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Minnesota surgery costs vary widely, report says: Identical procedures can cost one patient seven times more than others

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DULUTH—Imagine going to your favorite restaurant, ordering a meal and then being asked to pay twice as much as your friend paid for the same meal.

That might be unthinkable, but such price differences happen routinely with regard to surgical procedures at Minnesota hospitals, according to a report released on Thursday, Aug. 9, by the Minnesota Department of Health.

Actually, it's more extreme than that. A patient undergoing one of four hospital procedures may pay between two to nearly seven times as much as another patient at the same hospital, according to the report.

For example, the price for a major bowel procedure at one hospital ranged from about $14,500 to $68,800. The price for a spinal fusion ranged from about $27,600 to $80,800.

Similar variations show up in national studies, said Stefan Gildemeister, the state's health economist and the study's co-leader, but the numbers still seem startling.

"The magnitude of the variation that we are measuring in the amount of tens of thousands of dollars, it does give you pause," he said

In reality, it's old news, said Mark Sonneborn, vice president for health information and analytics at the Minnesota Hospital Association.

"We were aware and continue to be aware of variations in what patients pay," Sonneborn said. "Even the level of variation isn't very surprising. It's something we've known for a long time."

The report, which also compares price differences from hospital to hospital, is the second the health department released this year on surgical costs. The earlier report covered total knee replacement, hip replacement, vaginal baby deliveries and C-section deliveries, and also found significant price differences. This one covers appendectomies and removal of uterine fibroids as well as bowel procedures and spinal fusions.

Why are the differences so extreme?

It's not entirely clear, Gildemeister said, but it could come down to who's paying the bill

"Patients could differ by their age and acuity ... length of stay, et cetera," he said. "And what we did in the analysis is adjust for those factors. ... What remains is really the relative market power between an insurer and a health plan that ends up determining prices."

In other words, a small insurer with less business probably won't get the same discounts as a larger insurer, Gildemeister explained.

Sonneborn cited the same reason for variations within the same hospital. Variations from hospital to hospital may be explained by the fact that different hospitals have different purposes, he said. A teaching hospital that trains physicians faces higher costs than a community hospital.

The report, which the health department says is designed to bring transparency to health care pricing, doesn't name names. It analyzes prices paid through commercial health insurance from July 2014 to June 2015 and reported to the Minnesota All Payer Claims Database. Minnesota law prevents that data from being used to identify individual hospitals or providers.

The price differences should matter to consumers, even if they are covered by insurance, Gildemeister said.

"Patients ultimately are paying for the cost of care," he said. "To the extent that variation in health care prices is responsible for pushing up the price in health care ... we pay that through our growth in premiums."

Wendy Burt, the hospital association's vice president for communications, said the data the health department used are outdated and the report isn't particularly helpful to consumers.

A more useful resource, she said, is the Minnesota Health Scores website, which details prices for certain procedures at specific facilities across the state as well as data on the quality of care they provide.

To learn more

The Minnesota Health Scores website is at mnhealthscores.org.

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