Topics
More on Billing and Collections

Prices for healthcare vary widely across states, even nearby cities, Health Care Cost Institute says

Imaging, radiology and lab tests saw the greatest discrepancies.

Jeff Lagasse, Associate Editor

Patients in some states are paying more than double what those in other states pay for healthcare services, a recent study by the Health Care Cost Institute has found. In fact, even within single states, prices can vary widely.

The organization looked at differences in prices for over 240 common medical services in 41 states and the District of Columbia for its report.

Compared to the national average, Alaska has the highest average healthcare prices, followed by Wisconsin, North Dakota, New Hampshire and Minnesota.

In New Hampshire and Wisconsin, more than 20 percent of healthcare services are priced at twice the national average. That's a stark contrast to states such as Arizona, Florida, Maryland and Tennessee, where over 90 percent of services are priced lower than the national average.

[Also: No glaring link between healthcare prices, quality of care, new research finds.]

HCCI Executive Director David Newman said that while some of the price variation may be warranted, some may not be.

"Prices in a marketplace are a signal to the market," said Newman. "If, for instance, there's a scarcity of child psychologists in North Dakota … then raising the price is demonstrating to the market that there's a shortage. In other cases, you could have unwarranted price variation because of market structure and market competition."

The research found that prices varied more for certain services than for others. States have similar prices for acupuncture, for instance, while prices for cataract removal can swing wildly from state to state. Imaging, radiology and lab tests saw the greatest discrepancies.


This map shows state-to-state differences in knee replacement prices. Click here to see more examples of price discrepancies.

Prices for services also varied significantly between cities within the same state. Knee replacement prices varied the most in California, with a $27,243 average price difference between riverside ($30,261) and Sacramento ($57,504). In Ohio, the average price of a pregnancy ultrasound in Cleveland was almost three times that of Canton -- at $522 and $183, respectively. The two cities are about 60 miles apart.

Bob Shapiro, chief financial officer at New York-based Northwell Health, said it's counterintuitive that prices would vary so significantly, since traditionally there have been only a handful of factors that can exercise influence over costs.

The cost of living, he said, is one of them, and may be a part of the overall price discrepancy equation.

"For Medicare and Medicaid, we get paid at a certain amount from them based on the services we perform," said Shapiro. "That's uniform throughout the United States. But there are some distinctions in Medicare. They adjust rates based upon where the practice is, since the cost of living is different in different places.

"New York gets a higher payment. Idaho would get something less."

Shapiro also said it's possible that markups may occur from time to time as the costs of supplies and equipment fluctuate. Still, he said, there's no sensible reason why such dramatic price discrepancies would exist.

"The cost variation shouldn't be that big," he said. "It could be a provider that has a higher markup, or they are getting access to lower-cost materials. It's generally very basic: cost of materials, cost of labor."

HCCI researchers acknowledge the potential role played by cost of living, but say the remaining variation is most likely due to differences in underlying market dynamics, such as lack of transparency, market power, or the availability of alternative treatments. Reporting on price variation at the service level, they said, can facilitate a better understanding of the causes.

[Also: Maine hospitals see broad price disparities, mirror national trend, study says]

Newman said the data gives policymakers two options: Do something or do nothing. While he isn't an advocate for one approach over the other, he said that if those at the helm did decide to take action, there are a number of options they could potentially consider.

"Maybe one way is to encourage free-standing imaging clinics," he said. "Localities are big consumers of healthcare services. The state and healthcare services pay for services for employees, teachers, trash collectors … so as purchasers, they can encourage those who are administering their plans to go out and contract with free-standing imaging centers. There may be a lack of competition among lab services in some parts of the state, so there may be a shortage of competition in some areas.

"Alternatively," he said, "If you see shortages of certain types of physician services, you might want to encourage policies that promote the training of those kinds of doctors."

Newman said he senses increasing levels of transparency and accountability sneaking into the system, some of it heralded by the Affordable Care Act and the rise of accountable care organizations.

"As prices go up, there's a greater scrutiny of prices, and greater scrutiny of the quality being offered," he said. "Providers or facilities, whether they like it or not … are going to be held to increasing levels of accountability in the system. They're likely to hear the question, 'Why are your prices so high?' And in some cases that will be justified, and that's fine. In other cases it won't be."

Nine states were excluded from the report due to either lack of sufficient data, or because state statutes discourage data sharing. The excluded states are Alabama, Hawaii, Idaho, Michigan, Montana, South Dakota, Vermont and Wyoming. Arkansas was also excluded because it signaled that it did not want its state data compared to national data.

"Some states' data are locked up," said Newman. "This byzantine behavior stands in the way of efforts to pursue transparency and understand the root causes of rising healthcare spending."

Twitter: @SusanJMorse

Show All Comments