Local hospital charges not easy to analyze

Charges for procedures at Colorado’s hospitals vary wildly across the state — and even within cities.

And no one really can explain why.

What health care experts and consumer advocates do know: Some hospitals charge vastly more money for the same procedures, and it’s not necessarily the smaller, independently run hospitals that are more expensive.

“The lack of information around how hospitals come to the decision of how much to charge is troubling,” said Kyle Brown, senior health policy analyst and co-author of a recently released study about hospital charges performed by the Colorado Center for Law and Policy. “We’re trying to figure out why hospital charges vary so widely in the first place.

“And this is just the start of the conversation.”

The charges that appear on each hospital’s chargemaster — a list of procedures and prices that every hospital maintains — have little in common with what most patients actually pay.

That’s because Medicare pays far below “list” prices, and insurance companies also negotiate a lower rate for specific care.

Even amid the complex data released recently by the Centers for Medicare and Medicaid Services, Colorado Springs hospitals stand out. Out of 90 studied procedures, Penrose-St. Francis Health Services charged more for 49, the study found. Memorial charged more for 41 different procedures. And overall costs at both hospitals are below the state average.

“Colorado Springs is different,” Brown said. “For the treatment of any given diagnosis, either hospital might be more expensive than the other.

“But when there is a difference, it’s far more expensive at one hospital.”

For instance, a spinal fusion without major complications is just over $81,000 at Memorial Hospital, part of the University of Colorado Health system. The same procedure costs $100,000 more at Penrose. But blood infections could cost $57,255 at Memorial, compared to just slightly more than $46,000 at Penrose.

None of the data released by CMS makes sense, Brown said.

“Larger hospitals should — because of economies of scale — cost less,” he said. “But that’s not the case. In every instance, the small, stand-alone rural hospital is cheaper. The bigger the hospital becomes, the more negotiating power it has.”

And more negotiating power means that hospitals can force insurance companies to pay more for procedures. In health care, you don’t always get what you pay for, Brown says.

“There’s no correlation between higher prices and better quality,” he said. “We can’t find one.”

Varying costs

Memorial Hospital’s overall charges are 11 percent below the state average, and Penrose’s are 5 percent below the average. That makes them unusual among the state’s metropolitan hospitals, most of which have higher-than-average charges.

For instance, the Medical Center of Aurora, a HealthOne hospital, has charges that are 32 percent higher, while another HealthOne hospital, Swedish Medical Center in Englewood, has average charges that are 35 percent higher.

The only hospital under the state average in the largest metro area is Denver Health, with charges 18 percent below the state average. Memorial’s partner, University of Colorado Health, has charges 23 percent higher than the state’s average. But Poudre Valley Hospital in Fort Collins, another partner in University of Colorado Health, charges 22 percent below the state average.

For its part, Memorial says the reason for its lower prices is the partnership with UCH.

“Memorial Hospital and University of Colorado Health focus on providing high value health care: the highest possible quality and safety at the most competitive prices,” said Memorial spokeswoman Erin Emery in a statement.

“The strong partnership of numerous hospitals within UCHealth allows us to find efficiencies while continuing to improve the high quality of care we provide to our patients. This will continue to be our focus in Colorado Springs and throughout the Front Range.”

Even among the three hospitals, there are varied charges and no way to understand the reasons behind them, Brown said.

“We’re going to continue to look into this, to get hospitals to be more transparent about the way they set fees, and what those fees are,” he said.

The study also found that prices can be more similar at hospitals located in different areas of the state. For instance, the prices at Memorial Hospital are more similar to those at Platte Valley Medical Center, nearly 100 miles north in Brighton, than to those at Penrose-St. Francis, only three miles away.

Local difference

But local hospitals say they watch prices at the competing hospital and keep their prices close.

“We try to take price out of the equation,” said Gail Decker, administrative director for the revenue cycle at Penrose-St. Francis.

“We don’t want patients starting a price war. So we keep them very close together — in most cases — so patients can rely on other factors when they make their choice.”

Decker said she routinely talks to counterparts at Memorial to make sure the hospitals are keeping their prices competitive, but not too much different.

She speaks with the emergency room coordinators and outpatient surgery coordinators, and the two hospitals collaborate to keep prices around the same level.

“Sometimes charges vary because of contracts, the number of items purchased,” Decker said. “And sometimes we have a brand-new widget they don’t have yet — and we have to build the cost of that into our charges. And really, each hospital is unique — different contracts, different negotiations, sometimes different equipment.

“It’s hard to make an apples-to-apples comparison.”

And yet, Memorial and Penrose have a relationship that’s more “friendly rivals” and less “cutthroat competitors,” she said.

“They can’t do that in Denver; there’s just too much competition,” Decker said. “But here, we collaborate — we trade ideas back and forth on how to keep prices lower for all of us. Patients can choose their provider, and go to the facility based on other reasons, not just money.”

And getting to the final price for any given charge is complicated, she said.

In fact, Decker spends every October, November and December combing through Penrose’s 120,000 line-item charges, comparing them to other hospitals, seeing what rate and what CMS code to apply each January.

“It’s literally all I do for three months a year,” she said. “I sleep with that book under my pillow.”

By the numbers

25 percent: The amount hospitals in Denver routinely charge above the state average

25 percent: The amount hospitals in Delta, Alamosa and Sterling charge under the state average

11 percent: The amount Memorial Hospital charges below the state average

5 percent: The amount Penrose-St. Francis Health Services charges below the state average

49: The number of procedures that are more expensive at Penrose than Memorial

41: The number of procedures that are more expensive at Memorial than Penrose