The Free Press, Mankato, MN

May 8, 2013

Hospital billing rates vary widely in Minnesota

Feds reveal hospital charges

By Dan Linehan
Free Press Staff Writer

MANKATO —

Mayo Clinic Health System in Mankato charged an average of $26,449 for a joint replacement in the 2011 fiscal year. The same procedure cost $35,014 at St. Mary’s Hospital in Rochester, $31,592 in Mayo Clinic Health System in Fairmont and $54,854 in Mercy Hospital in Coon Rapids.

It costs as little, on average, as $5,300 at an Ada, Okla., hospital and as much as $223,000 in Monterey Park, Calif.

In an attempt to remove the veil on hospital pricing, the federal government on Wednesday morning told the public what more than 3,000 U.S. hospitals charge for their most common procedures. It also reported what the hospitals charge Medicare for the same procedures, typically a much lower figure than what is charged to people without insurance.

The wide variations among hospitals are perverse and often baffling.

“It doesn’t make sense,” Jonathan Blum, Medicare deputy administrator, told the Associated Press Wednesday. The higher charges don’t reflect better care, he said.

And the amounts are too huge to be explained by obvious differences among hospitals, such as a more expensive regional economy, older or sicker patients, or the extra costs of running a teaching hospital, he told AP.

There were wide disparities within Minnesota, as well.

For kidney failure with complications, the average bill at Rochester’s Mayo Clinic Methodist Hospital was $21,862. In Mayo’s Albert Lea hospital, the same procedure costs an average of $9,846.

Though a Mayo Clinic official was not available to answer questions about these disparities on Wednesday, hospitals often note that few patients pay these bills. The uninsured can be stuck with them, though, especially if they don’t try to bargain. And even the insured sometimes pay a percentage of these bills before insurance kicks in.

It’s easy to see one place where customers might want such bargaining to begin, as the data also show how much hospitals charge Medicare for these procedures.

On average, among all of the procedure costs reported by Minnesota’s hospitals, the charges for procedures were more than 2.11 times what Medicare billed for it.

Some markup would likely be seen as acceptable, but huge increases over Medicare rates may invite questions.

“Hospitals that charge two or three times the going rate will rightfully face scrutiny,” Health and Human Services Secretary Kathleen Sebelius told reporters, according to the Associated Press.

Using that test — comparing what Medicare believes a procedure should cost with what hospitals actually charge — Mankato’s hospital, along with the rest, would attract scrutiny.

For example, a billing code for various digestive disorders shows Mankato’s hospital charged $24,880, but only billed Medicare less than a third of that total, or $7,632. It’s important to note that Mankato is unique; the average cost in Minnesota hospitals for this procedure was $26,939 and the average Medicare billing was $9,213.

Getting this procedure at the University of Minnesota Medical Center, Fairview costs a whopping $70,022 on average.

Another way of looking at these data, though, is that Medicare is not paying the hospital enough for these procedures.

The hospital’s charges in other areas were closer to Medicare rates. For certain types of spinal fusion procedures without major complications, for example, Mankato’s hospital charged customers $26,133 and Medicare paid  $25,311.