Cost of common medical services varies wildly state to state, city to city

Commercially insured patients may pay drastically different prices for the same medical procedure depending on their location, according to an analysis published by the Health Care Cost Institute (HCCI) in Health Affairs.

“We don’t pay for health care, we pay for a physical or an ER visit,” Eric Barrette, co-author of the study and director of research at HCCI, said in a statement. “By drilling down into the price of individual services, we can better see where prices are higher than average and begin to unpack what is driving those higher prices.”

Using data from HCCI’s commercial claims database collected in 2012 and 2013, researchers compared prices for more than 240 procedures in 41 states and the District of Columbia, though not all states had data available on all services. In some instances, prices were found to vary threefold, even within the same state.

In one example, researchers compared the average price of pregnancy ultrasounds in a state’s different metropolitan areas, and found some substantial variation. In Cleveland, the procedure would cost an average of $522, while just 60 miles away in Canton, Ohio, the average price was $183.

Similar in-state variation was found with more expensive procedures. The average cost of a knee replacement in Sacramento, Calif. ($57,504), was close to double the average cost of the same service in Riverside ($30,261).

There were also examples of substantial differences between neighboring states. The average cost of services related to childbirth by cesarean section was well above the national average in California, but below average in Nevada.

Nationally, Alaska had the highest healthcare prices, followed by Wisconsin, North Dakota, New Hampshire and Minnesota. The lowest cost states were Arizona, Florida, Maryland and Tennessee, where 90 percent of the services examined in the study were priced below the national average.

Due to either lack of availability or state laws discouraging data sharing, the report excludes nine states: Alabama, Arkansas, Hawaii, Idaho, Michigan, Montana, South Dakota, Vermont and Wyoming.

“This byzantine behavior stands in the way of efforts to pursue transparency and understand the root causes of rising healthcare spending,” said HCCI Executive Director David Newman in a statement.

The study acknowledges some of the pricing variations may be partially explained by differences in wages and rent between states and cities. While additional transparency may be of some help, it's not seen as a blanket solution to all the issues raised by the analysis.

"In some instances, improved transparency may help lower prices; in other cases improved transparency may have no effect,"  Barrette said. "For example, in a highly concentrated market, improved transparency will allow more people to know the prices are high but may not have any influence on prices because of the market power the providers have."

The authors concluded by saying it is up to researchers, government entities and leaders in the healthcare field to identify the real reasons behind the variation in costs, and then develop policies to achieve “minimal unjustified differences in prices and low average prices.”