Inpatient costs account for most variation in hip, knee replacements

Prices for a variety of medical procedures vary widely throughout the country. A new study suggests hospital inpatient costs are responsible for much of the variation.

The cost for a simple knee or hip replacement procedure at 36 different hospitals in various markets varied from about $17,000 to more than $35,000, according to researchers at the National Institute for Health Care Reform (NIHCR). Researchers came to that conclusion based on an analysis of the claims data of 590,000 retired autoworkers who underwent procedures in 2011.

The study concluded that "hospital inpatient price differences (accounted) for the vast majority of spending variation rather than differences in spending on physician and other non-hospital services during and after discharge or spending on readmissions."

NIHCR studied markets in medium-sized cities in the Midwest, Southeast and upstate New York. Each market had at least one low-cost and high-cost hospital. Costs associated with the initial hospital stay accounted for more than 80 percent of the price variations. Although readmissions also explained some cost differential, the cost of the specific readmission itself was a more significant factor. Physician and other services accounted for less than one-tenth of one percent of the price differential.

Hospital pricing is a particular concern among consumers, who must now pay larger parts of their bills as insurers shift more costs to them. Some hospitals charge high prices in  "profit centers," such as the emergency room, partly to offset the costs of facility and equipment upgrades.

What accounted for the price difference among hospitals? Those with higher prices "tend to...have specialized service lines that other nearby hospitals do not offer, they are part of local hospital systems with greater bargaining clout, they have unusually good clinical reputations, or they are large teaching hospitals," the study said.

The study's authors did concede that knee and hip replacements constituted only 6 percent of procedures performed at the hospitals, but that they provided a "useful illustration" of cost differences between facilities nonetheless.

To learn more:
- read the NIHCR study and study announcement