Washington Health Alliance Report Shines Spotlight on Price Disparities

At one hospital, the cost of spinal fusion surgery is $60,260. At another, its $118,375. At still another, its about $31,000.

A new report by the Washington Health Alliance seeks to understand why such disparities occur and how businesses and providers can use the information to reduce health-care costs.

This first spending trend analysis introduces the idea of looking at the root causes of spending changes, says Washington Health Alliance Executive Director Nancy Giunto. We suspect our employer members are going to be very interested in using this information along with their own claims data to help untangle the reasons their health care costs are changing.

The Washington Health Alliance, a nonprofit with more than 185 member organizations, reviewed 171 distinct inpatient treatments of minor severity for calendar year 2016. It found wide disparities in seven common treatments, including vaginal delivery, knee and hip joint replacement surgery and normal newborn care.

Basic knee replacements, for instance, ranged from around $15,000 to more than $50,000, with a median price of $28,000.

While noting that price variations for medical procedures is nothing new, the report pinpoints several reasons why prices differ, including that larger hospitals, medical groups and insurers have an advantage over smaller groups in negotiating fees.

Price variation and the lack of transparency in pricing make it difficult for patients and purchasers to find high-value health care and are also factors in the rising costs of care, the report notes. If the employer knows from data supplied by its plan that it typically pays over $21,000 per case, but the Alliance report shows the median price in Washington state is about $16,500, the employer may be able to use that information to negotiate a lower price.

The Washington Health Alliance, along with Milliman MedInsight, was recently honored by Seattle Business magazine at its 2019 Leaders In Health Care Awards for its work identifying waste in the health-care system.