NCPA - National Center for Policy Analysis


January 5, 2005

A new California law requiring hospitals to disclose charges for goods and services demonstrates the wide variation in prices, says the Wall Street Journal.

The law requires hospitals to "open their books" to consumers showing how much they charge for everything from Tylenol (acetaminophen) to brain scans. The fluctuation in prices is surprising, for example:

  • A chest X-ray ranges in price from $120 at San Francisco General to $1,519 at Doctors Hospital in Modesto.
  • A complete blood count costs $47 at Scripps Memorial in Los Angeles, but $547.30 at Doctors in Modesto.
  • Acetaminophen tablets are free at Sutter General in Sacramento and Doctors Hospital in Modesto, but cost a staggering $7.06 per pill at Scripps Memorial.
  • A CT-scan varies in price from a low of $881.90 at Scripps Memorial to a high of $6,599 at Doctors Hospital.
  • Even blood-sucking live leeches range in price from $19 per leech at Scripps to $81 per leech at UC-Davis hospital.

The reason for the price fluctuations is that hospitals use different pricing formulas, usually multiplying wholesale costs for goods by an arbitrary number to come up with the patient cost. For instance, UC-Davis charges 13.5 times the wholesale cost for medicines purchase by the hospital for under $40, while more expensive medicines (over $40) are charged at about 7.5 times the wholesale cost.

However, the people most likely to bear the list price of hospital goods and services are the uninsured, since HMOs negotiate deep discounts off list prices. Additionally government health care providers such as Medicare dictate what they will pay, usually a flat fee per service.

While California's new law is designed to give patients the tools to shop around and compare prices, few patients have actually taken advantage of the lists. A few hospitals post their price lists on the Internet, but some require consumers to make an appointment with the hospital in order for them to view the price list and have it explained to them.

Source: Lucette Lagnado, "California Hospitals Open Books, Showing Huge Price Differences," Wall Street Journal, December 27, 2004.

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