Report Shines Light on Payment Variation at MN Hospitals

Wide disparities exist in how much four common medical procedures cost at Minnesota hospitals, according to a new report released by the Minnesota Department of Health (MDH) on Jan. 3. 

The report assesses the actual prices paid for hospital facility fees in Minnesota. The prices are gleaned from the Minnesota All-Payer Claims Database (APCD), which consists of data stripped of personal identifiers, from more than 1.1 billion health care claims coming from private and public payers covering more than 4.3 million people in Minnesota.
The report found that while the average price paid for a knee replacement in Minnesota was $23,997, the range in prices paid to Minnesota hospitals between July 2014 and June 2015 was as low as $6,186 and as high as $46,974. It also found that the average price for a Cesarean section delivery was $10,234, and ranged from $4,693 to $22,831.

“The MMA supports transparency about the cost and quality of care, and this new report expands on information currently available,” said MMA CEO Janet Silversmith. “Variation in payment and cost is not surprising, however, given differences in hospital services, size, operating costs, and patient mix. The real question is whether the degree of variation is reasonable and how this type of information can be used to create greater efficiencies and value for patients.” 

“We were really pleased to demonstrate the value of greater price transparency for employers on this project,” said Dan Pollock, the acting commissioner of health. “We hope this is just the start of future collaborations and ongoing support for using the Minnesota All-Payer Claims Database to help both consumers and employers make informed decisions about health care spending.”

“Transparency in markets is key to making sure they work effectively,” said Stefan Gildemeister, the state health economist and co-convener of this initiative. “By some estimates, pricing failures from the lack of transparent information on health care costs contribute more than 14 percent to waste or inefficiency in today’s health care spending. We hope this and other upcoming analyses on price variation in Minnesota can provide value to individuals and employers, and contribute to discussions about 
sustainability in health care spending growth.”

More than 100 organizations and programs supply de-identified data to the APCD, making it the most robust dataset in Minnesota for assessing costs of, and use of, health care. Anything in the data that might identify patients is removed or encrypted before it is submitted to the APCD. The data come from commercial health plans, self-insured employers through their third-party administrators, Medicaid and Medicare.

The prices in the new report reflect the fees paid to hospitals for certain types of inpatient treatment. The actual amounts paid by patients and employers are higher, when taking into account fees paid for physician services, prescription drugs and rehabilitation treatments. 

The report does not include the names of hospitals, as Minnesota law prevents the use of the database to identify individual hospitals or providers. In addition to costs, whether the share they are responsible for or the total amount, patients should consider other types of information, such as performance quality, to make informed health care decisions.

MDH plans to publish prices for other common hospital procedures, such as heart procedures or back surgery, in 2018.  

This project was funded in part through a $45 million State Innovation Model (SIM) cooperative agreement, awarded to MDH and the Minnesota Department of Human Services in 2013 by the Center for Medicare and Medicaid Innovation (CMMI) to help implement the Minnesota Accountable Health Model.