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From $1,200 to $12,000: Why nobody can figure out how much childbirth actually costs

Associated Press
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If any single fact illuminates why reining in health care spending is going to be easier said than done, it might be this: we don't even really know why a typical, low-risk childbirth costs $1,200 at some hospitals and $12,000 at others.

In fact, until recently it was unclear how much variation there was in the cost of childbirth in the first place. A new Health Affairs study examined nearly 275,000 low-risk childbirths at 463 hospitals spread across the country and reported the ten-fold spread in the cost of having a baby.

The good thing is that widely varying costs like this suggest big opportunities for savings. What, exactly, are the most expensive hospitals doing that jacks up their costs so much? What could they learn from a hospital that spends less? But that depends on understanding why the costs vary in the first place, and despite their best efforts, researchers could only figure out a small fraction -- 13 percent -- of the variation by factoring in differences such as the type of hospital or cesarean section.

"It suggests there may be differences in how hospitals practice and provide care. That may provide an opportunity for us to intervene," said Xiao Xu, an assistant professor of obstetrics, gynecology, and reproductive sciences at the Yale School of Medicine. But figuring out the nature of that intervention, Xu said, will take more research and more time.

This kind of result might seem par for the course in an industry where the pricing is often opaque at best and outright secretive at worst. It seems like every day there's a new study about how procedure X -- be it having an appendix removed or a hip replaced -- costs way more in one city or hospital than another.

But childbirth may be a helpful test case to understand why the numbers are only the beginning of the answer, and a window into the bigger problems hanging over the health care industry at large, when it comes to the challenge of driving spending down.

First of all, childbirth is big: it's the number one reason for hospital admissions, accounting for nearly four million hospitalizations each year. That makes it a non-trivial part of hospital care, which in turn is the priciest part of U.S. health care spending each year.

And yet, even the somewhat complex task of figuring out the cost of a procedure doesn't answer very many questions. Health care -- and especially complicated life events like child birth -- contain endless permutations of how care was delivered that could contribute to the cost. There's variation in hospital staffing and in procedures, ranging from cesarean sections to postpartum nursing care at home. Then there are the unexpected complications -- for not one patient, but two.

Add to that another layer: the fact that even if the variation in the costs that hospitals paid were clear, that doesn't even necessarily reflect the variety in the price tag consumers (and insurers) pay. In Massachusetts, a state that passed a law in 2012 to make health care costs more transparent, a research team trying to track down the price of a simple left knee MRI without a contrast dye found themselves transferred to six or seven departments and playing phone tag for days. Among 22 hospitals in a survey by Barbara Anthony, a senior fellow at the Pioneer Institute, a free market public policy think tank, it took anywhere from 10 minutes to nearly a week and a half to get an answer. If it's that difficult to figure out how much it will cost to get a short scan to look at your knee, good luck trying to pin down the cost of the miracle of life.

"In health care, the problem is we have a history of prices not being available. They’re not transparent. You don’t know them -- they’re secret," Anthony said. "Providers don’t even know the prices of the items, consumers don’t know what they’re paying out-of-pocket until they get the bill. How can you allocate efficiently in a market like that?"

Xu hopes to understand precisely why childbirth varies in cost at different facilities. She's especially intrigued by a pattern in the data in which the hospitals with high levels of negative health conditions stemming from the birth also tended to have higher costs. Again, it's hard to know why that is -- it could be that maternal complications require more care, which drives up the cost. But it's the reverse of the health care ideal where people pay the most for the best quality care.

Unpacking questions about cost and price can seem a simple matter of getting the information out there. But the tricky questions embedded in childbirth show that knowing the numbers is just the start.