New Medicare payment data offers pricing transparency for patients

07/05/2013

Last week, CMS released hospital charges and the corresponding Medicare payments for the 100 most common diagnostic codes at more than 3,000 hospitals nationwide. This database has received quite a bit of press, but what does it really show us? In Massachusetts, we have 56 hospitals represented. Of these hospitals, it shows how many patients received the procedure, what the average price billed was to the government and what Medicare actually paid. For those of us not accessing Medicare coverage, it may seem like data just for the sake of data, but in fact it can be quite useful to anyone accessing care at these facilities.

While a hospital may not actually receive the amount they are charging and your private insurance may not pay the amount that Medicare pays, it gives everyone a ballpark of how different facilities vary on cost. The table below shows the charges and payments for a kidney infection without complications at 2 different MA hospitals.

Hospital

Average Charges

Average Medicare Payment

Norwood Hospital

$7,376

$5,007

Brigham & Women’s

$23,987

$7,444

With Norwood Hospital, there is not a huge discrepancy in what was charged and what Medicare actually paid. Brigham and Women’s charged over 3 times as much as Norwood Hospital for the same diagnosis, but only received 1.5 times the reimbursement. This confirms to us that yes, Brigham and Women’s, the “Tier 1” hospital, is charging more for procedures, but the controls in place by Medicare, contracted rates, are keeping the actual payments to a reasonable level.

A hospital can charge whatever they want to Medicare or an insurance carrier. But as with Medicare, an insurance carrier will only pay the contracted amount to that facility as long as it is in their network. This data does not show us what the contracted amounts are with private insurance carriers, but we can use the cost relationship from hospital to hospital as a guide. Based on the data above we can assume that Brigham and Women’s would have a higher contracted rate with your insurance carrier than Norwood Hospital.

While the cost of care comparison may be more correlation and assumption than hard numbers, the number of discharges, or people that received a particular procedure, is not. Below is a chart on the number of discharges for permanent cardiac pacemaker implants (without complications) for 2011.

Hospital

Number of Discharges

Average Medicare Payment

Norwood Hospital

27

$16,673

Brigham and Women’s

65

$24,609

St. Elizabeth’s

15

$27,094

If someone were to use this data to decide what hospital to go to for this procedure, they could most likely rule out St. Elizabeth’s due to the higher payments and lower number of procedures done within the year. It may lead them to their local hospital for this procedure, as opposed to the hospital in the big city. The next logical step is to have CMS release the outcomes of these procedures so that instead of inferring, people will have actual results of these procedures to base their decisions on.

To most, the release of this data may just be data for data’s sake, but it is the first win in the war for price transparency. If the largest payer, the Federal Government, is releasing their pricing data, we can only hope that providers and private insurers alike will be pressured to follow suit.