Healthcare Costs Cannot Be Accurately Predicted

A review of hospital costs for a common medical procedure casts doubt on the theory that the healthcare marketplace is similar to that for other goods and services.

Researchers at the University of California, San Francisco (UCSF; USA) conducted a retrospective review of charges for appendectomies involving 19,368 adult patients hospitalized for appendicitis in 2009, using hospital discharge data from the state of California (USA). They then examined the total amount charged for treatment of patients with uncomplicated appendicitis who had a relatively short hospitalization and a routine discharge home. The researchers also compared costs of an appendectomy within the same county to control for county-to-county variation in cost.

The researchers found that the average cost of hospital treatment for patients with a diagnosis of appendicitis was USD 33,611. But more surprising was the range of costs, from USD 1,529 in one hospital to USD 182,955 in another - for the exact same procedure. Similarly, one patient receiving an appendectomy in a Fresno (CA, USA) hospital was charged USD 46,000 more than a patient in another Fresno hospital who received the same procedure. Surprisingly, the wide variation in Fresno was actually the smallest range observed in the cost of an appendectomy within any single county in California.

An analysis of the discrepancies revealed that county hospitals charged 36.6% less than nonprofit hospitals, and for-profit hospitals charged 16.3% more. Care for older patients tended to cost more, and Medicaid patients and the uninsured were charged slightly more for their treatment (2.3% and 1.4%, respectively). Although more than 67% of the variation in charges could be predicted by patient-level and hospital-level factors, the remaining 32% remained unexplained, the researchers found. The review was published as a letter published early online on April 23, 2012, in the Archives of Internal Medicine.

“Given estimates that 60% of bankruptcies in the United States involve catastrophic medical expenses, these data should alarm those making decisions about our society's ability to obtain medical care without financial catastrophe,” concluded lead author Renee Hsia, MD, and colleagues. “Health care providers are often unaware of what their recommendations cost; consumers with adequate insurance are shielded from charges, while the underinsured or uninsured see staggeringly high numbers without understanding what the charges mean, let alone if they are appropriate.”

The researchers concluded that their findings imply that the health care marketplace is unique, with inherent limitations that negate the proper application of market theory within the system, and that much work remains to be done to allow patients to fulfill the role of a true consumer.

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