Report finds 'huge swings' in Minnesota hospital charges

Dr. Joshua Jacobs holds a model of a cementless hip replacement.
State Health Department analysts found massive variation in the charges for four common procedures. Prices paid for a hip replacement, for instance, ranged from $6,666 to $$43,359.
M. Spencer Green | AP 2014

Minnesota Health Department researchers found huge price swings at Minnesota hospitals for common medical procedures.

For example, the prices paid for a knee replacement ranged from $6,186 to $46,974.

Department analysts looked at the charges private health insurers paid for that and three other common procedures over the year ending in June 2015.

The low price for a cesarean section baby delivery was $4,693 and the high price was $22,831 — a nearly five-fold difference.

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"This is eye opening information for the purchasers of health care," Carolyn Pare, CEO of the Minnesota Health Action Group, a coalition of public and private employers who buy health insurance.

"Employers have long suspected that there is a great deal of variation in both the quality and the cost of health care," Pare said in a statement. "But to be able to see the actual numbers provides them an opportunity to make better purchasing decisions. Employers can also help employees and their family members identify and access more affordable care."

The price swings are the result of a health system in which prices are negotiated by insurers and either not publicly known or clear, said state Health Department economist Stefan Gildemeister.

"Is it irrational? Yes," he said. "What can be done about it? I think more sunlight certainly helps to help markets work more efficiently."

However, the report does not name hospitals with high and low prices because state law bans identifying the institutions.

But even within individual hospitals, the report found wide variation in charges. For example, in the hospital with the lowest average price for a total hip replacement charges could range from $6,666 to $31,253.

The Minnesota Hospital Association says it can be misleading to look at procedures in isolation and consumers can already get detailed price comparisons from their insurers.

The price differences mirror the bargaining strength or weakness of insurers said Daniel Zismer, professor emeritus at the University of Minnesota School of Public Health. He said the major insurers in the state will typically pay less, and so will the people they insure.

"The real question is what am I going to end up paying out of my pocket," he said.