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Marketplace Creates Hospital Cost Differences, Says AHA

06/14/13

  04:26:48 pm, by MedBen5   , 272 words,  
Categories: Health Plan Management

Marketplace Creates Hospital Cost Differences, Says AHA

The fact that surgical costs differ from one hospital to another may not come a total surprise. But the recent introduction of a Medicare Provider Charge database by Health and Human Services, containing prices charged by more than 3,000 hospitals, has brought such cost variances under closer scrutiny.

WebMD recently compiled an FAQ examining hospital costs. Among the questions asked: Why is there such a big cost difference for the same services?

Hospital rates are based on a number of factors, according to the American Hospital Association, including:

  • Scope of services provided
  • Whether the hospital serves a large portion of poorer and sicker patients
  • Community reputation of the hospital

The difference in costs between one hospital and another is a “byproduct” of the marketplace, says the AHA.

Caroline Steinberg, the AHA’s vice president of trends analysis, believes the focus should shift from pricing to what hospitals actually collect for their services. Medicare and private insurer payments to hospitals are typically far lower than the stated cost. Medicare sets the rate of reimbursement, even though it adjusts the rates according to factors like the number of poorer people the hospital serves, Steinberg says.

But economist William Custer, PhD, director of health services research at the Institute of Health Administration at Georgia State University, says these factors can’t explain the cost variations.

“Hospitals have historically set prices based on their own methodology. One hospital can set prices three times greater than another; there’s no real pattern,” says Custer. “If we had a healthy health services market, you would expect those prices to be much closer aligned.”

Read more of the FAQ at the WebMD site.

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