By Dennis Thompson
THURSDAY, Jan. 16, 2014 (HealthDay News) -- The bill for delivering a healthy baby varies enormously among California hospitals, with new mothers facing cost differences of 8- to 10-fold depending on the hospital where they end up giving birth.
California women were charged between $3,296 and $37,227 for an uncomplicated vaginal delivery, depending on which hospital they visited, researchers report.
In addition, the investigators found that for a cesarean delivery, women were billed from $8,312 to nearly $71,000.
This amount of variation represents a huge problem for the consumer-oriented medical system that health care reform has promised to create, said lead author Dr. Renee Hsia, an associate professor of emergency medicine at the University of California, San Francisco.
Hsia and her colleagues found that they could only account for 35 percent of the difference between hospital bills, even after considering such variables as length of a patient's hospital stay, the competitiveness of a market, and the ownership and operation of a hospital.
That means 65 percent of what a California hospital charges for a normal delivery is based on nothing the researchers could identify.
"The proportion of charges we are unable to explain signifies that there is a significant gap in the efficiency in which we charge for hospital care," said Hsia, who is also a faculty member of the UCSF Institute for Health Policy Studies.
There's no regulation over what hospitals can charge patients, she noted, and patients often don't know beforehand what they will pay for their care.
"Hospitals can charge whatever they want. They can mark up their costs based on whatever they feel they should be, and 'should' is a very subjective determination," Hsia said. "Even though we talk about consumer empowerment, that can't be a reality until patients are able to obtain information about what they will be charged."
Hospitals with less competition or in markets with more uninsured people tended to charge significantly less, the researchers found. For-profit hospitals and hospitals located in places with higher costs of living or a more severely ill patient population tended to charge more.
To make matters even more confusing, the investigators found that hospitals wound up only receiving about one-third of what they charged, due to discount rates that the hospitals set up with private insurers.
On average, the estimated discounted prices paid by insurers amounted to 37 percent of the original hospital bill. The authors calculated that hospitals billed $1.37 billion in "excess charges" that were never paid for these births.
These discounts vary from insurer to insurer and hospital to hospital, and even vary within the same hospital, said Stuart Guterman, vice president for Medicare and cost control at The Commonwealth Fund.
"The only people who get stuck with paying billed charges are people who don't have health insurance, because they don't have anyone negotiating down their rate," Guterman said. "It makes it very hard to understand what's going on, and it is a symptom of a health care market that's out of control because there's no transparency about what hospitals charge and what they get paid for each service."
The study authors reviewed data from 2011 on nearly 110,000 cases in California involving women with private medical insurance, including about 77,000 for uncomplicated vaginal deliveries and about 33,000 for uncomplicated C-section births.
The researchers focused on newborn delivery because it is the most common cause for hospitalization, and provides a window into hospitals' billing practices, Hsia explained.
Hsia said that she fully expects that this variation in billing can be found in medical services provided by hospitals throughout the United States.
Hsia and Guterman both agreed that hospital billing has a direct impact on all health consumers. These bills affect the co-payments and deductibles a person has to cover, and can drive an uninsured person to bankruptcy.
"There are legitimate reasons for the cost of care to vary from one place to another, but not as much as they do," Guterman said. "We need to understand whether there's any relationship between that price and the quality of the care. We need to understand that relationship better to know we're paying the right price for a service."
The study findings appear in the Jan. 16 online edition of BMJ Open.