A "secret shopper" study conducted by researchers with University of Iowa Health Care and Iowa City VA Medical Center reveals the difficulty consumers face when attempting to obtain prices for a common surgical procedure.
The study found that 40 percent of top-ranked and 36 percent of non-top-ranked hospitals were unable to provide a price estimate for a total hip replacement procedure. Moreover, among the hospitals that could provide an estimate, the cost quoted for the procedure ranged from $11,100 to $125,798—a greater than ten-fold difference.
While data on hospital quality is now widely available from public and private sector sources, the UI study suggests that pricing data is much harder to obtain. The study suggests that calls for greater transparency in pricing have not had a big effect.
"There have been many initiatives to increase pricing transparency, including state and federal laws, and still many hospitals are unable to provide price information for a common procedure," says Jaime Rosenthal, lead author on the study, which was published online Feb. 7 in JAMA Internal Medicine, a JAMA Network publication. "Also, the variation in pricing was striking, as we tried to give each hospital identical information in terms of what the procedure would require."
Rosenthal and her colleagues Xin Lu and Peter Cram, M.D., randomly selected two hospitals from each state and the District of Columbia that performed total hip replacements as well as the 20 top-ranked orthopedic hospitals according to U.S. News and World Report. Calling on behalf of a hypothetical patient, Rosenthal requested the lowest "complete" price (hospital plus physician fees) for an elective total hip replacement. The fictitious patient, a 62-year old grandmother, did not have health insurance but was able to pay for the procedure out-of-pocket. When a hospital could provide the hospital fee only, the researchers contacted a hospital-affiliated orthopedic surgery practice to obtain a physician fee. Each hospital was contacted up to five times in an attempt to get pricing information.
The study found that nine top-ranked hospitals (45 percent) and 10 non-top-ranked hospitals (10 percent) were able to provide a complete bundled price. Complete price estimates were obtained from an additional three top-ranked hospitals (15 percent) and 54 non-top-ranked hospitals (53 percent) by contacting the hospitals and physicians separately. At top-ranked hospitals the complete price ranged from $12,500 to $105,000 and at non-top-ranked hospitals prices ranged from $11,100 to $125,798.
The study did not find any specific hospital characteristics that were associated with a lower or higher price estimate, but Cram notes that only a small sampling of hospitals was included in the study.
"A big finding was the absolutely huge variation in price estimates," says Cram, UI associate professor of internal medicine and director of the Division of General Internal Medicine. "We believe that our results highlight the reality that hospitals have a very hard time knowing their own prices.”
"The range in prices suggests that a savvy customer may find that he or she can comparison shop and find significant savings," adds Rosenthal. "Our study suggests that it is important for consumers to ask for information about the cost of medical care and procedures and to be persistent."
For policy makers and hospitals, Rosenthal says, the study suggests there is a long way to go on to improving pricing transparency efforts.
Rosenthal, a graduate of West High in Iowa City, is currently a senior at Washington University in St. Louis. The findings are a result of a summer research project Rosenthal conducted with Cram at the UI Carver College of Medicine.
This work is funded in part by grants from the National Heart, Lung, and Blood Institute and from the National Institute on Aging at the National Institutes of Health.