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Huge discrepancies in medical charges found -- in Alaska and nationwide

Thanks to data released Wednesday by the White House, medical patients can now get a glimpse at the costs hospitals in their hometowns charge for various procedures. In Alaska, as in many locales, the fees vary wildly, with some diagnoses and treatment twice as expensive at one facility over another.

The vastly diverse numbers are “indefensible,” said Bruce Lamoureux of Providence Health and Services in Alaska. “What you are seeing in these numbers is years and years of unusual actions by hospitals, health systems and physicians in order to secure reimbursement.”

“We welcome this transparency. It will shake up the industry, which is long overdue,” he said.

Consider this: a respiratory illness requiring four days on a ventilator, if treated at Providence Alaska Medical Center, costs about $155,000. But the same treatment at the Alaska Native Medical Center costs $72,000, more than 50 percent cheaper.

Meanwhile, a spinal fusion at Alaska Regional Hospital costs about $152,000, while just a short distance away at Providence, it's about $79,000.

All three hospitals are within a few miles of each other in Anchorage, Alaska's largest city.

Alaska costs in middle of pack

The White House released the information as part of an Obama administration effort to make the health care system more affordable and accountable.

Big variations in costs in Anchorage are seen in communities throughout the nation, according to the White House data, which the Washington Post has nicely summarized.

The Post found that Alaska's overall costs for the most common 10 inpatient procedures falls somewhere in the middle between the high-end and low-end among costs from all of the states. Six states – California, Florida, Nevada, New Jersey, Pennsylvania and Texas consistently had the highest charges. Northern state likes Idaho, Montana and North Dakota generally had the lowest.

For example, the same spinal fusion that ranges from $79,000 to $152,000 in Alaska, costs a whopping $471,120 in New Jersey, but a mere $21,000 in Maryland.

“Users will be able to make comparisons between the amount charged by individual hospitals within local markets, and nationwide, for services that might be furnished in connection with a particular inpatient stay,” states a White House introduction to the data.

Despite the wild variation in rates the hospitals charge, the Medicare payment they collect for each procedure are more closely clustered. Looking again the spinal fusion, total payments to the hospital, including Medicare and patient co-payments and deductibles, range from $20,742 to $40,029. Of these, Alaska's hospitals collected the highest amounts.

For patients with Medicare or private insurance, the “retail price” charged for the procedures is probably something they will never pay. The government and private insurance companies negotiate lower agreed-upon rates of reimbursement. But patients without coverage could in theory get stuck with the bigger tab.

Why the massive disparities? The Washington Post's Wonkblog explains: “Experts attribute the disparities to a health system that can set prices with impunity because consumers rarely see them — and rarely shop for discounts.”

Alaska hospitals analyzing data

The most expensive procedures measured in Alaska have variations of tens of thousands of dollars between facilities. A major bowel procedure at Providence Alaska Medical Center can run $172,000, while at Fairbanks Memorial Hospital it's some $60,000 less, billed at $109,000.

Alaska's hospitals are still working to understand the data. Like consumers, it's the first time they've gotten to see the price structure set by their competitors, said Kjerstin Lastufka, spokesperson for Alaska Regional Hospital. Regional would like more information about the specific cases that went into the data set. For example, are the hospitals that charge higher rates for procedures treating patients with a more severe case of the same condition?

She doesn't yet know. But asking more questions is an effort to understand the price fluctuations.

What is important is that “the patient isn't being charged to these numbers,” Lastufka said, since preset medicare or insurance rates, plus charity or discount programs to help the uninsured and underinsured, help patients pay for what the care they need or receive.

“The important thing for patients to know is that what they pay has to do with the coverage they have rather than the charges,” she said.

Providence's Lamoureux attributes the roller-coaster pricing to a variety of money-gathering tactics, including price structures that evolved as a byproduct of decades of perverse incentives and unusual reimbursement rules.

Through cost-shifting, facilities shift to commercial insurance carriers the losses incurred when Medicare underpays for the true cost of treatment. Within this strategy, some facilities hyper-inflate the real costs to mitigate the negotiation process, knowing that private insurance companies will demand a discount of their own.

Also contributing to the whacky highs and lows is the emphasis some facilities place on highly profitable procedures. These facilities may cluster their profit structure around the higher-earning procedures, like those found in orthopedics or cardiology, while letting other procedures slip by at much lower rates, closer to cost.

The bottom line, Lamoureux said, is that providers have for years manipulated their price structures either to sustain themselves or maximize profits.

Calling the White House data release “long overdue,” Lamoureux, along with Lastufka of Alaska Regional, said increased transparency is a good thing.

“This will begin to level the playing field for consumers and cause all of us as providers to do a better of job of matching charges with costs and allowing people to make more informed decisions,” Lamoureux said.

Patients without health-care coverage are advised to shop around, he said.

Assuming all facilities are equal – meaning safety, quality and level of care are comparable – someone who is paying out of pocket may benefit by going to the hospital that's charging the least for the particular procedure. From there, the patient can then negotiate downward – asking for a deep discount similar to what insurance carriers receive, and then working to take advantage of any cost-saving programs the facility may offer.

“Try to get it discounted right off the bat,” since “we know the full charge is funny money and includes confusing, manipulating tactics as part of its structure,” Lamoureux advised.

Compare the prices for procedures in Alaska here. By choosing a filter for the White House's dataset, you can make the search as narrow or wide as you like – scouring the nation or simply inquiring about prices in your hometown.

Contact Jill Burke at jill(at)alaskadispatch.com