FARGO — The charge for a natural baby delivery at North Dakota’s six largest hospitals can range from $4,343 to $15,056 — a difference of 347% — according to figures compiled by a study of health care costs.
Similarly wide charge variations were found for a colonoscopy, which ranged from $1,775 to $5,509, and for caesarean section baby deliveries, which differed from $5,058 to $31,000, according to the study.
The cost comparisons were part of an analysis of hospital costs in North Dakota presented to the North Dakota Legislature, which is studying health care costs compared to other states.
Hospital representatives contend that the charge figures cited in the study have little meaning — what matters, they say, is the charge billed through insurance companies, which demand discounts that make the retail price largely irrelevant.
But North Dakota Insurance Commissioner Jon Godfread said patients lack access to information about prices to enable them to be smart consumers of health care, a disadvantage that allows hospitals to operate free of competitive pressures.
“I think consumers are at a major disadvantage when it comes to being able to price their health care,” he said. “It’s really hard for them to know if they’re getting a good deal.
“Getting this information was next to impossible. We had a very informed consumer doing this.”
The charge comparison in the study, conducted for the state by the JWHammer consulting firm, used a “secret shopper” who contacted each of the six hospitals for their charges for the three procedures.
The “shopper” called each of the hospitals, following a script so the inquiries were uniform, and asked for complete charges for each procedure, said Jennifer Hammer, president of the consulting firm.
It took multiple calls, which in some cases only produced answers after the hospitals sent information by mail, a process that took several weeks, she said.
The federal government requires hospitals to provide consumers with online access to the prices they charge for their services, but the tool isn’t easy to use since health care is often bundled into a variety of services, each with a distinct code.
There is no uniform way of structuring charges, said Martha Leclerc, a Sanford Health senior vice president. “Every hospital approaches it differently,” she said, with some bundling services into a single charge and others billing separately.
Sanford, for example, doesn’t bill separately for supplies that are routinely used for a procedure and cost less than $30, she said. Charges are structured differently even among different Sanford hospitals.
“We don’t have standardized charges across our system because the markets are all vastly different,” she said.
Also, health care is very complex. There are a dozen charging codes for a normal child delivery, including four codes without complications, making it extremely difficult to predict a cost before a procedure is performed or to provide comparative information, Leclerc said.
That complexity and uncertainty made it difficult to respond to the “secret shopper’s” request for charge information, and help to explain the wide range of responses from hospitals, she said.
As a result, Leclerc said, “You’re not looking at apples to apples.”
The prices consumers pay for hospital services vary widely because so many factors go into providing care, said Mary Muhlbradt of Trinity Health in Minot.
“True costs can depend on market factors such as cost of living, population in the area and availability of providers or services,” she said.
Those factors also include the availability of labor, with many hospitals forced to hire traveling nurses, said Chelsey Kralicek of CHI St. Alexius in Bismarck.
“Costs with health care systems vary dramatically based on the number of contract staff they utilize, negotiated contracts with suppliers and the type/cost of equipment being utilized,” she said.
For rural hospitals especially, patient volumes are another key factor in determining prices, said Katherine Ryan-Anderson of Jamestown Regional Medical Center.
The number of patients using a service like a 3D-mammogram, a piece of equipment that costs $1.5 million or more, can vary widely depending on whether 50 or 500 mammograms are provided in a month, she said.
Consequently, critical-access hospitals that serve rural areas including Jamestown are paid according to their costs, an arrangement aimed at providing critical services for rural residents.
“Small-town hospitals will close if they are paid the same way as larger systems,” Ryan-Anderson said. “Critical-access hospitals aren’t looking to get rich. We’re simply looking to cover costs.
“In a good year, with high volumes, our profit margin is 2%,” she added, a return that is typical of rural hospitals.
Doug Arvin, chief financial officer for Altru Health System in Grand Forks, said the study doesn’t acknowledge the cost disadvantages that confront rural health providers.
“It’s misleading to compare North Dakota to other states given the inherently higher cost of providing specialized care, such as heart surgery and kidney transplant services, with the same efficiencies as more densely populated areas,” he said.
The study’s charges for procedures at Trinity Health are inaccurate, Muhldbradt said. Trinity’s average charge is $4,442 for a colonoscopy, $10,315 for a normal baby delivery and $17,557 for a caesarean section without complications — all considerably higher than the figures cited for the hospital in the study, but within the range of prices, she said.
“While they are on the lower end of the range for North Dakota hospitals, the real data isn’t even close to the numbers depicted in the report, leaving many assumptions and proposals suspect,” Muhlbradt said.
Consumers should have better information at their fingertips starting next year, when federal regulations will require hospitals and health insurers to publish hospital charges according to what’s covered under a patient’s insurance plan.
That way, consumers should be able to find out what their out-of-pocket cost will be, providing better cost transparency, Godfread said.
“I think there’s some help coming,” he said. Making hospital charges more readily available will make hospitals more accountable to those who are paying the bills.
“This system has insulated our hospitals and providers from some of these discussions,” Godfread said. Even a consultant had difficulty getting charge comparison information.
“This was a difficult study to complete,” he said. “We’ve got to do something about it.”
That will take conversations between hospitals, insurers and legislators. That won’t happen in the current legislative session but should take place in the next session as legislators continue to study the issue, Godfread said.
A charge comparison that incorporates what a patient’s insurance plan covers will provide much better information for consumers, Leclerc agreed. “That’s really what should be our focus,” she said.
Also, Leclerc said, public and private insurers essentially dictate what they will pay for services through contracts. “It’s not the hospitals that get to decide. It’s the payers.”
Even uninsured patients don’t always pay the full charges, said Tara Ekren of Essentia Health in Fargo. They can pay rates less than total charges through discounts and financial assistance policies.
Price transparency, the study said, is a means to an end — a key incentive to promote competition, which stimulates innovation, lower prices and better quality.
“The alternative to competition is and should be increased government oversight,” the study said. “When entities act like a monopoly, it may be necessary for government to regulate them like a monopoly.”
The study said North Dakota hospitals have been resistant to change, with many clinging to what are called “fee for service” contracts, where hospitals bill for services. In recent years, public and private insurers have been moving to what are called “managed care” of “value-based” contracts, which require providers to share in the financial risk of providing care and pay according to outcomes.
Hospital representatives bristled at that conclusion, saying North Dakota hospitals have entered into many managed care contracts with public and private payers.
Essentia Health has a “multitude” of value-based arrangements with Medicare, Medicaid and private payers comprising 42% of fee-for-service revenues, Ekren said. The agreements require Essentia to “deliver on the triple aim of lower total costs of care, improving quality and strengthening patient engagement,” she said.
By meeting quality and cost goals in 2019, Ekren said, Essentia saved Medicare $13.2 million.
Although the study examined how North Dakota's hospital costs compare to other states, it didn't delve into the reasons driving hospital costs.
That could be the focus of a follow-up study, Godfread said. Hammer agreed that more study can help guide efforts to improve health care quality and costs.
"There is a lot of work yet to be done," she said. "It will be an ongoing effort to improve health care."