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A revealing look at cost of health care

The Journal Gazette

The federal government’s release of information on the tremendous and seemingly arbitrary variation in medical treatment costs offers a much-needed glimpse into the calculations hospitals use to determine patients’ bills.

The data don’t provide a complete picture but serve as a starting point to help consumers better understand health care costs.

More important, the disclosure should help in the effort to reduce excessive costs.

On Wednesday, the Centers for Medicare and Medicaid Services for the first time released the average list price from 3,300 U.S. hospitals for the 100 most common inpatient procedures.

The public release of the 2011 data is a welcome effort to increase the transparency of the country’s opaque health care pricing.

The data showed wide inconsistency in charges for the same service at different hospitals.

A joint replacement, the most common hospital procedure for Medicare patients, costs $5,304 in Ada, Okla., and $223,373 in Monterey, Calif. The average charge was $53,063.

Geography is generally not a factor. Hospitals in the same city can charge different prices for the same treatment. The difference between treating a nutrition disorder as inpatient care at Lutheran Health and Parkview Health can be as much as $5,000, according to the federal data.

Health care officials have long admitted that cost-shifting occurs.

Hospitals adjust charges to cover expenses such as offering emergency room care, public education initiatives, physician training and care for uninsured patients.

Brian Tabor, vice president of the Indiana Hospital Association, said the released information does not provide consumers all the information they need. Medicare doesn’t pay anywhere close to the costs disclosed.

“The charges are just an artifact of the system we have,” he said. “It’s just a sticker price. The true price is what’s been negotiated with your insurance carrier.”

But he also said releasing the information is a good thing.

“What it does for hospitals is allow us to talk about the things we want to talk about.

“It allows us to talk about why we need to expand coverage and provides us an opportunity to talk about all the other things hospitals do.”

The true value of the information is to jump-start a broader conversation about a health care system consuming a much greater share of the nation’s gross domestic product than other nations’.