Imagine walking into a hospital and being charged more than $10,000 for a blood test to check your cholesterol level. And going to another hospital in the same state and being charged $10 for the exact same blood test. That’s what a team led by a University of California San Francisco researcher found when it looked at the prices California hospitals charge for 10 common blood tests.
Researchers studied charges for a variety of tests at 160 to 180 California hospitals in 2011 and found a huge variation in prices. The median charge for a basic metabolic panel, which measures sodium, potassium and glucose levels, among other indicators, was $214. But hospitals charged from $35 to $7,303, depending on the facility. None of the hospitals were identified.
The biggest range involved charges for a lipid panel, a test that measures cholesterol and triglycerides, a type of fat (lipid), in the blood. The median charge was $220, but costs ranged from a minimum of $10 to a maximum of $10,169. Yes, more than $10,000 for a blood test that doctors typically order for older adults, to check their cholesterol levels.
The smallest range in charges was for a blood test that checks for a protein that signals for muscle inflammation. It cost $10 to $628.
The study was published Friday in the British Medical Journal Open.
Senior researcher Renee Hsia, associate professor of emergency medicine at UCSF and director of health policy studies at the Department of Emergency Medicine, studies disparities in health costs. But even Hsia, who is also an emergency physician at San Francisco General Hospital, was taken aback at the differences.
“I was very surprised,” she said.
Unlike other medical services or procedures that might vary by patient or doctor, these blood tests are common, simple and standard procedures. A technician draws blood from a patient, then walks the blood to a lab, where the blood sample is put into a machine that performs the analysis, she said. "In general, for most of these tests, nobody is doing hand assays or looking into a microscope," Hsia said.
Most consumers with health insurance won't pay those prices; most often, their health plans have negotiated a lower price with the hospital or provider. But patients without insurance face the full brunt of the charges, especially if they don’t qualify for a hospital’s charity care discounts, Hsia said.
In general, county hospitals and teaching hospitals had lower prices than non-teaching hospitals, not-for-profit and for-profit hospitals, she said.
“But outside of that, one of the most concerning findings is the small degree to which any factors could explain the differences…This shows that the way we price health care is so irrational,” Hsia said.
The researchers looked at data from California because the state's hospitals are required by law to submit their average charges for 25 of their most common outpatient procedures to state health planning officials. But the results, Hsia said, would be very similar across the rest of the country. The researchers weren’t able to do a national analysis because the data are so difficult to find, and many states and hospitals don’t make their charges publicly accessible.
The study's main conclusion is that there is no clear explanation for the price differences, Hsia said. A hospital’s case mix, labor costs and number of beds did not affect charges for these common procedures. Although teaching hospitals and county-run hospitals were generally lower in price, there were no other factors that could explain the differences. The majority of hospitals were not-for-profit, urban, non-teaching hospitals. On average, their patient mix included about 25 percent Medicaid and 41 percent Medicare patients.
One factor that researchers weren’t able to measure was a hospital’s investment in higher quality facilities or supplementary services. “The costs of these differences, while of value to patients, are not easy to measure” and may not be reflected in variables, such as a wage index, the study found. “However, they likely do trickle down into charges for all basic services, including blood tests.”
The bottom line, according to the study, is that hospitals recoup losses in other areas from third party payers to cover overall costs. “This often results in some services subsidizing others, with their charge increases generally unrelated to their value,” the study concluded.
A spokeswoman for the California Hospital Association said hospitals are required by federal regulation to keep a master list of charges. But the data are meaningless for most consumers because most patients with insurance pay discounted rates, she said. Even most uninsured patients who meet income guidelines pay discounted fees, “unless it’s an incredibly wealthy person who has chosen not to get insurance, and those people can probably pay the bill,” said Jan Emerson-Shea, the association’s vice president for external affairs.
Every hospital has its own pricing strategy, she said, and the charges reflect costs such as overhead, facility improvements, and new technology. In California, all hospitals must also meet new earthquake safety standards by 2020, and many hospitals will need to rebuild their facilities.
“So if there’s an $800 million seismic price tag, they’re going to have to incorporate that into hospital charges,” she said.