Effort to decipher hospital prices yields key finding: don’t try it at home

Reviewed by Emily Henderson, B.Sc.Jul 9 2021

A federal price transparency rule that took effect this year was supposed to give patients, employers and insurers a clearer picture of the true cost of hospital care. When the Trump administration unveiled the rule in 2019, Seema Verma, then chief of the Centers for Medicare & Medicaid Services, promised it would "upend the status quo to empower patients and put them first."

I set out to test that statement by comparing prices in two major California hospital systems. I am sorry to report that, at least for now, that status quo — the tangled web that long has cloaked hospital pricing — is alive and well.

I have spent hours toggling among multiple spreadsheets, each containing thousands of numbers, in an effort to compare prices for 20 common outpatient procedures, such as colonoscopies, cataract surgeries, hernia repair and removal of breast lesions.

After three months of glazed eyes and headaches from banging my head against walls of numbers, I am throwing in the towel. It was a fool's errand. My efforts ultimately yielded just one helpful piece of advice: Don't try this at home.

I was most of the way to that realization when a conversation with Shawn Gremminger helped push me over the line.

"You are a health care reporter, I'm a health care lobbyist, and the fact that we can't do this ourselves is an indictment of where things stand at this point," said Gremminger, health policy director at the Purchaser Business Group on Health, which represents large employers who pay their employees' medical bills directly and have a big stake in price transparency. "The subset of people who can do this is pretty small, and most of them work for hospitals."

I heard similar comments from other veterans of the health care industry, even from the former managed-care executive who inspired the story.

He had come to me with a spreadsheet full of price info that appeared to show that a Kaiser Permanente hospital in the East Bay charged significantly higher prices for numerous procedures than a nearby hospital run by archcompetitor Sutter Health.

That was a compelling assertion, since Sutter is widely viewed in California as the poster child for excessive prices. Nearly two years ago, Sutter settled a high-profile antitrust case that accused the hospital system of using its market dominance in Northern California to illegally drive up prices.

I knew from the outset it would be tricky to compare Kaiser and Sutter because, operationally, they are apples and oranges.

Sutter negotiates separate deals with numerous health plans, and its prices can vary by thousands of dollars for the same service, depending on your insurance. Kaiser's hospitals are integrated with its insurance arm, which collects premiums — so, in effect, it is playing with house money. There is just one Kaiser health plan price for each medical service.

Still, the story seemed worth looking into. Those Sutter and Kaiser prices matter, because they are used to calculate how much patients pay out of their own pockets. And helping patients know what they'll owe in advance is one of the goals of the transparency rule.

The federal rule requires hospitals to report prices for all the medical services they provide in huge spreadsheets that can be processed by computers.

It also obliges them to provide prices in a more "consumer-friendly" format for 300 so-called shoppable services, which are procedures that can be scheduled in advance. And it requires that they report the cost of any "ancillary services," such as anesthesia, typically rendered in concert with those procedures. Of the 300 "shoppables," 70 are specified by the government and the rest are chosen by each hospital.

Most of the 20 common medical procedures I attempted to compare were among those 70. But a few, from lists of top outpatient procedures provided by the Health Care Cost Institute, were not. I decided to use the more comprehensive, less friendly spreadsheets for my comparisons, since they contained all 20 of the procedures I'd chosen.

Each carried a five-digit medical code known as a CPT, a term trademarked by the American Medical Association that stands for "current procedural terminology." The transparency rule requires hospitals to include billing codes, because they supposedly provide a basis for price comparison, or in the rule's jargony language, "an adequate cross-walk between hospitals for their items and services."

Much to my chagrin, I soon discovered they don't provide an adequate crosswalk even within one hospital.

My first inkling of the insuperable complexity came when I noticed that Sutter's Alta Bates Summit Medical Center in Oakland listed the same outpatient procedure with the same CPT code three times, thousands of rows apart, with entirely different prices. CPT 64483 is the designated code for injection of anesthetics or steroids into a spinal nerve root with the use of imaging, which relieves pain in the lower back, legs and feet caused by sciatica or herniated discs. The spreadsheet showed a maximum negotiated price of $1,912 in row 12,718, $3,650.85 in row 19,014 and $5,475.80 in row 19,559 (let your eyes glaze over for just a few seconds, so you know what it feels like). The reason for the triple listing is tied to Medicare billing guidelines, Sutter later told me. I'll spare you the details.

My head really began to hurt when I decided to double-check some of the prices I had pulled from the big spreadsheets against the same items on the shorter shoppables sheets. Kaiser's prices were generally consistent across the two, but for Alta Bates, there were large discrepancies.

The highest negotiated price for removing a breast lesion, for example, was $6,156 on the big sheet and $23,069 on the shorter one. The difference seems largely attributable to the estimated cost of additional services, some rather nonspecific, that Sutter lists on the smaller sheet as accompaniments to the procedure: anesthesia, EKG/ECG, imaging, laboratory, perioperative, pharmacy and supplies.

But why not include them in both spreadsheets? And what do the two dramatically divergent prices actually encompass?

"How many bills they really represent and what they mean is difficult to interpret," said Dr. Merrit Quarum, CEO of Portland, Oregon-based WellRithms, which helps employers negotiate fair prices with hospitals. "It depends on the timing, it depends on the context, which you don't know."

In some cases, Sutter said, its shoppables spreadsheets show charges not only for ancillary services typically rendered on the day of the procedure, but also for related procedures that may precede or follow it by days or weeks.

The listings for Kaiser's ancillary services do not always match Sutter's, which further clouds the comparison. The problematic fact of the matter is that hospitals performing the same procedures bundle their bills differently, use different medications, estimate varying amounts of time in the operating room, and utilize more or less advanced technology. And physician charges are not even included in the posted prices, at least in California.

All of which makes it almost impossible for mere mortals to anticipate the total cost of their medical procedures, let alone compare prices among hospitals. Even if they could, it might be of limited value, since independent imaging centers and surgery centers, which are increasingly common — and generally less expensive — aren't required to report their prices.

The bottom line, I'm afraid, is that despite my efforts I don't have anything particularly insightful to reveal about how Kaiser's prices compare with Sutter's. The prices I examined were as transparent to me as hieroglyphics, and I'm pretty sure that hospital executives — who unsuccessfully sued to stop implementation of the price transparency rule — are not losing any sleep over that fact.

This story was produced by KHN, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.