Wendy Lynch, Ian Beren, Justin Shaneman and Nathan Kleinman
Posted 12/30/11 on the HCMS Blog
It’s not surprising news that inpatient healthcare costs vary from hospital to hospital; large differences in price for the same procedure are common. But the reasons for variation are less clear. Some hospitals have consistently more expensive fees for identical treatments. However, these differences do not necessarily reflect better care: a recent study found that some high-cost hospitals rank low in quality scores and some high-quality hospitals are relatively low-cost (1). Plus, evidence shows that spending more does not produce better outcomes, higher satisfaction, or more appropriate care (2, 3).
Some plausible reasons for price differences include higher negotiated rates with health plans, delivery of additional or unnecessary services, poor efficiency or management of hospital stays, or several other possible causes. Yet, the most common assumption most of us make when we see price differences among hospitals is that some hospitals have patients that are simply sicker.
A recent HCMS analysis of hospital use by employees of a large, regional employer refutes that assumption.+ The graphic below shows cost per admission at ten different hospitals in the same geographic region according to the severity of illness burden of the patients the hospital treated. Most hospitals fall along this expected cost trend, with a median cost of $2,300 per increasing unit of illness. However, a few had costs above that expected rate of $15,000 to $20,000 per admission.