New study reports prices of medical procedures among Oregon hospitals

A new report issued by the Oregon Health Authority (OHA) details the median amounts paid by commercial insurers for the most common inpatient and outpatient procedures that were performed in Oregon hospitals in 2014. Drawing on data collected in the All Payer All Claims (APAC) database, the report shows variation in prices for the same procedures among hospitals operating in the same region and across the state.

The report, “Oregon Hospital Payment Report 2014,” was mandated by Senate Bill 900, which was passed by the Legislature in the 2015 session. The goal is to provide a source of transparency to the public on hospital prices. Inpatient care accounts for as much as 30 percent of health care spending in the state.

“Hospitals perform vital procedures that save lives and improve quality of life for Oregonians,” said Lynne Saxton, Director of the Oregon Health Authority. “This report gives patients and policymakers an unprecedented look at the payments hospitals and commercial health plans have negotiated for the procedures Oregonians depend on hospitals to perform.”

According to the data provided in the report: 

• Gallbladder surgery was the most expensive outpatient procedure paid for by commercial insurers. The median cost was more than $9,000.
• Heart valve replacement surgery was the most expensive inpatient procedure insurers paid for in 2014. The median cost was more than $74,000.
• Mammograms were the most common procedure paid for by commercial insurers. More than 86,000 mammograms were performed in 2014.

The paid amounts reported in the study reflect the charges commercial insurers paid for different procedures at different hospitals. However, these prices do not include all costs. For example, costs to patients in co-pays, deductibles or coinsurance are not contained in the data. Charges for outpatient procedures do not include additional professional fees.

The price of a procedure in a hospital depends on a number of factors. These factors should be taken into account when comparing charges between facilities. Here are some reasons that account for variations:

• Rate negotiation: Each hospital negotiates with each insurance provider they accept for the reimbursement rate for a procedure. This paid amount will vary depending on the hospital and the insurance company.
• Case complexity: An insurance company may reimburse a hospital within a range of amounts for a given procedure up to a predetermined maximum. This range is influenced by how sick the patient is, and how many extra services were required in order to perform the procedure.
• Patient participation: In addition to paid amounts, patient responsibility amounts also vary. Plans that require higher patient paid amounts (copays, deductibles) will have lower paid amounts in comparison to insurance plans with lower patient paid amounts.
• Geographic factors: A hospital’s location influences paid amounts. Communities with higher costs of living have higher salary, lease, and utilities costs. These differences in hospital operating expenses should be considered when comparing paid amounts.
• Economies of scale: Hospital volume influences the paid amount. Hospitals that perform the procedure hundreds of times will often accept a lower paid amount for each case because they make the difference up in larger volumes.

“Oregon’s community hospitals are proud to lead our state toward a more transparent health care system, starting with a clearer picture of prices paid for procedures in their facilities,” said Andy Davidson, president and CEO of the Oregon Association of Hospitals and Health Systems, which worked in 2015 to pass the legislation authorizing the report released today. “We commend the OHA for their thoughtful year one report. We believe this report, and the display of the data on our OregonHospitalGuide.org website, will lead the way toward a better grade on the national scorecard on price transparency issued annually by the Catalyst for Payment Reform organization.”

“Oregon Hospital Payment Report 2014” is the first of an annual series of reports on health care prices drawing from the APAC database. OHA will continue to report hospital prices and may provide data on other procedures, including procedures performed in non-hospital settings.