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

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.