Hospital, Physician Prices: Wide is the Range

A Congressional Budget Office report documented the wide range in prices paid for hospital and physician services. Hospital inpatient services were the priciest in Massachusetts and cheapest in Arkansas

Second of three parts

Price isn’t just an ordinary moving target in healthcare. It oscillates depending on who is paying, when, under which contracts and the rebates and discounts that are applied.

So, it is not a big surprise that when the Congressional Budget Office (CBO) took a look at the prices paid for hospital services, it found a huge range.

In a report issued last month about how much the Medicare fee-for-service program and commercial insurers pay for hospitals and doctors, the CBO analyzed data on prices on a state-by-state basis. The prices by Medicare fee for service ranged from 24% below the national average in Arkansas to 55% above it in Massachusetts. CMS sets Medicare prices but they are adjusted to take into account the cost of living and other factors related to hospital costs

The range in prices paid was even larger among commercial insurers, although Arkansas and Massachusetts were still on the opposite ends of the spectrum.

The average price paid by commercial, employment-based health plans ranged from 54% higher than the national average Medicare fee-for-service price in Arkansas to 294% higher than that average price level in Massachusetts.

Here is the chart fromt the CBO repor tshowing the state-by-state payment for inpatient service. The Medicare fee-for-service price is on the left and the commercial plan price on the right.

The CBO researchers also looked at prices paid for physician services. The analysis was conducted by tallying what Medicare fee for service and commercial plans paid for a group of 500 physician services in 2017.

The Medicare fee for service prices were lowest in Mississippi and highest in Washington, D.C. The commercial plan prices were lowest in Alabama (10% higher than the average of the Medicare fee-for-service price ) and highest in Wisconsin (78% above the national average).

The CBO researchers also found that prices paid for hospital services ranged widely within metropolitan statistical areas. The report gives San Francisco and prices for vaginal delivery of a baby as an example. The median price for commercial insurers in San Francisco in 2016 was $13,363, but the price at the 90th percentile was $23,880, which is more than twice the price of $11,098 at the 10th percentile.

Here is the chart from the report showing the 90th and the 10th percentile range for vaginal deliveries in six cities: