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Why Does a Hip Surgery Cost $78K in the U.S. and $13K in Belgium?

New York Times series looks at skyrocketing prices in American hospitals, including ones in the Bay Area, and the imbalance between the benefits of being tax-exempt versus charity cases.

Stanford Hospital in Palo Alto had a net income of $186 million in 2011 but offered just $19 million in charity care.
Stanford Hospital in Palo Alto had a net income of $186 million in 2011 but offered just $19 million in charity care.

Over the past few months, the New York Times has been running a series of articles investigating the rising cost of healthcare in U.S. hospitals. For the most part, the pieces have focused on comparing the high prices patients pay in the United States to the often lower hospital bills found in other developed countries where the quality of treatment is equal to, if not better than the care offered in American hospitals. 

The differences are often huge. One man profiled in the third part of the series went to Brussels for an artificial hip after learning his local hospital was going to charge him $78,000 for the operation. The bill in Belgium was $13,600, including round-trip airfare between Colorado and Europe. 

Tuesday’s installment is the fifth in series and it looks at hospitals in Northern California to illustrate the frequently exorbitant prices charged for basic items like IV bags and codeine pills. 

Using as examples hospitals familiar to every resident of the Bay Area, the article also shows that public records don’t support the claims of hospital administrators that huge bills combined with tax exemptions help hospitals pay for charity care provided to poor people. 

According to the New York Times, Stanford University Hospital offered $19 million in charity care and reported net income of $186 million in 2011. For example, El Camino Hospital in Mountain View spends just .56 percent of its operating expenses on charity cases. Sequoia Hospital in Redwood City spends .63 percent on such cases. The percentages range from zero to more than 30 percent.

The New York Times article relied heavily on research from the Institute for Health and Socio-Economic Policy, which released a report in August documenting how the non-profit status enjoyed by hospitals cost the state and counties $1.8 billion in 2010. 

Non-profit hospitals are forbidden from using surplus revenue to benefit individuals. Instead, the surplus money is to be used to benefit the communities the hospitals serve. In return, these hospitals don’t pay state or federal taxes on profits, they don’t pay property taxes and they are not obliged to pay sales taxes. Charity care is not a requirement of maintaining tax exempt status. Kaiser and Sutter would both be in the Fortune 500 if they were for-profit enterprises, according to the Institute for Health and Socio-Economic Policy

The Orinda-based policy group estimated that the tax exempt status of non-profit hospitals cost Santa Clara County $46 million and San Mateo County $19 million.

The New York Times series comes at a time when the healthcare industry is in the midst of massive change. The Affordable Care Act aims to drive down healthcare costs even as a wave of consolidations among providers has afforded organizations like Sutter Health more muscle to set prices. Fortunately for consumers, these changes are accompanied by new tools that allow patients to compare prices between hospitals. 

Jon Keeling December 04, 2013 at 02:01 AM
$78K for a hip replacement in this area? Where? I had mine both done at Stanford. The last one was 7 months ago. The hospital bill came to $138,868.01. And that did NOT include the charges for the doctors! No, the total was well over $150K. Of course insurance paid the vast majority of it. But many of the line-items were quite silly. Acetaminophen was 78 cents each for one line item and $1.03 on another line item (same code both times...go figure). "Intense physical therapy" (2 sessions @ 15 minutes each) were billed at $2284. Of course it was valuable to have someone make sure I didn't slip as I tried to stand up the day of or after surgery. But could I have refused this service to save some money? Apparently they charged me for prescription medication I brought with me (corkage fee? they didn't have to do anything; I brought it and gave it to myself!). I'm sure they charged me for a bunch of pain medication I refused, too. But it would just be too time-consuming for me to go line-by-line through the 80 or so line items in this bill... Yeah. Things are completely out of whack here. But how can we get them back "in whack"? ;-)
bruce k December 04, 2013 at 09:26 AM
If you were being paid 6 times what you were worth and could push that cost onto the public - you'd be adamantly against Obamacare or any other attempt to regulate prices in the medical industry too, in including paying all kinds of businesses and media to make it seem like there were great reasons for it, and getting people out in from of cameras and posting on the Internet about they supported the system as it is ... even though it is against the best interests of the country and is driving a health crisis and contributing to the economic crisis.

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