Spectrum publishes average payments for payer groups

GRAND RAPIDS, MI  – In an effort to improve transparency of its prices, Spectrum Health last month began publicizing the average prices paid by major payers for 250 common procedures.

The Grand Rapids, Mich.-based healthcare system puts the prices on its Web site. While it has published average prices for common procedures on its Web site since October 2006, the system added average prices for Medicare, Medicaid and health insurance companies in late February.

The effort is the latest in a series of initiatives by the integrated delivery system to give healthcare consumers purchasing information. For example, its Web site contains its quality performance for 47 conditions. Its quality improvement initiative has saved millions by cutting costs and will lead to an estimated $10 million in additional revenue, executives say.

Hospitals nationwide are beginning to wrestle with the difficulties of sharing price information with consumers. Few, if any, have achieved the level of detail on Spectrum’s site.

“It’s in tune with what consumers want,” said Michel P. Freed, executive vice president and CFO of the system. “More are getting high-deductible plans. It’s difficult to get people to spend more out-of-pocket when they don’t know what the cost is.”


Spectrum’s charges are listed in charts for adult inpatient and outpatient procedures and childbirth services, as well as the most common radiology and laboratory tests. Average hospital charges include prices for nursing care, room charges and supplies and medication, and the Web site notes that consumers need to contact their physicians to find out their charges.

Prices for the various payers show the public how the hospital’s average price compares with what it receives in payment. For example, the hospital’s estimated average price for a total hip replacement is $19,600. The average insurance payment is $15,919, Medicare pays $13,379 on average, and Medicaid pays only $8,429 for the procedure.

“It shows that Medicaid is like a hidden tax, and why I end up shifting what Medicaid doesn’t pay over to the private sector,” Freed said. “I tell people it’s like an excise tax. They see this data and they understand better what we’re going through in the industry.”

Posting payment information will eventually provide a competitive advantage for Spectrum, Freed believes.

“If our quality is excellent and our cost is excellent, we hope people will give us a try,” he said. “We’re confident that people will make a good decision with this information.”