A Consumer Viewpoint on Discerning
Hospital Value for Knee Replacements
This article explains how information from CMS, a government agency can
help you decide where to have your next knee replacement. The Centers for
Medicare and Medicaid provide regular reliable information on hospital safety
metrics and pricing, both for gross hospital charges and for net
reimbursements. For many health care consumers, it is the gross charge figure which is of concern, because if you have private insurance or
God-forbid-are-uninsured, what you actually pay for your health care procedure will
be based on this number. Since workers and families are so much more mobile
now, it pays for the health care consumer to shop around for the best consumer
value.
Presently there are a number of Medicare and federal government
initiatives addressing hospital price transparency, so I examined a number of
CMS circulars to assess hospital data from 2011 for procedures and prices. The
May 2013 CMS circular on Hospital Pricing and Charge Variation to Promote
Transparency lists broad disparities in hospital prices for both heart failure
and knee transplant procedures.[1]
Since the latter is a scheduled surgery and not an emergency procedure, I
reviewed all hospital prices, both gross charges and net Medicare reimbursements
for the knee surgery for Minnesota, which was mentioned in the article. Then I
looked at the same procedure for all hospitals performing it for Washington.
Knee Replacement Surgery
Minnesota-Land-of-Ten-Thousand-Lakes
Using the Center for Medicare information for the DRG code 470 for a lower
extremity joint replacement, such as a knee transplant, I reviewed the fiscal
year 2011 hospital charges and actual reimbursements for all Minnesota
hospitals for this procedure.[2]
Needless to say there was quite a spread as I identified the
facilities that were the best value and then the most expensive hospitals for this
procedure.
Best Buy for Knee Replacement
The least expensive facility for which to to have this procedure in the
Land-of-a-Ten-Thousand-Lakes, was the Mayo Clinic in Austin, MN which posted a
gross charge of $23,430 and was paid $12,820 on average for this procedure. FYI,
this was also one of the best deals in the nation, for this procedure. Sure you
could go to Ada, Oklahoma and have it done for $5,300, but not with the vaunted
Mayo Clinic quality (which is by the
way, organized as a true group practice). Private employers, health care
consumers with health savings accounts, and medical tourists may be interested in
visiting this facility for a bargain rate knee replacement and Mayo Clinic
quality. Other Mayo Clinic prices for the same procedure were: St. Mary’s
Hospital which was reimbursed $16,109 and Mayo Clinic in Albert Lee, where the
net Medicare reimbursement was $12,933. Another hospital that did very well in this
metric was Lakeview Hospital, which booked $25,009 for the gross charge and
$12,591 for the net reimbursement for the knee replacement. Lakeview is part of
Healthpartners, a large nonprofit health care group in Minnesota.
Most Expensive for Knee
Replacement
The most expensive facility in Minnesota for a knee transplant was the
Hennepin County Hospital (a level 1 trauma center) which received a net reimbursement
of $23,526 for the procedure. Trauma centers receive special funding because
they are designated for the most intensive care and serve a disproportionate
share of the region’s poor and disenfranchised.
Though Cambridge Medical Center charged $58,683 for the procedure it
only received $13,545 in reimbursement.
Other hospitals charging more than $50,000 for this type of procedure
included Abbott Northwestern and Unity Hospital, which are private facilities,
and this probably explains the big difference between what they are charging
and what they are actually paid by Medicare. Also, all three of these
facilities are part of the behemoth Allina Health, which is a nonprofit entity,
posting the most expensive prices for knee transplants in the state. For several
of these hospitals the average reimbursement for the knee procedure was 25% of their gross procedure charges. Which means that Medicare is not over
paying for the procedure, but private insurers and health care consumers will
be paying a higher charge here than at other facilities without this huge disparity.
This spread between gross charges and net payment is indicative of a national
problem and is one of the reasons the Obama Administration is touting hospital
pricing transparency, with the Maryland model as a standard. Maryland has the
lowest spread between gross charges and actual reimbursements, because of a
thirty year old law, as reported in my December article.[3]
Washington-The Evergreen State
Next I reviewed the diagnostic code 470 for knee transplants for all
hospitals in Washington State performing this surgery, for data reported in
2011, to identify best buys and the most pricey locations.
Best Buy for Knee Replacement
Washington State’s prices were much more uniform than Minnesota, but
the least expensive hospital for the knee replacement, based on the average
Medicare reimbursement for the 2011 fiscal year was Overlake Hospital in
Bellevue, with a gross charge of $45,672 and a net reimbursement of $13,444. It
should be noted that Overlake also scores very well on health quality measures,
which can be found on the Medicare site as well. But if you want to look at the
gross charges and the net reimbursement, Valley Medical Center in Renton was
the top performer, with a low gross charge of $31,753 and a higher net reimbursement
of $21,521. This means they have a lower price disparity for this procedure.
Most Expensive Place for Knee
Replacement
Harborview Medical Center, which is the regional level 1 trauma center,
was the most expensive place for this procedure at $24,298 in net reimbursement
and $67,105 in gross charges. But, let’s face it; a trauma center is not your
best site for this type of surgery. The
second most expensive place in the state for this procedure was the University
of Washington Medical Center, with a gross charge of $31,753 and a net payment
of $21,521. Again, this may not be your best choice for this type of procedure,
but a great choice for a kidney transplant. The third most expensive place for
this procedure was Tacoma General-Allenmore, which is a specialty hospital and
does not provide primary trauma center services, with an average charge of
$86,022 and an average reimbursement of $17,369. All of these hospitals are non profit
entities but Harborview is funded through state coffers along with the
University of Washington.
Crib Notes for Smart Health Care
Consumers
Remember, the cost of services for a privately insured or uninsured
health care consumer is based on a mark-up of the Medicare reimbursement and
the greater the disparity between gross charges and net reimbursement means
that difference will come out of the other customer’s payments. So, the private
insurance sector will pay more to make up for the Medicare shortfall and all
private non-Medicare or Medicaid customers will pay higher prices for the same
service. In short, if the gross charges are less for the procedure, you will be
at less risk of overpaying for the procedure. For example, Valley Medical
Center’s average gross charge for the knee replacement procedure was
$31,753 and the net charge to Medicare was $21,521. This is a difference of
$10.232, which will in part be paid by private insurers, depending on the
contract stipulations. But if you look at Tacoma General-Allenmore’s spread
between net reimbursement and gross charges, it is $68,653, which means the
private payer has to make up more of this difference somehow. In other words privately insured customers will
experience lower costs at Valley Medical Center for this procedure.
This article was researched using public resources from the Center for Medicare and Medicaid for the 2011 fiscal year, which is the most current information available. To be a wise health care consumer, keep on reading what the healthpolicymaven has to say.
[1]http://www.cms.gov/apps/media/press/factsheet.asp?Counter=4597&intNumPerPage=10&checkDate=&checkKey=2&srchType=2&numDays=0&srchOpt=0&srchData=hospital+data+on+charge+variat&keywordType=All&chkNewsType=6&intPage=&showAll=1&pYear=1&year=2013&desc=&cboOrder=date
[2] 470
- MAJOR JOINT REPLACEMENT OR REATTACHMENT OF LOWER EXTREMITY W/O MCC
[3] http://healthpolicymaven.blogspot.com/2014/02/national-review-of-mandates-for.html
