An important step toward cost transparency

How much to treat this pneumonia? The Centers for Medicare and Medicaid took a step towards answering such questions by publicly releasing how much each of 3000+ U.S. hospitals charged Medicare for 100 common medical issues in 2011 and how much Medicare actually paid them.

The charges were remarkably variable, even among hospitals that share a zip code. Massachusetts hospitals tended to charge below the national average (eg. for pneumonia with complications, $14,686 compared to $51,726 nationally), though teaching hospitals like mine were more expensive (Massachusetts General Hospital charged $49,883 on average for pneumonia with complications; this has something to do with teaching hospitals seeing more complex patients, subsidizing low income patients, and training residents like me).

The sticker prices released by Medicare don’t mean much for most patients – when an insurer (whether a government agency like Medicare or a private company) pays the bill, it negotiates lower rates (Medicare paid MGH $14,525 on average per case of pneumonia with complications). Even patients with little or no insurance who would otherwise pay retail might cut a deal directly with the hospital. These numbers don’t really correlate with how much it actually costs the hospital to treat a patient with a given illness and, of course, reveal little about the quality of care offered at each hospital.

Still, the sheer range of charges tells us something about the free-for-all that is our health care marketplace; the public release of this information is an important step toward cost transparency that may help researchers, policymakers, and doctors make sense of it all.

The topic arises daily in my current job. Along with a fellow resident, I run a team of interns and medical students on a 24-bed general medicine unit, and have to decide – among other things – when patients are ready to leave. A young man with alcohol dependence gets hospitalized for the third time this month with nausea and vomiting – we offer him detox programs and order blood tests but he turns away the social worker and refuses a needle-stick to draw his blood.

Do we discharge him, as common sense would dictate? Or do we keep him in the hospital longer, working to convince him how important it is to quit drinking in the hopes that it will prevent another hospitalization next week? This calculus involves a complex interplay of psychological, social, and clinical factors, of course, but cost plays an important role as well. I love the idea of informing such decisions with hard numbers (the more granular, the better) – both at the level of the individual patient and national policy.

Ishani Ganguli is a journalist and an internal medicine-primary care resident who blogs at The Boston Globe’s Short White Coat, where this article originally appeared. 

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