Experiments designed to charge a predetermined fee for common surgical procedures offer a glimpse into the future of healthcare spending.
Wildly different prices for the same medical procedures often leave consumers bewildered and financially ruined. Charges are all over the map. Here in Southern California, the hospital cost alone for hip-replacement surgery typically runs from about $103,000 at UC Irvine Medical Center to $41,000 at Hemet Valley Medical Center. The variation is influenced by myriad factors. Facilities that offer expensive specialty services such as trauma centers, burn units or transplant programs tend to charge more for care. Meanwhile, hospitals often charge privately insured patients more to make up for what they lose on uninsured patients and relatively low reimbursement rates from Medicare. Caregivers and hospitals point out that they receive only a fraction of charges they submit, whether to insurance companies or the federal government. Like the patients they serve, they, too, welcome more predictability. Many providers and insurers say they are now ready to experiment with new ways to cut unpredictable healthcare spending.
In one closely watched test beginning in August, several of California's best-known healthcare providers -- including Cedars-Sinai Medical Center, the UCLA Health System, and Hoag Memorial Hospital Presbyterian in Newport Beach -- will begin charging lump-sum fees for hip and knee replacements. Doctor bills, X-rays, artificial joints, tests and hospital care are among the fees that will be wrapped together for commercially insured patients who would otherwise be charged for each service. The single charge will vary from hospital to hospital based on the fee each negotiates.
The lumped charges for hospitals and doctors will cover most aspects of medical treatment from surgery through 90 days of recovery. That's a radical departure from the traditional practice of hospitals and doctors charging separately for their services, a fragmented system that drives up costs while leaving no one to coordinate decisions about patient care. Hospitals and doctors say they expect to share in savings when patients recover promptly, while bearing the risk of additional expenses when complications arise.
The federal government already is testing similar "bundled" payments for its Medicare program in Colorado, Texas, New Mexico and Oklahoma. And President Obama's new healthcare law calls for exploring additional arrangements for surgical services for the elderly and the poor.