980 to almost 1.9 Trillion at present. There also is a marked increase in “other expenses”, perhaps reflecting the uncontrolled administrative overhead of the current system.

from Health Care Industry Report 2006 KPMG pg37
A noncompetitive marketplace, rife with patent monopoly, conflicts of interest, and less than fully informed consumers under duress, will not foster competition on price or for that matter quality. In our private health care system the primary responsibility (indeed the fiduciary responsibility) of each entity is to increase profits rather than deliver a service in the most economical fashion. This has to change.

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