How Much for That Brain Scan? Hospitals Reveal Prices

California hospitals on Friday let the public in on an industry secret: how much they charge for everything from Band-Aids to brain surgery.

But almost everybody agrees that the data are virtually useless to consumers, who were supposed to benefit under a 2003 law that required the disclosures.

After closely guarding such information from patients and competitors for decades, hospitals had until Friday to provide their “chargemasters,” or retail price lists, to the state for public dissemination. More than 250 of the state’s 422 hospitals met the deadline, state officials said.

The spreadsheets run into hundreds of pages for each hospital and list prices for thousands of items and services. They offer a peek into the arcane and byzantine world of hospital finance and show how dramatically prices vary.

A brain scan, for instance, runs $2,813 at San Dimas Community Hospital. The list price is $1,650.51 at Cedars-Sinai Medical Center.

Comparisons can be tricky, however, because the law did not require hospitals to use standard definitions for products and procedures.

Even where comparisons are possible, they may be meaningless because hospitals don’t charge full price for most patients. Instead, they generally bill at steep discounts according to insurance contracts or government mandates.

The disclosure law was hard-won and hailed as a victory for consumers. But hospital executives say there has been little interest from patients in looking at the price documents since last July, when the law required hospitals to begin showing them to anyone who came in and asked.

The state hospital trade organization initially opposed the mandate and remains concerned that price lists might serve only to confuse.

“These documents can run up to 40,000 or 50,000 separate line items,” said Jan Emerson, spokeswoman for the California Hospital Assn. “You don’t look at them to figure out what the cost of an appendectomy is.”

Looking at a hospital price list to estimate the cost of an operation would be “like estimating the price of a brake job by looking at a parts price list,” said Kenny Kwong, an official in the California Office of Statewide Health Planning and Development whose job it is to collect the price lists.

Despite the drawbacks, the disclosures may ultimately help change the way medical services are bought and sold, said Glenn Melnick, a Rand Corp. economist and a USC professor of healthcare finance.

“The healthcare market is moving toward one where consumers will be asked to play a much bigger role in determining their care,” he said. “By forcing hospitals to release pricing information -- in a lot of places in the U.S. this stuff is still secret -- it begins the process of forcing them to develop a system that is useful to retail consumers in the health market.”

Among the challenges for consumers seeking to understand the system, however, is the disparity between list prices and real prices. Hospitals collect far less than they charge in part because their biggest customers never pay retail -- or anything close.

Medicare and Medicaid programs, the biggest payers, dictate reimbursement rates -- paying California hospitals in 2003, on average, 22 to 28 cents on the dollar.

Private insurers and health maintenance organizations negotiate with hospitals for discounts. In 2003, traditional insurers paid California hospitals an average of 44 cents on the dollar, and HMOs paid an average of 35 cents.

Hospitals collected an average of 38 cents on the dollar from patients without insurance. With 1 out of 5 Californians lacking health insurance, consumer advocates fought for the disclosure of prices as part of an effort to stop hospitals from hitting uninsured patients with bills based on full prices.

Many hospitals say they have curtailed such practices and extend free care or discounts to most low-income uninsured patients.

Pricing information also is important to people with insurance policies that make them responsible for paying a substantial part of the bill. An estimated 1 million Americans now have these so-called consumer-directed health plans, which are increasingly embraced by employers seeking to control costs.

“This is an industry that’s had very little transparency,” said state Assemblyman Dario Frommer (D-Glendale), one of the architects of the law that mandates disclosure.

The lawmaker is pushing a bill that would require hospitals to report prices on their 25 most commonly performed procedures, such as hernia repairs and childbirth, and to give patients estimates for non-urgent care upfront.

Price lists are only the first step, Frommer said. He also is seeking to have California develop a website, as Wisconsin has done, that allows consumers to compare hospitals by prices and quality measures.

Consumers “ought to have this information,” he said, “where they can get the best healthcare for the best price.”